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EXHIBIT 10.27
JMW ACQUISITION CO.
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT is made as of August 4, 1987,
by and among JMW Acquisition Co., a Utah corporation (the "Company"), Motion
Control, Inc., a Utah corporation ("MCI"), and the persons and entities listed
on the Schedule of Investors attached hereto as Exhibit A (the "Schedule of
Investors"). The persons and entities listed on the Schedule of Investors are
hereinafter collectively referred to as the "Investors" and each individually as
an "Investor".
A. MCI is a manufacturer and marketer of medical products. Cordis
Corporation ("Cordis") currently owns 2,913,750 shares of the common stock of
MCI, which is approximately 84% of MCI's outstanding common stock. Additionally,
MCI owes Cordis approximately $1,950,933 for loans made by Cordis to MCI,
$70,000 of which was loaned pursuant to a working capital line of credit and
shall be referred to as the "Working Capital Loan", and the remaining $1,880,933
of which shall be referred to as the "Loans". Cordis is also guarantor on a
certain loan in principal amount of $750,000 from the Continental Illinois
National Bank and Trust Company of Chicago to MCI (the "Guarantee").
B. The Company, Cordis and MCI entered into a Class A Convertible
Preferred Share Agreement dated February 1, 1986 (the "Cordis Agreement")
pursuant to which Cordis agreed, in general, to transfer its shares in MCI to
the Company in exchange for certain shares of the Company's preferred stock, and
to cancel the Loans, upon the closing of a financing in which the Company raised
at least $750,000 and upon the simultaneous purchase of shares of the Company's
common stock by certain subscribers in accordance with paragraph 3 of the Cordis
Agreement, all on the terms and conditions set forth in the Cordis Agreement.
C. The Investors other than Cordis (the "New Investors") desire to
purchase $1,500,000 of the Company's preferred stock, and the Company desires to
sell such preferred stock to the New Investors, on the terms and conditions set
forth herein.
D. In light of such investment, and as contemplated by the Cordis
Agreement, Cordis desires to transfer all of its shares in MCI to the Company in
exchange for certain shares of the Company's preferred stock, and to cancel the
Loans, on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 Authorization. The Company will have authorized as of the
Closing (as defined below) the issuance
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pursuant to the terms and conditions hereof of 4,215,618 shares of preferred
stock, par value $0.01 per share, of which 67,200 shares shall be designated
Series A Preferred Stock (the "Series A Stock"), 3,975,618 shares shall be
designated Series B Preferred Stock (the "Series B Stock"), and 172,800 shares
shall be designated Series C Preferred Stock (the "Series C Stock") (the Series
A Stock, Series B Stock and Series C Stock to be referred to collectively as the
"Preferred Stock"), having the rights, preferences and privileges set forth in
the Revised Articles of Incorporation (the "Revised Articles") attached hereto
as Exhibit B.
1.2 Issuance and Sale. The Company shall issue and sell to each
Investor, and each Investor shall purchase from the Company, the number of
shares of Preferred Stock set forth opposite such Investor's name on Exhibit A
to this Agreement (all shares of Preferred Stock purchased hereunder being
collectively hereinafter referred to as the "Purchased Shares"). The
consideration for the Series B Stock shall be $0.3773 per share. The aggregate
consideration for the Series A Stock and Series C Stock, all of which is being
purchased by Cordis, and the release of Cordis from its obligations under the
Guarantee, shall be the transfer by Cordis to the Company of all shares in MCI
held by Cordis and the assignment to the Company of all of Cordis' right title
and interest in and to the Loans, all on the terms and conditions set forth in
this Agreement. The Company's agreements hereunder with each of the Investors
are separate agreements, and the sales of Preferred Stock to each of the
Investors hereunder are separate sales.
2. CLOSING. The purchase and sale of the Purchased Shares shall take
place at the offices of Fenwick, Davis & West, Xxx Xxxx Xxxx Xxxxxx, Xxxx Xxxx,
XX 00000, at 1:00 p.m., on August 4, 1987, or at such other time and place as
the Company and the Investors mutually agree upon in writing (which time and
place are designated as the "Closing"). At the Closing, the Company shall
deliver to each Investor a certificate representing the Purchased Shares that
such Investor is purchasing hereunder against delivery to the Company by each
New Investor of the full purchase price of such Purchased Shares, which, shall
be paid in accordance with reasonable instructions from the Company provided to
each New Investor, in writing, at least two business days prior to the Closing,
and against delivery to the Company by Cordis of share certificates representing
all shares of MCI held by Cordis, properly endorsed for transfer to the Company,
free and clear of any liens or encumbrances. Additionally, Cordis shall deliver
to the Company the promissory note(s) evidencing the Loans endorsed and assigned
to the Company. The Company shall provide Cordis with evidence satisfactory to
Cordis that it has been released from the Guarantee.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MCI. The Company
and MCI each hereby represent and warrant, jointly and severally, to each
Investor, that, except as expressly set forth on the Schedule of Exceptions
("Schedule of Exceptions") attached hereto as Exhibit C, (which exceptions shall
be deemed to be representations and warranties as if made hereunder) the
statements in the following paragraphs of this Section 3 are all true and
correct:
3.1 Organization, Good Standing and Qualification. The Company and
MCI are each a corporation duly organized, validly existing and in good standing
under the laws of the State of Utah with all requisite corporate power and
authority to own their respective properties and assets, and to carry on their
business as now conducted and as proposed to be conducted in that certain Iomed
Systems, Inc. Five Year Business Plan 1987-1992, heretofore furnished to each of
the Investors and furnished to Fenwick, Davis & West, Investors' counsel, on May
27, 1987 (the "Business Plan"). The Company and MCI are both duly qualified to
transact intrastate business in the State of Utah and neither the Company nor
MCI is required to be qualified to do business as a foreign corporation in any
other jurisdiction.
3.2 Capitalization.
(a) The Company. Immediately prior to the Closing, the
authorized capitalization of the Company shall consist of:
(i) Preferred Stock. A total of 4,215,618 shares of
Preferred Stock; 67,200 of which shall be designated Series A Stock; 3,975,618
of which shall be designated Series B Stock; and 172,800 of which shall be
designated Series C Stock. None of the Preferred Stock shall be issued or
outstanding. The rights, preferences and privileges of the Preferred Stock will
be as stated in the Revised Articles.
(ii) Common Stock. A total of 15,000,000 shares of
common stock, $0.01 par value per share ("Common Stock"), of which 500,000
shares shall be issued and outstanding.
(iii) Options, Subscription Agreements, Reserved
Shares. Except for (A) the conversion privileges of the Preferred Stock, and (B)
certain Subscription Agreements to purchase 3,313,195 shares of Common Stock
(the "Subscription Agreements") which were entered into by the Company in
accordance with the specific terms, conditions and requirements of the Cordis
Agreement, there are not outstanding any options, warrants, rights, (including
conversion or preemptive rights, or rights of first refusal) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock
or any securities convertible into or ultimately exchangeable or
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exercisable for any shares of the Company's capital stock. Except as to the
3,313,195 shares of Common Stock subject to purchase pursuant to the
Subscription Agreements, none of the Company's outstanding capital stock, or
stock issuable on exercise or exchange of any outstanding options, warrants or
rights, is subject to any rights of first refusal or other rights to purchase
such stock (whether in favor of the Company or any other person), pursuant to
any agreement or commitment of the Company.
(iv) Outstanding Shareholders, Option Holders and
Subscription Agreement Holders. Attached hereto as part of Exhibit D is a
complete list of all outstanding shareholders, option holders, parties to
Subscription Agreements, and other security holders of the Company immediately
prior to the Closing.
(b) MCI. Immediately prior to the Closing, the authorized
capitalization of the MCI shall consist of:
(i) Preferred Stock. A total of 100,000 shares of
preferred stock, $0.50 par value per share ("MCI Preferred Stock"), none of
which shall be designated or issued and outstanding.
(ii) Common Stock. A total of 10,000,000 shares of
common stock, $0.01 par value per share ("MCI Common Stock"), of which 3,487,875
shares shall be issued and outstanding, and 100,000 issued and held in treasury.
(iii) Options, Subscription Agreements Reserved
Shares. There are not outstanding any options, warrants, rights, (including
conversion, preemptive rights or rights of first refusal) or agreements for the
purchase or acquisition from MCI of any shares of its capital stock or any
securities convertible into or ultimately exchangeable or exercisable for any
shares of MCI's capital stock. None of the outstanding capital stock, or stock
issuable on exercise or exchange of any outstanding options, warrants or rights,
is subject to any rights of first refusal or other rights to purchase such stock
(whether in favor of the MCI or any other person), pursuant to any agreement or
commitment of MCI.
(iv) Outstanding Shareholders and Option Holders and
Subscription Agreement Holders. Attached hereto as part of Exhibit D is a
complete list of all outstanding shareholders, option holders, and other
security holders of MCI immediately prior to the Closing.
(c) Post-Closing Shareholder Status. Attached hereto as
part of Exhibit D is a complete list of all shareholders, option holders and
other security holders of the Company and MCI immediately after the Closing.
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3.3 Subsidiaries. The Company and MCI do not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, joint venture, association, or other business entity; except that,
contemporaneously with the Closing, the Company will acquire all right, title
and interest in and to not less than 95% of the issued and outstanding capital
stock of MCI, and all options, warrants, rights or agreements for the purchase
or acquisition from MCI of any shares of its capital stock, or any securities
convertible into or ultimately exchangeable or exercisable for any shares of
MCI's capital stock (except for options and warrants to purchase a total of
25,400 shares of MCI Common Stock).
3.4 Due Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, and the Shareholder Agreement referred to in
Section 5.4 hereof (the "Shareholder Agreement"), the performance of all
obligations of the Company hereunder and under the Shareholder Agreement, and
the authorization, issuance (or reservation for issuance) and delivery of all of
the Purchased Shares being sold hereunder and of the Common Stock issuable on
conversion of the Purchased Shares (the "Conversion Shares") has been taken or
will be taken prior to the Closing, and this Agreement and the Shareholder
Agreement each constitute a valid and legally binding obligation of the Company,
enforceable in accordance with their respective terms, except as may be limited
by general principles of equity or by bankruptcy or similar laws affecting the
rights of creditors generally;
(b) all corporate action on the part of MCI, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement, and the performance of all obligations of MCI
hereunder has been taken or will be taken prior to the Closing and this
Agreement constitutes a valid and legally binding obligation of MCI, enforceable
in accordance with its terms, except as may be limited by general principles of
equity or by bankruptcy or similar laws affecting the rights of creditors
generally.
3.5 Valid Issuance of Stock.
(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable. The Conversion Shares
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Revised Articles, will be duly and validly
issued, fully paid and nonassessable.
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Based in part on the representations made by the Investors in Section 4 hereof,
the Purchased Shares and, based on current facts and laws, the Conversion
Shares, will be issued in full compliance with all applicable federal and state
securities laws.
(b) The outstanding shares of Common Stock of the Company are
all duly and validly issued, fully paid and nonassessable, and such shares of
Common Stock and all outstanding options, warrants, and other securities of the
Company have been issued in full compliance with the registration requirements
of the 1933 Act and the registration and qualification requirements of all
applicable state securities laws.
(c) The outstanding shares of Common Stock of MCI are all duly
and validly issued, fully paid and nonassessable.
3.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority on the part of
the Company or MCI is required in connection with the consummation of the
transactions contemplated by this Agreement, or the Shareholder Agreement,
except for (i) any filing which may be required pursuant to the Utah Securities
Laws (the "Law"), and the rules thereunder, and (ii) such other qualifications
or filings under the United States Securities Act of 1933 (the "1933 Act") and
the regulations thereunder and all other applicable federal and state securities
laws as may be required in connection with the transactions contemplated by this
Agreement. All such qualifications and filings, if required, will be listed on
the Schedule of Exceptions, and in the case of qualifications, will be effective
on the Closing date and, in the case of filings, will be made within the time
prescribed by law.
3.7 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the best of the Company's and MCI's
knowledge, currently threatened against the Company or MCI or their respective
activities, properties or assets or, to the best of the Company's and MCI's
knowledge, against any officer, director, or employee of the Company or MCI, nor
is any officer of the Company or MCI aware of any factual or legal basis for any
such action, suit, proceeding, claim, arbitration or investigation, including,
without limitation, actions pending or, to the best of the Company's or MCI's
knowledge, threatened (or any basis therefor known to the Company or MCI)
relating to the prior employment of any of the Company's or MCI's employees or
consultants, their use in connection with the Company's or
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MCI's business, of any information or techniques allegedly proprietary to any of
their former employers or clients, or their obligations under any agreements
with prior employers or clients. To the best of the Company's and MCI's
knowledge, none of the employees, officers or directors of the Company or MCI
are subject to any agreement with any of their former employers regarding
proprietary information of such former employers. Neither the Company nor MCI is
a party to or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality and there is no
action, suit, proceeding, claim, arbitration or investigation by the Company or
MCI currently pending or which the Company or MCI intends to initiate.
3.8 Employee Invention and Trade Secret Agreement. Each employee and
officer of the Company and MCI, and each consultant of the Company and MCI, has
entered into and executed an Invention and Trade Secret Agreement in the forms
attached hereto as Exhibit E-1 and E-2, respectively; provided, however, that
non-officer employees and consultants not involved in the creation or
development of inventions, improvements, works of authorship, formulas,
processes, computer programs, databases or trade secrets need only sign a Non
Disclosure Agreement in the form attached hereto as Exhibit E-3. To the best of
the Company's and MCI's knowledge, none of the employees, officers or
consultants of the Company or MCI are in violation of such agreements.
3.9 Status of Proprietary Assets. The Company and MCI have full
right, title and ownership of all patents, patent applications, trademarks,
service marks, trade names, copyrights, trade secrets, confidential and
proprietary information, compositions of matter, formulas, designs, proprietary
rights, know-how and processes (all of the foregoing collectively hereinafter
referred to as the respective "Proprietary Assets") necessary to enable them to
produce and market their current products and services; and proposed products
and services described in the Business Plan (the "Products") and to conduct
their businesses as now conducted and as proposed to be conducted as described
in the Business Plan, without any conflict with or infringement of the rights of
others. A complete list of all Proprietary Assets of the Company and of MCI is
included in Exhibit C. No third party has any ownership right, title, interest,
claim in or lien on any of the Proprietary Assets and the Company and MCI have
taken, and in the future the Company and MCI will take, all steps necessary to
preserve the secrecy of all of their Proprietary Assets, except those for which
disclosure is required for legitimate business or legal reasons. The Company and
MCI have and will maintain in place systems to preserve their rights in, and the
secrecy of, the Proprietary Assets, and will protect their rights in the
Proprietary Assets.
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There are no outstanding options, licenses, or agreements of any kind relating
to any Proprietary Asset, nor is the Company nor MCI bound by or a party to any
option, license or agreement of any kind with respect to any patent, trademark,
service xxxx, trade name, copyright, trade secret, license, information,
composition of matter, formula, design, proprietary right, know-how or process
of any other person or entity. Neither the Company nor MCI is obligated to pay
any royalties or other payments to third parties with respect to the marketing,
sale, license or use of any Proprietary Asset. Neither the Company nor MCI has
received any communications alleging that the Company or MCI has violated or, by
conducting their respective businesses as proposed, would violate any patent,
trademark, service xxxx, trade name, copyright or trade secret, license,
composition of matter, formula, design, or other proprietary or contractual
rights of any other person or entity. Neither the Company nor MCI is aware that
any employee of the Company or MCI is obligated under any agreement (including
licenses, covenants or commitments of any nature) or subject to any judgment,
decree or order of any court or administrative agency, or any other restriction
that would interfere with the use of his or her best efforts to carry out his or
her duties for the Company or MCI or to promote the interests of the Company and
MCI or that would conflict with the Company's or MCI's business as proposed to
be conducted. To the best of the Company's and MCI's knowledge, neither the
execution nor delivery of this Agreement nor the carrying on of the Company's or
MCI's business by the employees of the Company or MCI, nor the conduct of the
Company's or MCI's business as proposed, will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees is now
obligated. Neither the Company nor MCI believes it is or will be necessary to
utilize any inventions of any employees of the Company or MCI (or persons either
currently intends to hire) made prior to their employment by the Company or MCI.
Notwithstanding the foregoing, the Company's and MCI's interest in the
Proprietary Assets are subject to certain rights of the University of Utah, as
specifically described in the Schedule of Exceptions attached hereto as
Exhibit C.
3.10 Compliance with Law and Charter Documents. Neither the Company
nor MCI is in violation or default of any provisions of its Articles of
Incorporation or Bylaws, and, except for any violations which individually and
in the aggregate would have no material adverse impact on the Company's or MCI's
businesses, the Company and MCI are in compliance with all applicable statutes,
laws, regulations and executive orders of the United States of America and all
states, foreign countries or other governmental bodies and agencies having
jurisdiction over the Company's or MCI's
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business or properties. Neither the Company nor MCI has received any notice of
any such violation of such statutes, laws, regulations or orders which has not
been remedied prior to the date hereof. The execution, delivery and performance
of this Agreement, the Shareholder Agreement and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or default, or be in conflict with or constitute, with or without the
passage of time or the giving of notice or both, either a default under the
Company's or MCI's Articles of Incorporation or Bylaws, or a material default
under any statutes, laws, regulations or orders, or any agreement or contract of
the Company or MCI, or an event which results in the creation of any lien,
charge or encumbrance upon any asset of the Company or MCI.
3.11 Material Agreements. Set forth on Exhibit F attached hereto is
a complete list of all agreements, contracts, leases, licenses, instruments and
commitments to which the Company or MCI is a party or is bound which,
individually or in the aggregate, are material to the business, properties,
financial conditions or results of operations of the Company or MCI; provided
that for purposes of this Section 3.11 only, no agreement under which the only
remaining obligation of the Company or MCI is to make a payment of money in the
amount of $10,000 or less will be deemed to be material to its business,
properties, financial condition or results of operations if the failure to make
such payment will not result in the loss by the Company or MCI of any rights
that are material to the conduct of its business (provided that such agreements,
in the aggregate, do not require payment of more than $100,000). Neither the
Company nor MCI has breached, nor does the Company or MCI have any knowledge of
any claim or threat that the Company or MCI has breached, any term or condition
of (i) any agreement, contract, lease, license, instrument or commitment set
forth in Exhibit F, or (ii) any other agreement, contract, lease, license,
instrument or commitment if any such breach or breaches, whether individually or
in the aggregate, would have a material adverse effect on the business,
properties, financial condition or results of operations of the Company or MCI.
Each agreement set forth in Exhibit F is in full force and effect and, to the
Company's and MCI's knowledge, no other party to such agreement is in material
default thereunder. Neither the Company nor MCI is a party to any agreement that
restricts its ability to market or sell any Product (whether by territorial
restriction or otherwise).
3.12 Certain Actions. Since the Balance Sheet Date (as defined in
Section 3.17) neither the Company nor MCI has (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of capital stock, (ii) incurred any indebtedness for money
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borrowed or incurred any other liabilities individually in excess of $10,000 or
in excess of $25,000 in the aggregate, (iii) made any loans or advances to any
person, other than advances made in the ordinary course of business (none of
which are material), (iv) sold, exchanged or otherwise disposed of any assets or
rights, other than the sale of inventory in the ordinary course of business, or
(v) entered into any transactions with any of their respective officers,
directors or employees or any entity controlled by such individuals.
3.13 Disclosure. The Company and MCI have provided each Investor
with all the information that such Investor has requested in writing in
connection with its purchase of the Purchased Shares. Neither this Agreement nor
any exhibit hereto or certificates of any officer of the Company or MCI
delivered at the Closing (when all of such written information is read together)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading. The
Business Plan has been prepared in a good faith effort to describe the Company's
present and proposed products, operations and projected growth, and neither the
Company nor any officer of the Company is aware of any untrue statement of a
material fact in the Business Plan, or any omission to state a material fact
necessary to be included in the Business Plan to make the statements therein not
misleading except for information otherwise provided to the Investors in
writing. With respect to any financial projections contained in the Business
Plan, the Company represents only that such projections were prepared in good
faith and that the Company reasonably believes there is a reasonable basis for
such projections.
3.14 Registration Rights. Except as provided in that certain
Employment and Consultation Agreement dated June 1, 1986 between MCI and Xxxxxxx
X. Xxxxxxxx, and in the Cordis Agreement (which will be null and void as of the
Closing) and in Section 7 of this Agreement, neither the Company nor MCI has
granted or agreed to grant to any person or entity any rights (including
piggyback registration rights) to have any securities of the Company or MCI
registered with the United States Securities and Exchange Commission ("SEC") or
any other governmental authority.
3.15 Corporate Documents. The Revised Articles of Incorporation and
Bylaws of the Company and the Articles of Incorporation and Bylaws of MCI are in
the form previously provided to Fenwick, Davis & West, special counsel to the
Investors.
3.16 Title to Property and Assets. Except as set forth on the
Financial Statements attached hereto as
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Exhibit G, the Company and MCI own their respective properties and assets free
and clear of all mortgages, liens, encumbrances, security interests and claims
except for liens, encumbrances and security interests rich arise in the ordinary
course of business and do not affect their respective material properties. With
respect to the property and assets they each lease, the Company and MCI are in
compliance with such leases and hold valid leasehold interests free of any
liens, encumbrances, security interests or claims of any party other than the
lessors of such property and assets.
3.17 Financial Statements. MCI has delivered to each Investor its
unaudited financial statements (consisting of a balance sheet, income statement
and statement of changes in financial position) for the fiscal year ended June
30, 1986. MCI has also delivered to each Investor its unaudited, interim
financial statements (consisting of a balance sheet, income statement and
statement of changes in financial position) for the period ended May 31, 1987.
The Company has delivered to each Investor its unaudited interim balance sheet
at May 31, 1987. May 31, 1987 is hereinafter referred to as the "Balance Sheet
Date". Copies of such documents are attached hereto as Exhibits G-1, G-2 and G-3
(the respective "Financial Statements"). The Financial Statements present fairly
the financial condition and operating results of the Company and of MCI as of
the dates and for the periods indicated therein, in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated except that the interim statements are subject to customary
year-end adjustments permitted or required by generally accepted accounting
principles (which, as to MCI, are currently estimated to decrease net income by
approximately $20,000). Except as set forth in the Financial Statements, neither
the Company nor MCI has any liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the
Balance Sheet Date and (ii) obligations under contracts and commitments incurred
in the ordinary course of business which are not required under generally
accepted accounting principles to be reflected in the Financial Statements and
which, individually and in the aggregate, are not material to the financial
condition or operating results of the Company or MCI. The Company and MCI
maintain and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
3.18 Changes Since Date of Financial Statements. Since the
Balance Sheet Date there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company or MCI from that reflected in the Financial
Statements, except changes
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in the ordinary course of business which have not been, in the aggregate,
materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company or MCI (as
presently conducted and as proposed to be conducted);
(c) any waiver by the Company or MCI of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or MCI, except such a
satisfaction, discharge or payment made in the ordinary course of business that
is not material to the assets, properties, financial condition, operating
results or business of the Company;
(e) any material change or amendment to a material contract or
arrangement by which the Company or MCI or any of their respective assets or
properties are bound or subject, except for changes or amendments which are
expressly provided for in this Agreement;
(f) any material change in any compensation arrangement or
agreement with any present or prospective employee; or
(g) any other event or condition of any character which the
Company or MCI has reason to believe would materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company or MCI.
3.19 ERISA Plans. Neither the Company nor MCI has any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974,
as amended.
3.20 Tax Returns and Payments. The Company and MCI have timely
filed all tax returns and reports required by law and have never been audited by
any state or federal taxing authority. All tax returns and reports of the
Company and MCI are true and correct in all material respects. The Company and
MCI have paid all taxes and other assessments due, except those, if any,
contested by them in good faith which are listed in the Schedule of Exceptions.
The provisions for taxes of the Company and MCI as shown in the Financial
Statements are adequate for taxes due or accrued as of the date thereof.
3.21 Insurance. The Company and MCI have in full force and effect
(i) fire and casualty insurance policies, with
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extended coverage, sufficient in amount (subject to reasonable deductibles) to
allow them to replace any of their respective properties that might be damaged
or destroyed (except for properties that, in the aggregate, are not material)
and (ii) such amount of product liability insurance as the Board of Directors
deems reasonable.
3.22 Labor Agreements and Actions. Neither the Company nor MCI is
bound by or subject to any contract, commitment or arrangement with any labor
union, and no labor union has requested or, has sought to represent any of the
employees, representatives or agents of the Company or MCI. There is no strike
or other labor dispute involving the Company or MCI pending or, to the knowledge
of the Company and MCI, threatened, nor is the Company or MCI aware of any labor
organization activity involving the Company's or MCI's employees. Neither the
Company nor MCI is aware that any officer, employee or consultant intends to
terminate their employment or relationship with the Company or MCI, nor does the
Company or MCI have any present intention to terminate the employment or
relationship of any of the foregoing.
3.23 Real Property Holding Corporation Status. Since their
respective dates of incorporation (and that of their earliest predecessor)
neither the Company nor MCI has been a "United States real property holding
corporation", as defined in Section 897(c)(2) of the Internal Revenue Code of
1986 (the "Code"), and in Section 1.897-2(b) of the Treasury Regulations issued
thereunder (the "Regulations").
3.24 Shareholder Agreement. Except for the Shareholder Agreement
referred to in Section 5.4, and the Cordis Agreement (which will be null and
void upon the Closing) neither the Company nor MCI has any agreement, obligation
or commitment with respect to voting of any shares of its capital stock, and to
the best of the Company's and MCI's knowledge, there is no voting agreement or
other arrangement among its shareholders with respect to the voting of any
shares of its capital stock.
3.25 FDA Approval. After due investigation, (i) the Company and MCI
have no reason to believe that the United States Food and Drug Administration
("FDA") will ultimately prohibit the marketing, sale, license or use in the
United States of any of the Products and (ii) neither the Company nor MCI know
of any product or process which the FDA has prohibited from being marketed or
used in the United States which in function and composition is substantially
similar to any Product.
4. REPRESENTATIONS AND WARRANTIES OF INVESTORS. Except as to
Section 4.8, which shall apply only to Cordis, each Investor hereby
represents and warrants to the Company, severally and not jointly, that:
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4.1 Authorization. This Agreement constitutes its valid and legally
binding obligation. Each Investor represents that it has full power and
authority to enter into this Agreement. Each Investor has duly and validly taken
all corporate or partnership action necessary for the execution, delivery and
performance of this Agreement by such Investor.
4.2 Purchase for Own Account. The Purchased Shares to be purchased
by such Investor hereunder and the Conversion Shares issuable upon conversion
thereof (collectively hereinafter referred to as the "Securities") will be
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the public resale or distribution thereof within
the meaning of the 1933 Act, and such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same.
4.3 Disclosure of Information. Such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Purchased Shares to be purchased by it hereunder. Such
Investor further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Purchased Shares. The foregoing, however, does not in any way
limit or modify the representations and warranties made by the Company and MCI
in Section 3.
4.4 Investment Experience. Such Investor has experience as an
investor in securities of companies in the development stage and acknowledges
that it is able to fend for itself, can bear the economic risk of its investment
in the Purchased Shares and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of this
investment in the Purchased Shares. Such Investor also represents that it has
not been organized for the purpose of acquiring the Purchased Shares and that
the amount of this investment does not exceed 10% of such Investor's net worth.
4.5 Restricted Securities. Such Investor understands that the
Securities such Investor is purchasing are characterized as "restricted
securities" under the 1933 Act inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under the 1933
Act and applicable regulations thereunder such Securities may be resold without
registration under the 1933 Act only in certain limited circumstances. In this
connection, each Investor represents that it is familiar with Rule 144 of the
SEC, as presently in effect, and understands the resale limitations imposed
thereby and by the 1933 Act.
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4.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, each Investor further agrees not
to make any disposition of all or any portion of the Purchased Shares or the
Conversion Shares unless and until:
(a) there is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) such Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such securities under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be required: (i) for any
transfer of any Purchased Shares or Conversion Shares in accordance with SEC
Rule 144, or (ii) for any transfer of any Purchased Shares or Conversion Shares
by an Investor that is a partnership to the estate of any such partner, or for
the transfer by gift, will or intestate succession by any partner to his or her
spouse or lineal descendants or ancestors, provided that in each of the
foregoing cases the transferee agrees in writing to be subject to the terms of
this Section 4 to the same extent as if the transferee were an original Investor
hereunder.
4.7 Legends. It is understood that the certificates evidencing the
Purchased Shares and the Conversion Shares may bear the legend set forth below,
together with other legends required by the laws of the State of Utah or any
other state:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
The legend set forth above shall be removed by the Company from any certificate
evidencing Purchased Shares or Conversion Shares upon delivery to the Company of
an opinion by counsel,
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in form and substance reasonably satisfactory to the Company, that a
registration statement under the 1933 Act is at that time in effect with respect
to the legended security or that such security can be freely transferred in a
public sale without such a registration statement being in effect and that such
transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Purchased Shares or Conversion Shares were issued.
4.8 Cordis Representations. Cordis hereby represents and
warrants to the Company, MCI and the New Investors that:
(a) the shares of MCI Common Stock being transferred to the
Company in connection with the Closing are the only securities of MCI held by
Cordis, or in which Cordis has any interest, and such shares shall be
transferred to the Company free and clear of any liens or encumbrances.
(b) it owns no securities in the Company, other than the
Series A Stock and Series C Stock to be issued pursuant to this Agreement.
(c) it has not assigned or otherwise transferred any part of
its interest in the Loans or Working Capital Loan, and upon the Closing and
repayment of the Working Capital Loan, neither the Company nor MCI will owe any
sums to Cordis; and
(d) upon the Closing the Cordis Agreement will be null and
void, and of no further effect.
(e) the consummation of the transactions contemplated herein
do not violate any obligation of the Company or MCI to Cordis.
Except for the Subscription Agreements referred to in the Cordis Agreement,
which shall remain in effect, Cordis hereby waives, to and including the date of
the Closing, each and every provision of the Cordis Agreement that may be in
conflict with the terms or conditions of this Agreement, or which may be
necessary, required or appropriate for MCI or the Company to carry out and
perform their obligations under this Agreement.
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under Sections 1.2 and 2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto, which consent may be given by written, oral or telephonic communication
to special counsel to the Investors:
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5.1 Representations and Warranties True. Each of the
representations and warranties of the Company and MCI contained in Section 3
shall be true and correct on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the date
of the Closing.
5.2 Performance. The Company and MCI shall have performed and
complied with all material agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by each of
them on or before the Closing and the Company shall have obtained all approvals,
consents and qualifications necessary to complete the purchase and sale of the
Purchased Shares described herein.
5.3 Certificate Effective. The Revised Articles shall have
been duly adopted by the Company by all necessary corporate action of its Board
of Directors and shareholders, and shall have been duly filed with the Secretary
of State of the State of Utah.
5.4 Shareholder Agreement. Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxx
shall have executed and delivered the Shareholder Agreement in the form attached
hereto as Exhibit H.
5.5 Company Compliance Certificate. The Company shall have
delivered to the Investors at the Closing a certificate signed on its behalf by
the President of the Company certifying that the conditions specified in
Sections 5 have been fulfilled and stating that there shall have been no
material adverse change in the business, affairs, prospects, operations,
properties, assets or condition of the Company not previously disclosed to the
Investors in writing.
5.6 Securities Exemptions. The offer and sale of the Purchased
Shares to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act, requirements of the Utah Securities
Law and the registration and/or qualification requirements of all other
applicable securities laws.
5.7 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to each Investor and to the Investors' special counsel, and they shall
each have received all such counterpart originals and certified or other copies
of such documents as they may reasonably request.
5.8 Ownership of Technology. Each Investor shall have received
from the Company and MCI all documents and
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other materials requested by it for the purpose of examining and determining the
Company's and MCI's rights in and to any technology, the Products, and
Proprietary Assets now used, proposed to be used in, or necessary to, the
Company's or MCI's business as now conducted and as proposed to be conducted as
described in the Business Plan; and the status of the Company's and MCI's
ownership rights in and to all such technology, the Products and Proprietary
Assets shall be satisfactory to each Investor and to special counsel to the
Investors.
5.9 Bylaws. The Bylaws of the Company shall have been duly
amended in the form attached hereto as Exhibit J by the Company by all necessary
corporate action of its Board of Directors and shareholders.
5.10 Board of Directors. Effective at the Closing, the
directors of the Company shall be Messrs. Xxxxxxxx, Ober, Kellman, Xxxxxx and
Xxxxxxxx.
5.11 Certified Charter Documents. There shall have been
delivered to special counsel to the Investors a copy of the Revised Articles and
the Bylaws of the Company (as amended through the date of the Closing) and of
the Articles of Incorporation and Bylaws of MCI, certified by the Secretary of
the Company or MCI as applicable, as true and correct copies thereof as of the
time immediately prior to the Closing.
5.12 No Material Change. There shall have been no material
adverse change since the Balance Sheet Date in the business, properties,
financial condition or results of operations of the Company or MCI.
5.13 Opinion of Company Counsel. Each Investor shall have
received from Xxxxxx and Xxxxxxxx, counsel for the Company and MCI, an opinion,
dated as of the date of the Closing, in the form attached as Exhibit I.
5.14 Acquisition of MCI. Pursuant to and in accordance with
the terms and conditions of this Agreement and the Subscription Agreements, the
Company shall acquire, contemporaneously with the Closing, at least 95% of the
issued and outstanding capital stock of MCI and all outstanding options,
warrants, other securities, or rights to purchase or otherwise obtain any
capital stock of MCI (except for options and warrants to purchase a total of
25,400 shares of MCI Common Stock).
5.15 Release of Guaranty. Cordis shall have been released from
any obligation under the Guarantee, and the Company and/or MCI shall have
provided evidence of such release to Cordis.
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5.16 Working Capital Loan. Cordis shall have been repaid the Working
Capital Loan and neither the Company nor MCI shall owe any amounts to Cordis.
5.17 MCI Compliance Certificate. MCI shall have delivered to the
Investors at the Closing a certificate signed on its behalf by the President of
MCI certifying that the conditions specified in Subsections 5.1, 5.2, 5.7, 5.8,
5.11, 5.12, 5.13, 5.14, 5.15, and 5.16 have been fulfilled and stating that
there shall have been no material adverse change in the business, affairs,
prospects, operations, properties, assets, or condition of MCI not previously
disclosed to the Investors in writing.
5.18 Cordis Transaction. Cordis shall have transferred all of its
shares in MCI, and assigned the Loans, to the Company, as set forth in Sections
1.2 and 2.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to each Investor under this Agreement are subject
to the fulfillment on or before the Closing of each of the following
conditions by such Investor:
6.1 Representations and Warranties. The representations and warranties
of the Investors contained in Section 4 shall be true and correct on the date of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have delivered the
purchase price specified for each such Investor in Section 2 and Exhibit A.
6.3 Certificate Effective. The Revised Articles shall have been duly
adopted by the Company by all necessary corporate action of its Board of
Directors and shareholders, and shall have been duly filed with the Division of
Corporations and Commercial Code of the State of Utah.
6.4 Securities Exemptions. The offer and sale of the Purchased Shares
to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act, the qualification requirements of the
Law and the registration and/or qualification requirements of all other
applicable securities laws.
6.5 Bylaws. The Bylaws of the Company shall have been duly amended in
the form attached hereto as Exhibit J by the Company by all necessary corporate
action of its Board of Directors and shareholders.
7. REGISTRATION RIGHTS. The Company covenants and agrees with each
Investor as follows:
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7.1 Definitions. For purposes of this Section 7:
(a) The terms "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (i) the Common
Stock issued or issuable upon conversion of any of the Purchased Shares and (ii)
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 Purchased Shares and/or the other securities described above in this
paragraph (b), excluding in all cases, however, any Registrable Securities
acquired in a transaction or series of transactions in which the rights under
this Section 7 were not assigned or were not assignable;
(c) The term "Registrable Securities then outstanding" means
the shares of Common Stock which are Registrable Securities and (i) are then
issued and outstanding or (ii) are then issuable pursuant to then exercisable or
convertible securities;
(d) The term "Holder" means any person owning of record
Registrable Securities that have not been sold to the public pursuant to an
effective registration statement under the 1933 Act or exemption therefrom;
provided that a holder of Purchased Shares or other securities convertible into,
or exercisable or exchangeable for, Registrable Securities shall be considered
to be a Holder of the Registrable Securities into which such securities can be
converted into, or exercised or exchanged for, provided, however, that in no
event shall the Company be required to register any securities except the
Registrable Securities; and
(e) The term "Form S-3" means such form under the 1933 Act as
in effect on the date hereof or any successor registration form under the 1933
Act subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
7.2 Demand Registration.
(a) Request for Registration. If the Company shall receive at
any time after the earlier of (i) July 15, 1990, or (ii) six (6) months after
the effective date of the first registration statement filed under the 1933 Act
for a public offering of securities of the Company (other
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than a registration statement relating solely to a merger, recapitalization or
reorganization), a written request from the Holders of at least fifty percent
(50%) of the Registrable Securities then outstanding that the Company file a
registration statement under the 1933 Act covering the registration of all or a
portion of the Registrable Securities then outstanding held by such Holders, and
the aggregate gross sales price of all Registrable Securities expected to be
registered is reasonably expected to be greater than $1,000,000, then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of
subsection 7.2(b), effect, as soon as practicable, the registration under the
1933 Act of all Registrable Securities which the Holders request to be
registered within twenty (20) days of the mailing of such notice by the Company
in accordance with Section 9.6.
(b) Underwriting Requirements. If the Holders initiating the
registration (the "Initiation Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 7.2,
and the Company shall include such information in the written notice referred to
in subsection 7.2(a). In such event, the right of any Holder to include such
Holder's Registrable Securities in a registration effected pursuant to this
Section 7.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company as
provided in subsection 7.5(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Initiating Holders and approved by the Company, which approval shall not be
unreasonably withheld. Notwithstanding any other provision of this Section 7.2,
if the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of Registrable Securities to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof in proportion (as
nearly as practicable) to the amount of Registrable Securities then outstanding
owned by each Holder.
(c) Number of Demand Registrations. The Company is
obligated to effect only two (2) such registrations pursuant to this Section
7.2.
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(d) Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with registrations
pursuant to this Section 7.2, and related filings and qualifications, including
(without limitation) all registration, filing and qualification fees, printer's
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements (up to $10,000) of one counsel for the selling
Holders shall be borne by the Company; provided, however, that the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to this Section 7.2 if the registration request is subsequently
withdrawn at the request of the Holders of at least 60% of the Registrable
Securities to be registered (in which case the Holders requesting the withdrawal
shall bear such expenses, pro rata, based on the number of Registrable
Securities each was to include in the registration), unless the Holders of at
least sixty percent (60%) of the Registrable Securities then outstanding agree
to forfeit their right to one demand registration pursuant to this Section 7.2;
provided further, however, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Holders at the time of their
registration request, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to this Section 7.2.
7.3 Incidental (Piggyback) Registration.
(a) Request for Registration. If the Company proposes to
register any of its stock or other securities under the 1933 Act in connection
with the public offering of such securities (including for this purpose a
registration effected by the Company for shareholders other than the Holders but
excluding a registration relating solely either to the sale of securities to
employees of the Company pursuant to a stock purchase, stock option or similar
plan, or to a merger, recapitalization, or reorganization), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company in accordance with Section 9.6, the
Company shall, subject to the provisions of Section 7.3(b), cause to be
registered under the 1933 Act all of the Registrable Securities that each such
Holder has requested to be registered.
(b) Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under this Section 7.3 to include any of a Holder's
Registrable Securities in such underwriting unless such Holder accepts the terms
of the underwriting as agreed upon between the Company and
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terms and conditions set forth herein the underwriters selected by it. If the
total amount of securities, including Registrable Securities, requested by
security holders of the Company to be included in such offering exceeds the
amount of securities sold other than by the Company that the underwriters
reasonably believe is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters believe
will not jeopardize the success of the offering. If any securities held by
security holders of the Company are to be included in the offering, Registrable
Securities held by any of the Holders shall be included prior to securities held
by any other security holders (the securities to be included to be apportioned
pro rata first among the Holders of Registrable Securities in proportion, as
nearly as practical, to the amount of Registrable Securities then outstanding
owned by each Holder, and then, if additional securities may be included, among
the other selling security holders according to the total amount of securities
entitled to be included therein owned by each such selling security holder; or
in such other proportions as shall mutually be agreed to by such other selling
security holders).
For purposes of the preceding parentheticals concerning apportionment, for any
selling security holder which is a Holder of Registrable Securities and which is
a terms and conditions set forth herein partnership or corporation, the
partners, retired partners and shareholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
security holder", and any pro rata reduction with respect to such selling
security holder shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
selling security holder, as defined in this sentence.
(c) Expenses of Incidental (Piggyback) Registration. The
Company shall bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registrable Securities with respect to
registrations pursuant to Section 7.3 for each Holder, including without
limitation all registration, filing, and qualification fees, printers' and
accounting fees relating or apportionable thereto and the reasonable fees and
disbursements (up to $10,000) of one counsel for the selling Holders (as a
group) selected BY them, but excluding underwriting discounts and commissions
relating to Registrable Securities. The Company shall have the right to select
the states in which the registration shall be qualified, provided, however, that
if the Holders request qualification in additional states the Company shall use
best efforts to qualify the registration in such states, provided that the
Holders pay any costs directly associated with such additional qualifications.
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(d) Company withdrawal of Registration. The Company shall have
no liability to any Holder for the Company's withdrawal of any registration
(other than a registration made pursuant to Section 7.2) as to which a Holder
has registration rights under this Section 7.3, provided such withdrawal is made
in good faith by the Company and not for the purpose of impairing any Holder's
rights under this Section 7.3.
7.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 7.4: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$250,000; (3) if the Company has successfully effected one or more registrations
on Form S-3 pursuant to this Section 7.4 within the six (6) month period
immediately preceding the date on which the Company receives from a Holder or
Holders a written request to effect a registration pursuant to this Section 4;
(4) if the Company would be required to undertake an audit in addition to its
normal year-end audit, unless the Holders requesting the registration agree to
pay for such audit, or unless the additional audit is necessitated by the
Company's decision to delay the registration as permitted by the following
sentence. Additionally, the Company may postpone a requested S-3 registration
for a period of time not to exceed four months, if the Board of Directors
determines in good faith, and so notifies the Holders requesting registration,
that an S-3 registration at the requested time would materially adversely affect
the public market for the Company's securities, provided that this right may not
be used more than once in a given 12-month period.
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(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. All expenses incurred in connection with
the registrations requested pursuant to this Section 7.4, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements (up to $5,000) of one counsel for
the selling Holder or Holders (as a group) and counsel for the Company, shall be
borne by the Company. Registrations effected pursuant to this Section 7.4 shall
not be counted as registrations effected pursuant to Sections 7.2 or 7.3.
(d) The Company is obligated to effect only three (3) such
registrations pursuant to this Section 7.4.
7.5 Obligations of the Company. Whenever required under this
Section 7 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) consecutive days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them and covered by a registration statement filed under this Section 7.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, and provided further,
that, in
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connection with a registration pursuant to Sections 7.2 or 7.4 hereof,
the Company shall not be required to qualify securities in more than 10 states
unless the Holders pay the costs directly associated with such additional
qualifications.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriters of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement as promptly as possible, at any time when a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 7, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 7, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities; provided that the Company need only use its best efforts to furnish
the letter from the Company's accountants described in the immediately preceding
clause (ii).
7.6 Obligations of Holders. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 7
that the selling Holders shall furnish to the Company, at their expense, such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as
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shall be required to effect the registration of their Registrable Securities.
7.7 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 7.
7.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 7:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, agents, officers and directors of
each Holder, any underwriter, (as defined in the 0000 Xxx) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act") , against any losses, claims, damages, or liabilities (joint or several)
to which they may become subject under the 1933 Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated under
the 1933 Act, the 1934 Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will reimburse
each such Holder, partner, agent, officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided however, that the indemnity agreement contained
in this Section 7.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or
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controlling person of such Holder. Notwithstanding anything to the contrary
contained in this Section 7.8, this indemnity shall not apply to a person
indemnified in this Section 7.8(a) insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in a
prospectus used by such person after the Company has advised such person in
writing that the prospectus is out of date or no longer accurate and the Company
has stated that the use of the prospectus should be discontinued.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each of the Company's
agents, each person, if any, who controls the Company within the meaning of the
1933 Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages, or liabilities (joint or several) to which the Company or any such
director, officer, agent, controlling person, underwriter, or other such Holder,
partner or director, officer or controlling person of such other Holder may
become subject under the 1933 Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, partner,
officer, agent, director, or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 7.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, (which consent shall not be unreasonably withheld);
and provided further, that in no event shall any indemnity under this Section
7.8(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 7.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 7.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires,
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jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonable fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, shall not relieve such indemnifying party of any liability to
the indemnified party under this Section 7.8, unless and to the extent that the
indemnifying party is materially prejudiced thereby, and the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 7.8.
(d) The foregoing indemnity agreements of the Company and
Holders are subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration
statement in question becomes effective or the amended prospectus filed with the
SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the Final
Prospectus was furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the 1933 Act.
(e) The obligations of the Company and Holders under this
Section 7.8 shall survive the conversion, if any, of the Purchased Shares, the
completion of any offering of Registrable Securities in a registration statement
under this Section 7, and otherwise.
7.9 Rule 144 Information; Reports Under 1934 Act. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
1933 Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
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(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(d) furnish to any Holder of Registrable Securities, forthwith
upon request (i) a written statement by the Company that it has complied with
the reporting requirements of SEC Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company), the 1933 Act and the 1934 Act (at any time after it has become subject
to such reporting requirements), or that it qualified as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
7.10 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 7 may be
assigned by a Holder to a transferee or assignee of at least 150,000 of the
Purchased Shares, or an equivalent amount of Registrable Securities, or any
combination thereof. The Company shall be furnished, within a reasonable time
after such transfer, with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned. Notwithstanding the foregoing, rights to
cause the Company to register securities may be assigned to any partner, partner
of a partner, retired partner, shareholder or affiliate of the Company or of a
Holder, or to the spouse, children, grandchildren, parents or siblings of an
Investor, or trust for the benefit of an Investor or any such persons,
regardless of the number of shares transferred.
7.11 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of sixty percent (60%) of the Registrable Securities then
outstanding, enter into any agreement with any holder or
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prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to include such securities in any registration
filed under Section 7.2, 7.3 or 7.4 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of such securities will
not reduce the amount of Registrable Securities of the Holders that are
included, or (b) to make a demand registration which could result in such
registration statement being declared effective prior to one hundred twenty
(120) days after the earlier of either of the dates set forth in the first
sentence of subsection 7.2(a), or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to Section 7.2, or (c) to
have incidental (piggyback) registration rights that conflict with or are prior
or superior to the rights granted to the Holders in Section 7.3.
7.12 Suspension of Registration Rights. Provided that (i) the Company has
previously closed a firm commitment public offering of the Common Stock of the
Company pursuant to a registration statement on Form S-1, filed with, and
declared effective by, the SEC pursuant to the 1933 Act and (ii) there then
exists an active public trading market for the Company's Common Stock, the
registration rights contained in this Section 7 shall be suspended as to any
Holder who: (a) (i) is legally able to sell all such Holder's Registrable
Securities to the public without registration in two (2) consecutive three (3)
month periods pursuant to the provisions of Rule 144 promulgated under the 1933
Act and (ii) owns less than (2%) of the Company's outstanding Common Stock,
calculated as provided in this Section 7.12. In calculating the amount of Common
Stock held by such Holder and the total amount of Common Stock outstanding for
purposes of this Section 7.12, there shall be deemed outstanding all shares of
the Company's Common Stock issuable on conversion, exchange or exercise of any
outstanding securities of the Company.
7.13 Amendment of Registration Rights. Any provision of this Section 7 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of sixty percent (60%) of the
Registrable Securities then outstanding; provided, however, that no such
amendment or waiver that materially and adversely affects Cordis in a manner
substantially different than the New Investors shall be binding on Cordis
without Cordis' approval. Any amendment or waiver effected in accordance with
this Section shall be binding upon each Holder and the Company and shall treat
each Holder on an equal and ratable basis, unless otherwise agreed to in writing
by the adversely treated Holder(s). By acceptance of any benefits under this
Section 7, holders of Registrable Securities hereby agree to be bound by the
provisions hereunder.
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7.14 Standoff Agreement. Each Holder hereby agrees that, in
connection with the first registration of the Company's Common Stock (or other
securities) covering an underwritten offering of such stock or securities to the
general public, such Holder shall not, to the extent requested by the Company or
the underwriter of such offering, sell or otherwise transfer or dispose (other
than to donees who agree to be similarly bound) of any Registrable Securities
(other than those Registrable Securities which are included, in such
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed ninety
(90) days) from the effective date of the registration statement for such
registration as the Company or such underwriters may specify in writing;
provided, however, that:
(a) such agreement shall be applicable only to the first
registration statement of the Company which covers shares of Common Stock (or
other securities) to be sold on the Company's behalf to the general public in an
underwritten offering; and
(b) all executive officers and directors of the Company and
all other persons with registration rights (whether or not granted pursuant to
this Agreement) enter into similar agreements.
8. COVENANTS OF THE COMPANY.
8.1 Delivery of Financial Statements.
(a) The Company shall deliver to each Investor, for so long as
such Investor is a holder of Purchased Shares or Conversion Shares, (1) as soon
as available, and in any event within ninety (90) days after the close of each
fiscal year, consolidated balance sheets of the Company and its subsidiaries, if
any, including MCI, as at the end of such year, and consolidated statements of
income, shareholders' equity and changes in financial position of the Company
for such year setting forth in comparative form the figures for such year and
for the preceding year, all in reasonable detail, and duly audited by a firm of
independent certified public accountants of nationally recognized standing.
(b) The Company shall deliver to each Investor, for so long as
such Investor is a holder of at least 100,000 Purchased Shares, or the
equivalent number of Conversion Shares, or any combination of the two equivalent
to 100,000 Purchased Shares:
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(i) as soon as available, but in any event within
forty-five (45) days prior to the end of each fiscal year, an annual plan for
the Company's next fiscal year, prepared on a monthly basis, including
projected balance sheets, profit and loss statements and sources and
applications of funds and cash flow statements for such months and, as soon as
prepared in final form, any other budgets or revised budgets prepared by the
Company;
(ii) as soon as available, but in any event within
twenty (20) days after the end of each month (except the last month of the
fiscal year), consolidated balance sheets of the Company and its subsidiaries,
if any, including MCI, as at the end of such month, backlog report, and
consolidated statements of income, shareholders' equity and changes in financial
position, and sources and applications of funds and cash flow statements of the
Company and its subsidiaries, if any, including MCI, for such month, and a
report in comparative form showing the figures for such month, the figures for
the corresponding month of the preceding year, and the budgeted figures for the
current month, accompanied by management's analysis of the results of the month
and a statement explaining any differences between budgeted and actual results;
and
(iii) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
the Investor or any assignee of the Investor may from time to time reasonably
request.
(c) All financial statements required to be delivered
pursuant to Section 8.1(a) above shall be prepared in accordance with generally
accepted accounting principles consistently applied (except that monthly
financial statements need not comply with footnote requirements and may be
subject to standard year-end audit adjustments, provided that the omission of
such information is not material to an understanding of the Company's financial
situation), shall present fairly the financial condition of the Company and its
subsidiaries, if any, including MCI, and its results of operations for the
period specified, and shall be accompanied by an instrument executed for the
Company by the chief financial officer or chief executive officer of the Company
certifying that such statements comply with the requirements of this Section
8.1(b).
8.2 Inspection Rights. The Company shall permit each Investor, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor. At the Company's request, an Investor will sign a
non-disclosure agreement in the form of Exhibit E-3.
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8.3 Termination of Covenants. The covenants set forth in Section 8.1
shall terminate as to Investors and be of no further force or effect upon the
first sale of the Company's Common Stock pursuant to a registration statement
filed by the Company under the 1933 Act in connection with a firm commitment
underwritten offering of such Common Stock to the general public.
8.4 Insurance. The Company shall maintain in full force and effect
insurance policies issued by insurers of recognized responsibility insuring the
Company and its properties and business against such losses and risks and in
such amounts as are deemed adequate for the business of the Company by its Board
of Directors. The Company shall use its best efforts to obtain and maintain
product liability insurance in such amounts as the Board of Directors deems
appropriate.
8.5 Key Man Insurance. Within 60 days of the Closing the Company
will have procured a term life insurance policy on the life of Xxxxxxx X. Xxxx
or his successor in the amount of at least $1,000,000 with the proceeds payable
to the Company. The Company shall keep such policy in effect until the
termination of Xx. Xxxx'x employment, and shall provide the Investors with
evidence that such policy is in effect, upon request.
8.6 FIRPTA. The Company acknowledges that certain Investors may have
foreign persons and entities as partners and that the Company may be required,
and hereby agrees, to file in the future with the IRS all statements with its
United States income tax returns which are required under Section 1.897-2(h) of
the Regulations; provided that each Investor provides the Company, upon request,
with such information as the Company needs to prepare and file such returns. The
Company will use its reasonable efforts consistent with sound business practice
to avoid becoming a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code. However, in the event the Company in
the future becomes a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code, the Company shall promptly notify
each Investor in writing of such fact. Within thirty (30) days after receipt of
a request from an Investor, the Company shall prepare and deliver to such
Investor the statement required under Regulation Section 1.8972(h)(iv) and
either or both of the following documents: (i) an affidavit in conformance with
the requirements of Section 1445 (b)(3) of the Code or (ii) a notarized
statement, executed by an officer having actual knowledge of the facts, that the
shares of Company stock held by such Investor are of a class that is regularly
traded on an established securities market, within the meaning of Section
1445(b)(6) of the Code. If the Company is unable to provide either of the
documents described in (i) or (ii) above, if requested, it shall promptly notify
such Investor in writing of the reasons for such inability. Finally, upon the
request of
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an Investor and without regard to whether either document described in (i) or
(ii) above has been requested, the Company shall cooperate fully with the
efforts of such Investor to obtain a "qualifying statement," within the meaning
of Section 1445(b)(4) of the Code or such other documents as would excuse a
transferee of a foreign investor's interest from withholding of income tax
imposed pursuant to Sections 897(a) and 1445 of the Code.
8.7 Board of Directors. The Company shall use its best efforts to
cause two nominees of the Investors to be members of the Company's Board of
Directors at all times. All travel and related expenses incurred in connection
with attending meetings of the Company's Board of Directors by such directors,
and any other director, shall be promptly reimbursed by the Company upon receipt
of reasonable documentation of such expense.
8.8 Employee Invention and Trade Secret Agreement. The Company and
MCI shall require all employees and officers of the Company and MCI, and all
consultants of the Company and MCI, to enter into an Invention and Trade Secret
Agreement in the forms attached hereto as Exhibit E-1 and E-2, respectively (or
in such other form as the Company's Board of Directors may approve), as of the
date of commencement of their employment, term of office, or consultancy, as the
case may be, with the Company, provided, however, that non-officer employees and
consultants not involved in the creation or development of inventions,
improvements, works of authorship, formulas, processes, computer programs,
databases or trade secrets need only sign a Non-Disclosure Agreement in the form
attached hereto as Exhibit E-3.
8.9 Activities of MCI. MCI shall not undertake any activities not in
the normal course of business. Without limiting the foregoing, MCI shall not
amend it articles of incorporation or bylaws, effect any sale, conveyance,
encumbrance or otherwise dispose of all or substantially all of the assets of
that corporation, merge or consolidate with any other corporation, effect a
reclassification or recapitalization, issue any shares of stock, or any bonds,
notes, or other obligations convertible into or exchangeable for, or having
option rights to purchase, any shares of MCI stock, declare or pay any dividends
or effect any stock split or combination, or redeem or purchase any shares of
its stock.
8.10 Fees of Special Counsel. At the Closing, the Company will pay
all reasonable legal fees and expenses of Fenwick, Davis & West, incurred by the
Investors, or any of them, in connection with the transactions contemplated by
this Agreement.
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9. MISCELLANEOUS.
9.1 Survival of Warranties. The warranties, representations and
covenants of the Company contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing for a
period of 3 years after the Closing, and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investors.
9.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
9.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Utah, except as pertains to conflict
of laws.
9.4 Counterparts. 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 instruments.
9.5 Headings. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which are incorporated herein by this reference.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the Schedule of Investors or, in the case of the
Company and MCI, 1290 West 0000 Xxxxx, Xxxxx X, Xxxx Xxxx Xxxx, Xxxx 00000, or
at such other address as such party may designate by ten (10) days advance
written notice to all other parties.
9.7 Finder's Fees. Each party represents that it neither is nor will
be obligated for any finder's or broker's fee or commission in connection with
this transaction, except that it is acknowledged by all parties that the right
of Xxxx X. Xxxxxxx and W. Xxxxxx Xxxxxx to purchase certain shares of the
Company's Common Stock are, or may be, conditioned upon the closing of a
financing. Each Investor agrees to indemnify and
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to hold harmless the Company from any liability for any commission or
compensation in the nature of a finders' or broker's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a
finder's or broker's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
9.8 Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or the Revised Articles, 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.
9.9 Amendments and Waivers. Except as specified in subsection 7.13,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of Purchased Shares and/or Conversion Shares representing at
least sixty percent (60%) of the aggregate number of shares of Common Stock
into which the Purchased Shares then are convertible or have been converted
(excluding any of such shares that have been sold to the public); provided,
however, that no such amendment or waiver that materially and adversely affects
Cordis in a manner substantially different than the New Investors shall be
binding on Cordis without Cordis' approval. Any amendment or waiver effected in
accordance with this section shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding (including securities
into which such securities are convertible), each future holder of such
securities, and the Company; provided, however, that no condition set forth in
Section 5 may be waived with respect to any Investor who does not consent
thereto.
9.11 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.
9.12 Entire Agreement. This Agreement, together with all exhibits
and schedules hereto (including without limitation the Revised Articles)
constitutes the entire
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understanding and agreement of the parties with respect to the transactions
contemplated herein and supersede all prior understandings and agreements with
respect to such transactions. Without limiting the foregoing, it is hereby
agreed that this Agreement supercedes the Cordis Agreement completely, and that
the Cordis Agreement is null and void and of no further effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
THE "COMPANY" INVESTORS:
JMW ACQUISITION CO. NEWTEK VENTURES,
a California limited partnership
By: By: /s/ Xxxxx X. Xxxxxx
-------------------------------- -------------------------------------
Print Name: Print Name: Xxxxx X. Xxxxxx
------------------------- -----------------------------
Title: President Title: General Partner
------------------------- ----------------------------------
"MCI" MBW VENTURE PARTNERS LIMITED
PARTNERSHIP
MOTION CONTROL, INC. By: MBW MANAGEMENT, INC.
By: By:/s/ Xxxxxx X. Xxxxxxxxxx
-------------------------------- -------------------------------------
Print Name: Print Name: Xxxxxx X. Xxxxxxxxxx
------------------------- -----------------------------
Title: Title: Vice President
----------------------------- ----------------------------------
MICHIGAN INVESTMENT FUND L.P.
By: MBW MANAGEMENT, INC.
By:/s/ Xxxxxx X. Xxxxxxxxxx
-------------------------------------
Print Name: Xxxxxx X. Xxxxxxxxxx
-----------------------------
Title: Vice President
----------------------------------
UTAH TECHNOLOGY VENTURE FUND I
By: Impetus, Inc.
By:
-------------------------------------
Print Name:
------------------------------
Title: President
-----------------------------------
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CORDIS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Print Name: Xxxxxx X. Xxxxxxx
------------------------------
Title: President
-----------------------------------
/s/ Ian R.N. Bund
-----------------------------------------
Ian R.N. Bund
/s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxxxxx
/s/ Xxx X. Xxxxxxxxxxx
-----------------------------------------
Xxx X. Xxxxxxxxxxx, Trustee of
Xxx X. Xxxxxxxxxxx Profit
Sharing Plan
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LIST OF EXHIBITS
Exhibit A - Schedule of Investors
Exhibit B - Revised Articles of Incorporation
Exhibit C - Schedule of Exceptions (including list of Proprietary
Assets)
Exhibit D - Outstanding Security Holders of the Company and MCI
Exhibit E - Invention and Trade Secret Agreements
Exhibit F - Material Agreements of the Company
Exhibit G - Financial Statements
Exhibit H - Shareholder Agreement
Exhibit I - Opinion of Xxxxxx and Xxxxxxxx
Exhibit J - Bylaws
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41
EXHIBIT A
Schedule of Investors
Series and Number of
Shares of Preferred Purchase
Investor Stock Purchased Price
---------- -------------------- --------
Newtek Ventures 1,789,028 $675,000.26
000 Xxxxxxxxxx Xxxxxx, Series X Xxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
MBW Venture Partners 1,352,042 $510,125.44
Limited Partnership Series B Stock
c/o MBW Management, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
Michigan Investment 403,857 $152,375.24
Fund L.P. Series B Stock
c/o MBW Management, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
Utah Technology Venture Fund 397,562 $150,000.14
000 Xxxxxx Xxx Series X Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
Cordis Corporation 67,200 As set forth
00000 X. Xxxxxxx Xxxxxx Series A Stock in section 1.2 of
Xxxxx, XX 00000 172,800 the Agreement
Attn: Xxxx X. Xxxxxx Series C Stock
Ian R.N. Bund 13,252 $4,999.98
c/o MBW Management, Inc. Series B Stock
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
Xxxxx X. Xxxxxxxx 13,252 $4,999.98
c/o MBW Management, Inc. Series B Stock
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
Xxxxxx X. Xxxxxxxxxx 2,650 $999.85
c/o MBW Management, Inc. Series B Stock
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
42
Series and Number of
Shares of Preferred Purchase
Investor Stock Purchased Price
-------- -------------------- ---------
Xxx X. Xxxxxxxxxxx, Trustee 3,975 $1,499.77
of Xxx X. Xxxxxxxxxxx Series B Stock
Profit Sharing Plan
c/o MBW Management, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
---------
Total 4,215,618
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LIST OF EXHIBITS
Exhibit A - Schedule of Investors
Exhibit B - Revised Articles of Incorporation
Exhibit C - Schedule of Exceptions (including list of
Proprietary Assets)
Exhibit D - Outstanding Security Holders of the Company and MCI
Exhibit E - Invention and Trade Secret Agreements
Exhibit F - Material Agreements of the Company
Exhibit G - Financial Statements
Exhibit H - Shareholder Agreement
Exhibit I - Opinion of Xxxxxx and Xxxxxxxx
Exhibit J - Bylaws
44
EXHIBIT "B"
REVISED
ARTICLES OF INCORPORATION
OF
JMW ACQUISITION CO.
Pursuant to the applicable provisions of Utah law, as contained in
Section 16-10-60 of the Utah Business Corporation Act, we, the undersigned
natural persons, revise the following Articles of Incorporation. These revised
Articles of Incorporation shall supersede the original Articles of
Incorporation and all amendments to them to date.
ARTICLE I
The name of the corporation is JMW ACQUISITION CO.
ARTICLE II
The period of the corporation's duration is perpetual.
ARTICLE III
The purpose of purposes for which the corporation is organized are:
1. To engage in the business of the research, development,
manufacture and sale of medical devices, products and/or drugs, and to acquire
other businesses or companies related thereto or to the science of medicine or
other biological sciences.
2. To lease, buy, and hold, to sell, mortgage, exchange, assign, and
otherwise dispose of, to improve, manage, contain, conserve and operate and
generally to trade and deal in and with as principal or agent, and otherwise
acquire, invest in or hold, improved and unimproved real and personal property
in the United States and any foreign country; and to do all things related
thereto, including, but not limited to, becoming a limited general partner or
venturer in undertakings of all types.
3. In addition to the foregoing purposes, the Corporation may engage
in any and all other lawful acts that, presently or in the future, may legally
be performed by a corporation organized under the laws of the State of Utah,
including, without limitation, becoming a limited or general partner or
venturer in undertakings of all types.
45
ARTICLE IV
The corporation is authorized to issue two classes of shares, one
designated "Common Stock" and the other designated "Preferred Stock". Both
classes of shares shall have a par value of $0.001 per share. The number of
shares of Common Stock that this corporation is authorized to issue is
15,000,000. The number of shares of Preferred Stock that this corporation is
authorized to issue is 4,215,618, of which 67,200 shall be designated Series A
Preferred Stock, 3,975,618 shall be designated Series B Preferred Stock, and
172,800 shall be designated Series C Preferred Stock.
The relative rights, preferences, privileges and restrictions granted
to or imposed upon the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock, or the holders thereof, are as follows:
1. Definitions. For purposes of this Article IV the following terms
shall have the following definitions:
(A) Series A Stock shall mean Series A Preferred Stock.
(B) Series B Stock shall mean Series B Preferred Stock.
(C) Series C Stock shall mean Series C Preferred Stock.
(D) Preferred Stock shall mean the Series A Stock, Series B Stock
and Series C Stock, collectively.
(E) Common Stock shall mean this corporation's Common Stock.
(F) Liquidation Preference for Series A Stock shall mean $5.2083
per share plus any declared but unpaid dividends on such shares: for Series B
Stock shall mean $0.3773 per share plus any declared but unpaid dividends on
such shares; and for Series C Stock shall mean $5.2083 per share plus any
declared but unpaid dividends on such shares; all appropriately adjusted for
any stock combinations, stock splits, stock dividends or stock distributions (a
"Stock Combination or Division") with respect to such shares.
(G) Redemption Price for Series A Stock shall mean $5.2083 per
share plus any declared but unpaid dividends on such shares; for Series B Stock
shall mean $0.3773 per share plus any declared but unpaid dividends on such
shares; and for Series C Stock shall mean $5.2083 per share plus any declared
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46
but unpaid dividends on such shares; all as appropriately adjusted for any
Stock Combinations or Divisions with respect to such shares.
(H) Original Issue Date shall mean August 4, 1987.
2. Dividends. Dividends shall be paid on the Common and Preferred
Stock at such times and in such amounts as the Board of Directors deems
advisable. Notwithstanding the foregoing, no dividend (other than a dividend
payable solely in Common Stock) shall be declared or paid on any share of
Common Stock unless an equal or greater dividend per share has first been
declared and paid on each share of Preferred Stock, as appropriately adjusted
for any Stock Combinations or Divisions. Each share of Preferred Stock,
regardless of series, shall be paid the same dividend per share.
3. Liquidation Rights. In the event of any liquidation, dissolution,
or winding up of this corporation, either voluntary or involuntary,
distributions to the shareholders of this corporation shall be made in the
following manner.
Section 3.1 Series A Stock And Series B Stock Liquidation Rights.
The holders of Series A Stock and Series B Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of this corporation to the holders of Series C Stock or Common Stock by
reason of their ownership of such stock, an amount equal to their Liquidation
Preference for each share of Series A Stock and Series B Stock then held by
them. If such assets and funds are insufficient to permit the payment to the
holders of Series A Stock and Series B Stock of the full aforesaid preferential
amount, then the entire assets and funds of this corporation legally available
for distribution shall be distributed pro-rata among the holders of the Series A
Stock and Series B Stock in the proportion that the amount that a given holder
would receive as a liquidation preference on such holder's shares of Series A
Stock and Series B Stock, if such preference was paid in full, bears to the
total liquidation preference that would be received on all the outstanding
Series A Stock and Series B Stock, if such preference was paid in full.
Section 3.2 Series C Stock Liquidation Rights. After payment to the
holders of Series A Stock and Series B Stock of the amounts set forth in Section
3.1 above, the holders of the Series C Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
this corporation to the holders of Common Stock by reason of their ownership of
such stock, an amount equal to their Liquidation Preference for each share of
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Series C Stock then held by them. If such assets and funds shall be
insufficient to permit the payment to the holders of Series C Stock of the full
aforesaid preferential amount, then the entire assets and funds of this
corporation legally available for distribution and remaining after the payments
required by Section 3.1 have been made shall be distributed pro-rata among the
holders of the Series C Stock based on the number of shares of Series C Stock
held by each of them.
Section 3.3 Remaining Liquidation Rights. After payment to the
holders of Preferred Stock of the amounts set forth in Sections 3.1 and 3.2
above, the entire remaining assets and funds of this corporation legally
available for distribution, if any, shall be distributed among the holders of
common Stock and Preferred Stock pro-rata, based on the number of shares of
Common Stock held by each such holder (to be calculated for this purpose as if
all outstanding shares of Preferred Stock have been converted into Common Stock
pursuant to the terms hereof).
Section 3.4 Consolidation, Merger, Sale of Assets. A consolidation
or merger of the corporation with or into any other corporation or corporations,
or a sale of all or substantially all of the assets of the corporation, shall
not be deemed to be a liquidation, dissolution or winding-up within the meaning
of this Section 3.
4. Voting Rights.
Section 4.1 Preferred Stock Rights. Except as otherwise expressly
provided herein or as required by law, the holder of each share of Preferred
Stock shall be entitled to one vote for each share of Common Stock into which
such shares of Preferred Stock could then be converted (with any fractional
share determined on an aggregate conversion basis being rounded up or down to
the nearest whole share), shall have voting rights and powers equal to the
voting rights and powers equal to the voting rights and powers of a holder of
Common Stock, shall vote with the holders of Common Stock and not as a separate
class, and shall be entitled to notice of any shareholders meeting in accordance
with the Bylaws of the corporation. If these Revised Articles of Incorporation
or the law provides for the holders of Preferred Stock to vote separately from
the holders of Common Stock on a matter, then all series of Preferred Stock
shall vote together as one class. Under no circumstance shall any series of
Preferred Stock be entitled to vote separately on a matter.
Section 4.2 Cumulative Voting. Holders of the corporation's stock
entitled to vote at any election of directors of this corporation may cumulate
their votes and give one candidate a number of votes equal to the number of
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directors to be elected multiplied by the number of votes to which such
holder's shares are normally entitled, or distribute the such holder's votes on
the same principal amongst as many candidates as such holder thinks fit. No
holder, however, may cumulate such holder's vote for one or more candidates
unless such candidate's or candidates' names have been placed in nomination
prior to the voting and the shareholder has given notice at the meeting, prior
to voting, of such shareholder's intention to cumulate such shareholder's
votes. If any one holder has given such notice, all holders may cumulate their
votes for candidates in nomination.
5. Redemption.
Section 5.1 Mandatory Redemption of Series A Stock and Series B
Stock. The corporation shall redeem, on July 15, 1992, and on each of the next
four anniversaries of such date, 13,440 shares of Series A Stock and 795,099
shares of Series B Stock (or, as to a given series, all outstanding shares of
such series, if such amount is less than the amount of shares of such series
scheduled to be redeemed) at the then current Redemption Price for such shares,
from any source of funds legally available therefore. the shares of each series
to be redeemed shall be redeemed pro-rata from each holder of stock of such
series, based on the number of shares of stock of such series held by such
holder. If insufficient funds are legally available to redeem all the shares of
Series A Stock and Series B Stock to be redeemed on a given redemption date,
then the corporation shall redeem shares of Series A Stock and Series B Stock
from the holders thereof to the maximum extent permitted by law. in such event
the available funds shall be apportioned between the holders of Series A Stock
and Series B Stock based on the aggregate Redemption Price of the shares of each
such series scheduled to be redeemed. The funds available for redemption of
shares of each series shall be used to redeem shares from each holder of shares
of such series pro-rata, based on the number of shares of such series held by
such holder. Any shares scheduled for redemption that are not redeemed shall be
carried forward and redeemed (together with the other shares of Series A Stock
and Series B Stock that are then due to be redeemed) on the next redemption date
(or after July 15, 1996, as soon as legally possible) to the full extent of the
legally available funds of the corporation at such time. Shares of Series A
Stock and Series B Stock that are scheduled for redemption but are not redeemed,
shall continue to be entitled to all of the rights, preferences, privileges, and
restrictions accorded to such shares until they have been redeemed.
Section 5.2 Mandatory Redemption of Series C Stock. The corporation
shall redeem, on the later of July 15,
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49
1997, or the first anniversary of such date after the Series A Stock and Series
B Stock have been fully redeemed pursuant to the provisions of Section 5.1
hereof (the "First Series C Redemption Date"), and on each of the next four
anniversaries of the First Series C Redemption Date, 34,560 shares of Series C
Stock (or all outstanding shares of such series, if less), at the then current
Redemption Price for such series, from any source of funds legally available
therefore. The shares to be redeemed shall be redeemed pro-rata from each
holder of Series C Stock, based on the number of shares of Series C Stock held
by such holder. If insufficient funds are legally available to redeem all of
the shares of Series C Stock to be redeemed on a given redemption date, then
the corporation shall redeem the maximum number of shares of Series C Stock
permitted by law, and such redemption shall be made pro-rata from holders of
Series C Stock based on the number of shares of Series C Stock held by such
holder. Any shares scheduled for redemption that are not redeemed shall be
carried forward and redeemed (together with the other shares of Series C Stock
that are then due to be redeemed) on the next redemption date (or, after July
15, 2001, as soon as legally possible), to the full extent of the legally
available funds of the corporation at such time. Shares of Series C Stock that
are scheduled for redemption but are not redeemed shall continue to be entitled
to all of the rights, preferences, privileges and restrictions of such shares
until they have been redeemed.
Section 5.3 Notice of Redemption. At least forty five days (but not more
than ninety days) prior to the date fixed for any redemption pursuant to the
provisions of Section 5.1 or Section 5.2 (the "Redemption Date"), the
corporation shall give notice of such redemption (the "Redemption Notice") to
all holders of Series A Stock and Series B Stock (in the case of a redemption
pursuant to Section 5.1), and to all holders of Series C Stock (in the case of
a redemption pursuant to Section 5.2), (1)that the corporation is required to
redeem shares and the number of shares of such holder to be redeemed; (2) the
Redemption Date; (3) the Redemption Price; (4) the place at which such holders
may obtain payment of the Redemption Price upon surrender of their share
certificates; and (5) the date on which any right to convert the shares to be
redeemed to Common Stock terminates. Shares called for redemption in a
Redemption Notice and subsequently converted by the holder thereof prior to the
Redemption Date shall reduce the number of shares required to be redeemed by
the corporation on such Redemption Date pursuant to Section 5.1 or 5.2.
Section 5.4 Deposit of Redemption Funds. On or prior to the Redemption
Date this corporation shall deposit the Redemption Price of all shares to be
redeemed with a bank or
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trust company having aggregate capital and surplus in excess of $20,000,000, as
a trust fund, with irrevocable instructions and authority to the bank or trust
company to pay, on and after such Redemption Date, the Redemption Price of the
shares to their respective holders upon the surrender of their share
certificates. Any funds deposited by this corporation pursuant to this section
for the redemption of shares thereafter converted into Common Stock shall be
returned to this corporation promptly upon such conversion. The balance of any
funds deposited by this corporation pursuant to this section remaining
unclaimed at the expiration of one year following such Redemption Date shall be
returned to this corporation promptly upon its written request.
Section 5.5 Surrender of Shares. On or after each Redemption Date, each
holder of shares to be redeemed shall surrender such holder's certificates
representing such Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof. Upon redemption of only a
portion of the number of shares covered by a given certificate surrendered for
redemption, the corporation shall issue and deliver a new certificate covering
the unredeemed portion of the original certificate. From and after such
Redemption Date, unless payment of the Redemption Price is not made by the
corporation, all rights of the holders of the shares of stock to be redeemed as
holders of such stock (except the right to receive the Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares.
Section 5.6 Funds Available for Stock Redemption or Repurchase. Subject
to the other provisions of these Revised Articles of Incorporation, the
corporation shall have the right to redeem or repurchase its shares to the
extent of its unreserved and unrestricted earned surplus, and also to the extent
of its unreserved and unrestricted capital surplus.
Section 5.7 Return to Unissued Status. Shares of any series of Preferred
Stock that have been redeemed or reacquired in any manner by this corporation,
or which, if convertible, have been converted into shares of stock of another
class or classes, shall be retired, shall not be reissued and shall be cancelled
in accordance with the procedure required by the Utah Business Corporation Act.
6. Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
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51
Section 6.1 Right to Convert/Automatic
Conversion.
(A) Each share of Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the Original Issue Date, at the
office of this corporation or any transfer agent for the Preferred Stock, into
such number of fully paid an non-assessable shares of Common Stock as is
determined by dividing $0.3773 (the "Original Issue Price") by the Conversion
Price for shares of Preferred Stock at the time in effect. The initial
Conversion Price for shares of Preferred Stock shall be the Original Issue
Price; provided, however, that the Conversion Price for the Preferred Stock
shall be subject to adjustment as set forth in this Section 6.
(B) In the event of redemption of any shares of Preferred Stock
pursuant to Section 5 hereof, the Conversion Rights shall terminate as to the
shares designated for redemption at the close of business on the day prior to
the Redemption Date, unless payment of the Redemption Price is not made by the
corporation.
(C) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the then effective Conversion Price
immediately upon the closing of the corporation's sale of its Common Stock to
the public in a bona fide, underwritten public offering pursuant to a
registration statement under the Securities Act of 1933, as amended, the public
offering price of which is not less than $1.1319 per share (as appropriately
adjusted for any Stock Combinations or Divisions), and resulting in the receipt
by the corporation of at least $5,000,000 in gross proceeds.
Section 6.2 Mechanics of Conversion
(A) To convert Preferred Stock, the holder thereof shall
surrender the certificate or certificates representing such Preferred Stock,
duly endorsed, with signature guaranteed, at the principal corporate office of
this corporation or of any transfer agent for the Preferred Stock, and shall
give written notice to this corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid, and a check
payable to the holder in the amount of any cash amount payable to the holder in
lieu of fractional
- 8 -
52
shares of Common Stock, as provided in Section 6.8. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the certificate representing the shares of Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of such date. If
the conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, the conversion may, at the
option of any holder tendering Preferred Stock for conversion, be conditioned
upon the closing of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(B) Notwithstanding the foregoing, in the event of an automatic
conversion pursuant to Section 6.1(C) the Preferred Stock shall not be deemed
to be converted until immediately prior to the closing of such sale of
securities. Upon the closing of such an offering the outstanding shares of
Preferred Stock shall be converted automatically without further action by the
holders of said shares and whether or not the certificates representing said
shares are surrendered to this corporation or its transfer agent; provided,
however, this corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of
Preferred Stock unless certificates evidencing such shares of Preferred Stock
are either delivered to this corporation or any transfer agent, or the holder
notifies the corporation that said certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to this corporation to
indemnify this corporation against any loss incurred by it in connection
therewith. Upon the occurrence of the automatic conversion of the Preferred
Stock, the holders of the Preferred Stock shall surrender the certificates
representing said shares at the office of this corporation or of any transfer
agent for the Preferred Stock. Thereupon, there shall be issued and delivered
to such holder, promptly at such office and in such holder's name as shown on
such surrendered certificate or certificates (or such other name as such holder
may designate), a certificate or certificates for the number of shares of
Common Stock into which the shares of Preferred Stock surrendered were
convertible on the date on which the event effecting the automatic conversion
occurred.
Section 6.3 Conversion Price Adjustment of Preferred Stock.
The Conversion Prices of the Preferred Stock shall be subject to adjustment
from time to time as follows:
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(A) (i) If the corporation shall issue any Additional Stock
(as defined in Section 6.3(B) below) for a consideration per share less than
the Conversion price of the Preferred Stock in effect immediately prior to the
issuance of such Additional Stock, then the applicable Conversion Price for the
Preferred Stock in effect immediately prior to each such issuance shall
forthwith be adjusted to a price determined by multiplying such Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock which the aggregate consideration received by the
corporation for all such Additional Stock so issued would purchase at the
Conversion Price in effect immediately prior to the issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Additional
Stock; provided that, for the purpose of this Section 6.3(A)(i), all shares of
Common Stock (except as otherwise provided in this Section 6.3(A)) issuable
upon conversion of all outstanding shares of Preferred Stock shall be deemed to
be outstanding, and immediately after any shares of Additional Stock are deemed
to be issued pursuant to Section 6.3(A)(v) such shares of Additional Stock
shall be deemed to be outstanding.
(ii) No adjustment of the applicable Conversion Price shall
be made in an amount less than one cent ($0.01) per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
one cent ($0.01) per share or more in the Conversion Price. Except to the
limited extent provided for in Sections 6.3(A)(v)(c) and 6.3(A)(v)(d), no
adjustment of such Conversion Price pursuant to this Section 6.3(A) shall have
the effect of increasing such Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(iii) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any discounts, commissions or other expenses allowed, paid or
incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(iv) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
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54
(v) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities (that are not
expressly excluded form the definition of Additional Stock), the following
provisions shall apply:
(a) The aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe
for Common Stock shall be deemed to have been issued at the time such options
or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections 6.3(A)(iii) and 6.3(A)(iv)),
if any, received by the corporation upon the issuance of such options or rights
plus the minimum purchase price provided in such options or rights for the
Common Stock covered thereby.
(b) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion of or exchange thereof, shall be deemed to have been issued at the
time such securities were issued or such options or rights were issued and for
a consideration, if any, received by the corporation for any such securities,
or for any such options or rights, plus the minimum additional consideration,
if any, to be received by the corporation upon the conversion or exchange of
such securities or the exercise of any options or rights and conversion or
exchange of related securities, for such Common Stock (the consideration in
each case to be determined in the manner provided in Sections 6.3(A)(iii) and
6.3(A)(iv)).
(c) In the event of any change in the number of shares of
Common Stock deliverable or any increase in the consideration payable to
this corporation upon exercise of such options or rights or upon conversion of
or in exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions thereof,
the Conversion Price of the Preferred Stock obtained with respect to the
adjustment which was made upon the issuance of such options, rights or
securities, and any subsequent adjustments based thereon, shall be recomputed
to reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such related
securities.
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(d) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Preferred Stock obtained with respect to the
adjustment which was made upon the issuance of such options, rights or
securities or options or rights related to such securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such securities or upon
the exercise of the options or rights and conversion or exchange of such
related securities.
(B) "Additional Stock" shall mean any shares of Common Stock issued
(or deemed to have been issued pursuant to Section 6.3(A)(v)) by this
corporation after the Original Issue Date other than:
(i) Common Stock issued pursuant to a transaction described in
subsection 6.3(C) hereof;
(ii) Shares of Common Stock issuable or issued to employees,
officers, directors, or consultants of this corporation directly or pursuant to
a stock option plan or agreement or restricted stock plan or agreement approved
by the directors of this corporation, at any time when the total number of
shares of Common Stock so issuable or issued does not exceed 800,000
(appropriately adjusted to reflect subsequent Stock Combinations or Divisions,
and net of any such shares repurchased by the corporation at cost upon
termination of employment or services, and net of any such options which may
expire unexercised);
(iii) Common Stock issued or issuable upon conversion of the
Preferred Stock; or
(iv) Common Stock issued pursuant to subscription agreements
entered into by the corporation prior to the Original Issue Date.
(C) In the event the corporation should at any time or from time to
time after the Original Issue Date fix a record date for the effectuation of a
split of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by
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such holder for the additional shares of Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such split, dividend or
distribution if no record date is fixed), the Conversion Price of the
Preferred Stock shall be appropriately decreased so that the number of shares
of Common Stock issuable on conversion of each share of Preferred Stock shall
be increased in proportion to such increase of outstanding shares (and/or
shares deemed to be outstanding as determined in accordance with Section
6.3(A)(v)).
(D) If the number of shares of Common Stock outstanding at any time
after the Original Issue Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for the Preferred Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.
Section 6.4 Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidence of
indebtedness issued by this corporation or other persons, assets (excluding
cash dividends) or securities or rights not referred to in Section 6.3(C),
then, in each such case the holders of the Preferred Stock shall be entitled to
a proportionate share of any such distribution as though they were the holders
of the number of shares of Common Stock of the corporation into which their
shares of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the corporation entitled to
receive such distribution, or, if there is no such record date, on the date
such distribution is made.
Section 6.5 Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Preferred Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than a Stock
Combination or Division provided for elsewhere in this Section 6), in any such
event each holder of the Preferred Stock shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other
change by holders of the maximum number of shares of Common Stock into which
such shares of Preferred Stock could have been converted immediately prior to
such recapitalization, reclassification or change. In any such
-13-
57
case, appropriate adjustment shall be made in the application of the provisions
of this Section 6 with respect to the rights of holders of Preferred Stock
after such recapitalization, reclassification or the like to the end that the
provisions of this Section 6 (including adjustment of the Conversion Price then
in effect and the number of shares receivable upon conversion of the Preferred
Stock) shall be applicable after that event and be as nearly equivalent as
possible.
Section 6.6 Reorganizations, Mergers, Sale of Assets. If at any time
or from time to time after the Original Issue Date the corporation effects a
merger, sale or conveyance of all or substantially all of the assets of the
corporation, or similar reorganization (other than a reclassification, exchange
or substitution provided for in Section 6.5), then, as a part of the merger,
sale or conveyance of assets, or other reorganization provision shall be made
so that the holders of Preferred Stock shall thereafter be entitled to receive
upon conversion of the Preferred Stock the number of shares of stock or other
securities or property of the corporation to which a holder of the number of
shares of Common Stock deliverable upon conversion of such Preferred Stock
would have been entitled upon such merger, sale or conveyance of assets or
other reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 6 with
respect to the rights of the holders of Preferred Stock after the merger, sale
or conveyance of assets or other reorganization to the end that the provisions
of this Section 6 (including adjustment of the Conversion Price then in effect
and the number of shares purchasable upon conversion of the Preferred Stock)
shall be applicable after that event and be nearly equivalent as practicable.
Section 6.7 No Impairment. This corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 6 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
Section 6.8 No Fractional Shares. No fractional shares shall be
issued upon conversion of any of the Preferred Stock, and the number of shares
of Common Stock to be issued
-14-
58
shall be rounded down to the nearest whole share. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation shall
pay the holder cash equal to the fraction multiplied by the fair market value of
a share of such stock immediately prior to the conversion, as determined by the
Board of Directors in good faith. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock the holder is at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
7. Notices
Section 7.1 Notices of Record Date. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, or right to
purchase or otherwise acquire any securities or property of the corporation, or
any other right (other than the right to vote shares), the corporation shall
mail to each holder of the Preferred Stock at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or rights,
and the amount and character of such dividend, distribution or right.
Section 7.2 Manner of Notice. Any notice required or permitted to be
given by the provisions of these Revised Articles of Incorporation to the
holders of shares of Preferred Stock (or any series thereof) shall be given in
writing and shall be deemed to have been duly given if delivered personally or
when mailed by registered or certified mail, postage prepaid, to each such
holder of record of Preferred Stock (or applicable series) at such holder's
address appearing on the books of this corporation.
8. Protective Provisions for Preferred Stock. As long as at least an
aggregate of 500,000 shares of the Preferred Stock (as appropriately adjusted
for Stock Combinations or Divisions) shall be outstanding, this corporation
shall not, without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of more than 60% of the total number of shares
of Preferred Stock then outstanding, voting together as one class:
(A) Certain Changes in Authorization of Capital Stock. Increase or
decrease the total number of authorized shares of Common or Preferred Stock;
-15-
59
(B) Merger, Sales of Assets. Effect any sale, conveyance,
encumbrance or otherwise dispose of all or substantially all of the assets of
this corporation, or merger of consolidation with any other corporation (other
a subsidiary in which the corporation owns at least 80% of the voting stock,
and if the corporation is the surviving corporation of the merger) or any
reclassification or recapitalization involving a change in the rights,
preferences, privileges or restrictions provided for the benefit of the then
outstanding Preferred Stock;
(C) Certain Reclassifications. Reclassify any outstanding shares
into shares having any preference or priority as to dividends, assets or other
rights superior to or on a parity with any such preference or priority of any
series of Preferred Stock;
(D) Certain Preferred Stock Changes. Amend or repeal any provision
of, or add any provision to, the corporation's articles of incorporation, if
such action would alter or change the rights, preferences, privileges, or
restrictions of the Preferred Stock;
(E) Certain Senior or Parity Securities. Issue shares of any series
or class of stock, other than Common Stock, or issue any bonds, debentures,
notes or other obligations convertible into or exchangeable for, or having
option rights to purchase, any shares of stock of this corporation other than
Common Stock;
(F) Dividends, Distributions, Splits and Combinations. Declare or
pay any dividends or other distribution on account of Common Stock, or effect
any split or combination of the Common Stock or Preferred Stock, except that
nothing herein shall limit the corporation's right to repurchase Common Stock
pursuant to Section 8(G) below; or
(G) Redemption. Purchase or redeem any capital stock of this
corporation except a purchase or redemption of Common Stock from an officer,
employee, director or consultant of this corporation pursuant to the terms of a
stock purchase or stock option plan or agreement or a redemption, pursuant to
these Articles, of Preferred Stock.
ARTICLE V
Directors of the corporation shall not have personal liability to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty except in the following circumstances:
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60
(A) for any breach of the director's duty of loyalty to the
corporation or its shareholders;
(B) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(C) for actions specified under Section 16-10-44 of the Utah
Business Corporation Act; or
(D) for any transaction from which the director derived an improper
personal benefit.
If the Utah Business Corporation Act is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Utah Business Corporation Act, as so
amended. Any repeal or modification of the foregoing provisions of this Article
V will be prospective only, and shall not adversely affect any limitation on
the personal liability of a director of the corporation existing at the time of
such repeal or modification.
ARTICLE VI
1. Indemnification of Officers, Directors and Employees. Each person who
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he
or she or a person of whom he or she is the legal representative, is or was a
director, officer or employee of the corporation (including any constituent
corporation absorbed in a merger) or is or was serving at the request of the
corporation (including any such constituent corporation) as a director, officer
or employee of another corporation, or of a partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit plans,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by the Utah Business Corporation Act, against all expenses, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer or employee
and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that the corporation shall indemnify any
such person seeking indemnity in connection with a proceeding (or part thereof)
initiated by such person only if such
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61
proceeding (or part thereof) was authorized by the Board of Directors of the
corporation.
2. Advance of Expenses. The corporation shall pay all expenses
incurred by such a director, officer or employee in defending any such
proceeding as they are incurred in advance of its final disposition; provided,
however, that if the Utah Business Corporation Act then so requires, the
payment of such expenses incurred by a director, officer or employee in advance
of the final disposition of such proceeding shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such director, officer or
employee to repay all amounts so advanced if it should be determined ultimately
that such director, officer or employee is not entitled to be indemnified under
this Article VI or otherwise; and provided further that the corporation shall
not be required to advance any expenses to a person against whom the corporation
brings a claim, in a proceeding, alleging that such person has breached his or
her duty of loyalty to the corporation, committed an act or omission not in
good faith or that involves intentional misconduct or a knowing violation of
law, or derived an improper personal benefit from a transaction.
3. Non-Exclusivity of Rights. The rights conferred on any person in
this Article VI shall not be exclusive of any other right that such person
may have or hereafter acquire under any statute, provision of the Articles of
Incorporation, Bylaw, agreement, vote or consent of stockholders or
disinterested directors or otherwise. Additionally, nothing in this Article VI
shall limit the ability of the corporation to indemnify persons not covered by
this Article VI, including, without limitation, agents of the corporation, to
the full extent permitted by the Utah Business Corporation Act.
4. Indemnification Contracts. The Board of Directors is authorized
to cause the corporation to enter into a contract with any director, officer or
employee of the corporation, or any person serving at the request of the
corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VI.
5. Insurance. The corporation shall maintain insurance, at its
expense, to the extent it determines such to be reasonably available, to
protect itself, its directors and officers, and any other persons the Board of
Directors may select, against any such expense, liability or loss, whether or
not the corporation would have the power to indemnify such
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62
person against such expense, liability or loss under the Utah Business
Corporation Act.
6. Effect of Amendment. Any amendment, repeal or modification of any
provision of this Article VI shall be prospective only, and shall not adversely
affect any right or protection conferred on a person pursuant to this Article
VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
1. Committees. The board of directors of the corporation may designate
one or more committees of the board to exercise such authority as the board of
the directors shall delegate in the resolution establishing such committee(s),
to the extent permitted by law.
2. Preemptive Rights. Stock holders of the corporation shall not have
preemptive rights to acquire additional securities of the corporation.
3. Purchase of Shares. Subject to any limitations contained herein
relating to the repurchase or redemption of shares by the corporation, the
corporation shall have the right to purchase its own shares to the extent of
its unreserved and unrestricted earned surplus, and also to the extent of its
unreserved and unrestricted capital surplus.
ARTICLE VIII
The registered agent of the corporation is Xxxxxxx X. Xxxx, and the
address of the registered office of the corporation is 1290 West, 0000 Xxxxx,
Xxxxx X, Xxxx Xxxx Xxxx, Xxxx 00000.
In witness whereof, the undersigned has executed these Revised Articles of
Incorporation this ______ day of August, 1987.
___________________
President
___________________
Secretary
63
EXHIBIT "C"
Schedule of Exceptions to Representation and Warranties
The Company and MCI, jointly and severally, hereby specify and set forth
the following exceptions to those representations and warranties given pursuant
to Section 3 of the JMW Acquisition Co. Preferred Stock Purchase Agreement.
Section 3.2(b)(iii). Exhibit D 1.1 and Exhibit D 1.2 set forth all
outstanding options and warrants to purchase common shares of MCI.
Section 3.5(b). The Subscription Agreements, and the offer and sale of
the securities that are contemplated thereby, have not been registered under
any federal or state securities laws. To the extent that an exemption from such
registration is not available with respect to such agreements, or to the
issuance of securities as contemplated thereby, the holders thereof may have
rights of rescission against the Company. The Company does not believe that any
such liability would be material and estimates the maximum aggregate monetary
exposure to the Company to be less than $5,000.
Section 3.6. The Company anticipates that the following filings under
federal or state securities laws will be made within 30 days of the Closing:
With fifteen (15) days of the Closing, the Company intends to file the
statement required by Section 25102(f) of the California Corporation Securities
Laws of 1968.
Section 3.8. Some of the Invention and Trade Secret Agreements with
consultants will not be executed until approximately 30 days after Closing,
because the individual consultants are not available at the date hereof.
64
Additionally, Xxxxxxx X. Xxxxxxxx is party to an Employment and Consultation
Agreement dated June 1, 1986 which contains provisions relating to
confidentiality and technology transfer comparable to those included in Exhibit
E-1. It is therefore not contemplated that Xx. Xxxxxxxx will execute a separate
Exhibit E-1 Agreement.
Section 3.9. A substantial portion of the technology utilized by MCI is
not owned by MCI but is licensed from the University of Utah, or the University
of Utah Research foundation, pursuant to those agreements specified on Exhibit
F. Copies of all such license agreements have been delivered to the Investors,
which copies are true, correct and accurately describe the status of such
agreements on the date hereof.
The proprietary assets of MCI and the Company (excluding those that are
not material) are described on Exhibit F(b).
Xxxxxxx X. Xxxxxxxx and others are employees of the Center for Engineering
Design at the University of Utah, as well as employees of MCI and/or the
Company. Such persons may be deemed to have conflicts of interest as a result
of such relationships. Neither MCI nor the Company believe any of such
conflicts will be material, and no such conflicts have arisen in the past.
During the month of May 1987 MCI discontinued substantial efforts to
complete the development of and the marketing of the S.P.A.D. and has provided
an obsolescence reserve account for the inventory on hand.
Section 3.13. The following exceptions are made to the Iomed Systems,
Inc. Five-Year Business Plan, 1987-1992, copies of which have been furnished to
each of the Investors and to Investors' counsel, Fenwick, Davis and West:
2
65
Exceptions:
-----------
Page 7,13,15 W. Xxxxxx Xxxxxx (effective August 3, 1987) resigned his
position as a member of the Board of Directors of the Company.
Page 7,13,16 Xxxxxx Xxxxxxxx now expects to complete his Ph.D. in late 1987.
Page 11 This agreement and arrangements with Cordis have been modified
by this Agreement.
Page 12 The Company provided an obsolescence account reserve for all
S.P.A.D. inventory on hand. There is no assurance that the
Company will be capable of obtaining any return on its original
investment in this device.
Page 13,31 Cino Rossi's Representative Agreement has been terminated. We no
longer have sales representation in Europe.
Page 7,13,15 Xxxx X. Xxxxxxx of Xxxxxxx, Xxxxx & West has been appointed as
director of JMW Acquisition Co.
Page 25,41 It is unlikely that the Company will introduce a P.C.A. system
under limited marketing/distribution (I.D.E.) during fiscal 1988.
Page 29 New applications of iontophoresis may require F.D.A. regulatory
approval in the following forms: Pre-market Approval (PMA), New
Drug Approval (NDA) and/or Abbreviated New Drug Approval (AND A).
Although our present product has a 510(k) approval, the F.D.A.
could, at its option, retroactively require a PMA for the
existing product.
Page 36 The new Phoresor unit (Phoresor II) is now targeted for market
introduction on or about October 15, 1987.
Section 3.16. Neither MCI nor the Company can make any representation as
to the absence of liens on leased property incurred by the owners of such
property. MCI believes that the premises upon which it operates its business
are subject to a deed of trust executed by the owner thereof in favor of a
third party lender.
3
66
Section 1.18(f). MCI has recently conducted a salary review and, as a
result of this review has increased salaries of many of its employees. Such
increases average approximately 7% for hourly and production employees and
approximately 5% for management employees.
Section 3.20. In recent years MCI has not filed its own federal tax
returns, as such returns have been filed by Cordis, on a consolidated basis,
pursuant to a tax sharing agreement between MCI and Cordis. Neither the Company
nor MCI has or will have any liability for failure to file federal or state tax
returns.
Exception to Recital "A" The amount which MCI owes to Cordis for
loans made by Cordis to MCI is approximately $1,989,968.27, $79,733,27 of which
represents principal and accrued but unpaid interest under the Working Capital
Loan.
4
67
EXHIBIT D
OUTSTANDING SHARES, OPTIONS & WARRANTS
OF
MOTION CONTROL, INC. (MCI)
AND
JMW ACQUISITION COMPANY (JMW)
68
EXHIBIT D.1.1 Page 1 of 3
SHAREHOLDERS OF MOTION CONTROL, INC.
Shareholders Certificate Shares Warrants
--------------------------------- ----------- ----------- --------
XXXX, Xxxxxx Xxxx 128 250 125
XXXX, Xxxxx Xxxxxxxx 129 250 125
XXXX, Xxxx Xxxxxxx 130 250 125
XXXX, Xxxxxxx & Xxxxx 140 4,000 2,125
XXXXXXX, Xxxxx 36 10,000 5,000
CORDIS CORPORATION 93 150,000
100 73,000
104 1,000
105 5,000
106 1,000
111 1,000
112 150,000
114 20,000
115 7,000
116 170,000
124 50,000
135 12,000
137 2,200,000
139 73,750
---------
2,913,750
XXXXXXX, X. Xxxx 86 1,000 500
DANE, Xxxxx X. 85 10,000 5,000
DANE, Xxxxxxx 63 10,000 5,000
FALLALEH, Xxxxx 35 10,000 5,000
XXXXXX, Xxxxxx De & Xxxxxx X. 38 5,000 2,500
XXXXXXXXX, Xxxxxx 132 13,500 6,750
XXXXXXXXX, Xxxxxxx 68 10,000 5,000
XXXXXXX, Xxxxxx 89 500 250
HANOVER, Xxxxx Xxxxx 133 1,500
134 500
136 500
---------
2,500 1,250
XXXXXX, Xxxxx 23 1,100 550
69
EXHIBIT D.1.1 Page 2 of 3
SHAREHOLDERS OF MOTION CONTROL, INC.
Shareholders Certificate Shares Warrants
--------------------------------- ----------- ----------- --------
XXXXXX Trust 59 10,000 5,000
XXXXXXX, Xxxxx X. 113 5,625 2,813
XXXX, X. X. & Xxxx X. 153 10,000 5,000
XXXXXXXX, Xxxxxxxxx 80 5,000 2,500
XXXXXXXX, Xxxxx 81 5,000 2,500
XXXXXXXX, Xxxxxxx X. 78 174,000 87,000
XXXXXX, Xxxxxx 7 3,000
31 2,300
---------
5,300 2,650
XXXXXXX, Xxxx X. 6 1,000 500
XXXXXXX, X. Xxxx 26 4,300 2,150
XXXX, Xxxxx X. 72 2,500 1,250
XXXX, Xxxxx 74 2,500 1,250
XXXX, Xxxxx X. 73 2,500 1,250
XXXX, Xxxxxx X. 75 2,500 1,250
XXXXXX, Xxxxxx X. 149 5,000 2,500
XXXXXX, Xxxxx 8 2,000
27 2,000
---------
4,000 2,000
XXXXX, Xxxxxxxxx & Xxxxx Xxxx 102 5,000 2,500
KOLFF, THE XXXXX X. FAMILY
LIVING TRUST 145 15,000 7,500
KOLFF, THE XXXXXX X. FAMILY
LIVING TRUST 150 83,500 41,750
XXXXXX, Xxxxxx 141 250
XXXXXXX, Xxx (Deceased) 54 5,000 2,500
XXXXXXX, Xxxxxxx (Deceased) 55 5,000 2,500
XXXXXXX, Xxxxxx 120 6,430
XXXXXXX, Xxxxxxx X. 157 6,430
XXXXXXX, Xxxxxxx X. (As Custodian
for Xxxxxx Xx Xxxxxxx) 154 380 190
XXXXXXX, Xxxxxxx X. (As Custodian
for Xxxxx Xxxxx Xxxxxxx) 155 380 190
70
Page 3 of 3
EXHIBIT D.1.1
SHAREHOLDERS OF MOTION CONTROL, INC.
Shareholders Certificate Shares Warrants
--------------------------------- ----------- ----------- --------
XXXXXXX, Xxxxxxx X. (As Custodian
for Xxxxxxx Xxxx Xxxxxxx (Xxxxx) 156 380 190
XXXXX, Xxxxxxx X. 70 2,000
9 1,000
28 2,600
57 4,000
---------
9,600 4,800
XXXXXX, Xxxx 92 500 250
XXXXXX, Xxxxxxxx X. & Xx. Xxxxx X. 109 5,000 2,500
XXXXXXXXX, Xxxxxx X. 44 5,000 2,500
XXXXX, Xxxxx X. 158 5,000 2,500
XXXXXX, Xxxxxxx 11 10,000 5,000
XXXXXX, Xxxxxxx X. 12 10,000 5,000
PRINCE, YEATES & XXXXXXXXXX 39 2,700 1,350
XXXXXXX, Xxxxxx X. 138 5,000 2,500
RICHARDS, Victor, M.D. 103 5,000 2,500
XXXXX, Xxxxxxx X., M.D. 43 1,000
69 5,000
---------
6,000 3,000
XXXXXX, Xxxxxx X. 32 10,000 5,000
XXXXXXX, Xxxxxxxx X. 152 2,500
XXXXXXX, Xxxxxx X. 151 2,500 2,500
XXXXXXX, Xxxxx 64 10,000 5,000
XXXXXXX, Xxxxx X. 125 5,000 2,500
UNIVERSITY OF UTAH RESEARCH
FOUNDATION 143 5,000 --
VAN RY, J. J. 60 10,000 5,000
WEDBUSH, NOBLE, COOKE, INC. 148 2,500 2,500
XXXXXXX, Xxxxxx 58 10,000 5,000
XXXXX, Xxxx XxXxxxx 62 5,000
146 2,500
---------
7,500 2,500
--------- -------
TOTAL OUTSTANDING SHARES 3,487,875 278,133
TREASURY STOCK, COMMON 100,000
71
EXHIBIT D.1.2
STOCK OPTION LIST
ISO
PLAN NUMBER DATE OPTION
OPTIONEE SHARES OF SHARES OF OPTION PRICE/SHARE EXPIRES
---------------------------- ------ --------- ------------ ----------- ------------
Xxxxxx X. Xxxxxxx No 15,000 Aug 10, 1977 $1.00 Aug 10, 1987
No 24,000 Dec 7, 1983 $0.60 Dec 6, 1993
---------
TOTAL 39,000
Xxxxxxx Xxxxxxxxxx No 500 Sep 26, 1978 $1.50 Sep 26, 1988
No 100 Jul 29, 1979 $1.50 Jul 29, 1989
No 3,000 Dec 7, 1983 $0.60 Dec 6, 1993
---------
TOTAL 3,600
Xxxx Xxxxxx No 1,000 Jan 12, 1979 $1.50 Jan 12, 1989
Xxxx Xxxxxxxx No 300 Nov 12, 1979 $1.50 Jul 29, 1980
No 500 Jul 1, 1981 $1.50 Jul 1, 1991
Yes 3,000 Dec 7, 1983 $0.60 Dec 6, 1993
---------
TOTAL 3,800
Xxxxxxx X. Xxxxxxxx No 75,000 Jun 7, 1977 $1.00 Rescinded
Feb 12, 1983
Yes 170,000 Jul 27, 1982 $0.50 Jul 27, 1992
Yes 29,000 Dec 7, 1983 $0.60 Dec 6, 1993
---------
TOTAL 199,000
Xxxxxx X. Xxxxx Yes 160,000 Jul 27, 1982 $0.50 Jul 27, 1992
Yes 34,000 Dec 7, 1983 $0.60 Dec 6, 1993
---------
TOTAL 194,000
Xxxxxxx X. Xxxxx Yes 90,000 Jul 27, 1982 $0.50 Jul 27, 1992
Xxxxxx X. Xxxxx Yes 10,000 Jul 27, 1982 $0.50 Jul 27, 1992
Yes 10,000 Dec 7, 1983 $0.60 Dec 6, 1993
---------
TOTAL 20,000
J. Xxxxxx Xxxxxx Yes 9,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxxx Xxxx Yes 3,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxx Xxxxxx Yes 3,000 Dec 7, 1983 $0.60 Dec 6, 1993
72
EXHIBIT D.1.2
Page 2 of 2
STOCK OPTION LIST
ISO
PLAN NUMBER DATE OPTION
OPTIONEE SHARES OF SHARES OF OPTION PRICE/SHARE EXPIRES
----------------- ------ --------- ------------ ----------- ------------
Xxxx Xxxxxxx No 5,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxx Xxxxxx No 4,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxxxx Xxxxxxxx No 3,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxx Xxxxxxx No 5,000 Dec 7, 1983 $0.60 Dec 6, 1993
R. Xxxx Xxxxxxx No 11,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxxx X. Hanover No 12,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxx Xxxxxx No 7,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xx Xxxxxxx No 4,000 Dec 7, 1983 $0.60 Dec 6, 1993
Xxxxxxx X. Xxxx No 2,000 Dec 7, 1983 $0.60 Dec 6, 1993
Cino X. Xxxxx Yes 45,000 Jan 15, 1985 $0.70 Jan 14, 1995
Xxxxxxx X. Xxxx Yes 24,000 Jan 29, 1985 $0.70 Jan 28, 1995
--------
TOTAL SHARES 687,400
TOTAL ISO SHARES 590,000
73
EXHIBIT D.2.1
SHAREHOLDERS, WARRANT HOLDERS & OPTION HOLDERS OF
JMW ACQUISITION COMPANY
Certificate # Shares Warrants Options
------------- -------- -------- -------
XXXXXXXX, Xxxxxxx X. 2 346,136 -0- -0-
XXXXXX, W. Xxxxxx 3 153,864 -0- -0-
74
Page 1 of 4
EXHIBIT D.2.2
HOLDERS OF SUBSCRIPTION AGREEMENTS FOR SHARES IN
JMW ACQUISITION COMPANY
Name No. of Shares Vesting Period
---- ------------- --------------
XXXXXX, X. Xxxxxx 35,000 3 Years
XXXX, Xxxxxx X. 250 Fully Vested
XXXX, Xxxxx X. 250 Fully Vested
XXXX, Xxxx X. 250 Fully Vested
XXXX, Xxxxxxx & Xxxxx 4,000 Fully Vested
XXXXXXX, XXXX X. 6,000 3 years
XXXX, Xxxxx 5,000 Fully Vested
XXXXXXX, Xxxxx 5,000 Fully Vested
XXXXXXX, X. Xxxx 1,000 Fully Vested
XXXXXXXX, Xxxx X. 30,000 4 Years
DANE, Xxxxx X. 10,000 Fully Vested
DANE, Xxxxxxx 10,000 Fully Vested
FALLALEH, Xxxxx 10,000 Fully Vested
XXXXXX, Xxxxxx De & Xxxxxx X. 5,000 Fully Vested
XXXXXXXXX, Xxxxxx 13,500 Fully Vested
XXXXXXX, Xxxxxx 500 Fully Vested
HANOVER, Xxxxx X. 50,000 3 Years
XXXXXX, X. Xxxxxx 10,000 Fully Vested
XXXXXX, Xxxx 5,000 3 Years
HONE, XXXXXXX X. 2,000 4 Years
XXXXXXX, Xxxxx X. 5,625 Fully Vested
XXXX, X. X. & Xxxx X. 10,000 Fully Vested
75
Page 2 of 4
EXHIBIT D.2.2
HOLDERS OF SUBSCRIPTION AGREEMENTS FOR SHARES IN
JMW ACQUISITION COMPANY
Name No. of Shares Vesting Period
---- ------------- --------------
XXXXXXX, Xx 15,000 Fully Vested
XXXXXXXX, Xxxxxxxxx 5,000 Fully Vested
XXXXXXXX, Xxxxx 5,000 Fully Vested
XXXXXXXX, Xxxxxxx X. 1,440,000
Less Stock Issued: (346,126)
---------
Total 1,093,864 Fully Vested
JANATA, (Jiri) 10,000 4 Years
XXXXXX, Xxxxxx 5,300 Fully Vested
XXXXXXX, Xxxx 1,000 Fully Vested
XXXXXXX, X. Xxxx 45,000 3 Years
XXXXXXX, Xxxx 8,000 Fully Vested
XXXXXXX, Xxxx X. 44,000 3 Years
31,000 Fully Vested
---------
Total 75,000
XXXXXX, Xxxxxx X. 5,000 Fully Vested
KLEBINGOT, Xxxxxx X. 10,000 4 Years
XXXXXX, Xxxxx 40,000 3 Years
XXXXX, Xxxxxxxxx & Xxxxx Xxxx 5,000 Fully Vested
KOLFF, The Xxxxx X. Family Living Trust 15,000 Fully Vested
KOLFF, The Xxxxxx X. Family Living Trust 84,000 Fully Vested
XXXXXX, Xxxxxx 250 Fully Vested
XXXXXXX, Xxx (Estate of) 5,000 Fully Vested
XXXXXXX, Xxxxxxx (Estate of) 5,000 Fully Vested
XXXXXXX, Xxxxxxx X. 6,430 Fully Vested
XXXXXXX, Xxxxxxx X. (As Custodian for 380 Fully Vested
Xxxxxx Xx Xxxxxxx)
76
EXHIBIT D.2.2 Page 3 of 4
HOLDERS OF SUBSCRIPTION AGREEMENTS FOR SHARES IN
JMW ACQUISITION COMPANY
Name No. of Shares Vesting Period
--------------------------------------------------- ------------- --------------
XXXXXXX, Xxxxxxx X.
(As Custodian for Xxxxx Xxxxx Xxxxxxx) 380 Fully Vested
XXXXXXX, Xxxxxxx X.
(As Custodian for Xxxxxxx Xxxx Xxxxxxx (Xxxxx) 380 Fully Vested
XXXXX, Xxxxxxx 100,000 4 Years
XXXXXX, Xxxxx Xx 5,000 4 Years
XXXXXX, W. Xxxxxx 495,000
Less Stock Issued: (153,864)
--------
Total 341,136 Fully Vested
XXXX, Xxxxxxx X. 10,000 4 Years
XXXXXX, Xxxxxxxx 5,000 Fully Vested
XXXXXXXXX, Xxxxxx 5,000 Fully Vested
XXXXX, Xxxxx X. 5,000 Fully Vested
XXXXXX, Xxxxxxx 15,000 Fully Vested
XXXXXX, Xxxxxxx X. 15,000 Fully Vested
XXXX, Xxxxxxx X. 720,000 4 Years
XXXXXXXX, Xxxxxx 75,000 4 Years
PRINCE, YEATES & XXXXXXXXXX 2,700 Fully Vested
XXXXXXX, Xxxx 5,000 4 Years
XXXXXXX, Xxxxxx X. 5,000 Fully Vested
RICHARDS, Victor, M.D. 5,000 Fully Vested
RICHES, Ross 9,000 4 Years
ROSSI, Cino A. 20,000 Fully Vested
XXXXX, Xxxxxxx X., M.D. 8,000 2 Years
XXXXX, Xxxxxx X. 60,000 4 Years
XXXXX, Xxxx 10,000 4 Years
77
EXHIBIT D.2.2 Page 4 of 4
HOLDERS OF SUBSCRIPTION AGREEMENTS FOR SHARES IN
JMW ACQUISITION COMPANY
Name No. of Shares Vesting Period
--------------------------------------------------- ------------- --------------
XXXXXX, Xxxxxx X. 10,000 Fully Vested
XXXXXXX, Xxxxxxxx 2,500 Fully Vested
XXXXXXX, Xxxxxx X. 72,500 4 Years
XXXXXXX, Xxxxx 10,000 Fully Vested
XXXXXXX, Xxxxx X. 5,000 Fully Vested
UNIVERSITY OF UTAH RESEARCH FOUNDATION 5,000 Fully Vested
VAN RY, J. J. 10,000 Fully Vested
WEDBUSH, NOBLE, XXXX INC. 2,500 Fully Vested
XXXXXXX, Xxxxxx 10,000 Fully Vested
XXXXX, Xxxxxx X. 96,000 Fully Vested
XXXXXXXXXX, Xxxx 4,000 2 Years
XXXXXXXXXX, Xxxx 2,000 4 Years
XXXXX, Xxxx Xxxxxxx 7,500 Fully Vested
---------
TOTAL NO. OF SHARES SUBSCRIBED 3,316,195
TOTAL NO. OFO SHARES ISSUED & OUTSTANDING 500,000
---------
TOTAL 3,816,195
78
EXHIBIT D.2.3.
SHARES, WARRANTS & OPTIONS OF
MOTION CONTROL OUTSTANDING
(Immediately Following Closing)
SHARES & WARRANTS:
------------------
No. of No. of
Name Certificate # Shares Warrants
-------------- ------------- ------- --------
XXXXXXX, Xxxxx 36 10,000 5,000
XXXXXXXXX, Xxxxxxx 68 10,000 5,000
XXXXXX, Xxxxx 23 1,100 550
XXXXXX TRUST 59 10,000 5,000
XXXX, Xxxxx X. 72 2,500 1,250
XXXX, Xxxxx 74 2,500 1,250
XXXX, Xxxxx X. 73 2,500 1,250
XXXX, Xxxxxx X. 75 2,500 1,250
XXXXXXX, Xxxxxx 120 6,430 -0-
XXXXXX, Xxxx 92 500 250
JMW ACQUISITION CO. (Certificates 3,439,845 -0-
Received -------
Pursuant to
Subscription
Agreements)
TOTAL OUTSTANDING 3,487,875 20,800
Shares Held In Treasury 100,000
OUTSTANDING OPTIONS:
--------------------
No. of Price/ Date of Date
Name ISO Shares Share Option Expires
------- --- ------ ----- ------ -------
XXXXXXXXXX, Xxxxxx No 500 $1.50 Sep 26, 1978 Sep 26, 1988
No 100 $1.50 Jul 29, 1979 Jul 29, 1989
No 3,000 $ .60 Dec 7, 1983 Dec 6, 1993
-----
3,600
XXXXXX, Xxxx No 1,000 $1.50 Jan 12, 1979 Jan 12, 1989
-----
TOTAL OPTIONS OUTSTANDING 4,600
79
EXHIBIT D.2.4 Page 1 of 4
JMW COMMON SHAREHOLDERS
(Immediately Following Closing)
Name No. of Shares Vesting Period
---- ------------- --------------
XXXXXX, X. Xxxxxx 35,000 3 Years
XXXX, Xxxxxx X. 250 Fully Vested
XXXX, Xxxxx X. 250 Fully Vested
XXXX, Xxxx X. 250 Fully Vested
XXXX, Xxxxxxx & Xxxxx 4,000 Fully Vested
XXXXXXX, Xxxx X. 6,000 3 Years
XXXX, Xxxxx 5,000 Fully Vested
XXXXXXX, Xxxxx 5,000 Fully Vested
XXXXXXX, X. Xxxx 1,000 Fully Vested
XXXXXXXX, Xxxx X. 30,000 4 Years
DANE, Xxxxx X. 10,000 Fully Vested
DANE, Xxxxxxx 10,000 Fully Vested
FALLALEH, Xxxxx 10,000 Fully Vested
XXXXXX, Xxxxxx De & Xxxxxx X. 5,000 Fully Vested
XXXXXXXXX, Xxxxxx 13,500 Fully Vested
XXXXXXX, Xxxxxx 500 Fully Vested
HANOVER, Xxxxx X. 50,000 3 Years
XXXXXX, X. Xxxxxx 10,000 Fully Vested
XXXXXX, Xxxx 5,000 3 Years
HONE, Xxxxxxx X. 2,000 4 Years
XXXXXXX, Xxxxx X. 5,625 Fully Vested
XXXX, X. X. & Xxxx X. 10,000 Fully Vested
80
Page 2 of 4
EXHIBIT D.2.4
JMW COMMON SHAREHOLDERS
(Immediately Following Closing)
Name No. of Shares Vesting Period
----------------------------- ------------- --------------
XXXXXXX, Xx 15,000 Fully Vested
XXXXXXXX, Xxxxxxxxx 5,000 Fully Vested
XXXXXXXX, Xxxxx 5,000 Fully Vested
XXXXXXXX, Xxxxxxx X. 1,440,000 Fully Vested
Less Stock Issued: (346,136)
---------
Total 1,093,864
JANATA, (Jiri) 10,000 4 Years
XXXXXX, Xxxxxx 5,300 Fully Vested
XXXXXXX, Xxxx 1,000 Fully Vested
XXXXXXX, X. Xxxx 45,000 3 Years
XXXXXXX, Xxxx 8,000 Fully Vested
XXXXXXX, Xxxx X. 44,000 3 Years
31,000 Fully Vested
---------
Total 75,000
KEMMPIN, Xxxxxx X. 5,000 Fully Vested
KLEBINGOT, Xxxxxx X. 10,000 4 Years
XXXXXX, Xxxxx 40,000 3 Years
KILFF, Xxxxxxxxx & Xxxxx Xxxx 5,000 Fully Vested
KOLF, The Xxxxx X. Family Living Trust 15,000 Fully Vested
KOLFF, The Xxxxxxx X. Family Living Trust 84,000 Fully Vested
KUFLIF, Freida 250 Fully Vested
XXXXXXX, Xxx (Estate of) 5,000 Fully Vested
XXXXXXX, Xxxxxxx (Estate of) 5,000 Fully Vested
XXXXXXX, Xxxxxxx X. 6,430 Fully Vested
XXXXXXX, Xxxxxxx X. (As Custodian
Xxxxxx Xx Xxxxxxx) 380 Fully Vested
81
Page 3 of 4
EXHIBIT D.2.4
JMW COMMON SHAREHOLDERS
(Immediately Following Closing)
Name No. of Shares Vesting Period
----------------------------- ------------- --------------
XXXXXXX, Xxxxxxx X. (As Custodian for 380 Fully Vested
Xxxxx Xxxxx Xxxxxxx)
XXXXXXX, Xxxxxxx X. (As Custodian for 380 Fully Vested
Xxxxxxx Xxxx Xxxxxxx
(Xxxxx)
XXXXX, Xxxxxxx X. 100,000 4 Years
XXXXXX, Xxxxx Xx 5,000 4 Years
XXXXXX, W. Edwawd 495,000
Less Stock Issued: (153,864)
---------
Total 341,136 Fully Vested
XXXX, Xxxxxxx X. 10,000 4 Years
XXXXXX, Xxxxxxxx 5,000 Fully Vested
XXXXXXXXX, Xxxxxx 5,000 Fully Vested
XXXXX, Xxxxx X. 5,000 Fully Vested
XXXXXX, Xxxxxxx 15,000 Fully Vested
XXXXXX, Xxxxxxx X. 15,000 Fully Vested
XXXX, Xxxxxxx X. 720,000 4 Years
XXXXXXXX, Xxxxxx 75,000 4 Years
PRINCE, YEATES & XXXXXXXXXX 2,700 Fully Vested
XXXXXXX, Xxxx 5,000 4 Years
XXXXXXX, Xxxxxx X. 5,000 Fully Vested
RICHARDS, Victor, M.D. 5,000 Fully Vested
RICHES, Ross 9,000 4 Years
ROSSI, Cino A. 20,000 Fully Vested
XXXXX, Xxxxxxx X., M.D. 8,000 2 Years
XXXXX, Xxxxxx X. 60,000 4 Years
XXXXX, Xxxx 10,000 4 Years
82
EXHIBIT D.2.4
Page 4 of 4
JMW COMMON SHAREHOLDERS
(Immediately Following Closing)
Name No. of Shares Vesting Period
-------------------------------------- ------------- ---------------
XXXXXX, Xxxxxx X. 10,000 Fully Vested
XXXXXXX, Xxxxxxxx 2,500 Fully Vested
XXXXXXX, Xxxxxx X. 72,500 4 Years
XXXXXXX, Xxxxx 10,000 Fully Vested
XXXXXXX, Xxxxx X. 5,000 Fully Vested
UNIVERSITY OF UTAH RESEARCH FOUNDATION 5,000 Fully Vested
VAN RY, J. J. 10,000 Fully Vested
WEDBUSH, NOBLE, XXXX INC. 2,500 Fully Vested
XXXXXXX, Xxxxxx 10,000 Fully Vested
XXXXX, Xxxxxx X. 96,000 Fully Vested
XXXXXXXXXX, Xxxx 4,000 2 Years
XXXXXXXXXX, Xxxx 2,000 4 Years
XXXXX, Xxxx Xxxxxxx 7,500 Fully Vested
---------
TOTAL NO. OF SHARES SUBSCRIBED 3,316,195
TOTAL NO. OF SHARES OUTSTANDING 500,000
---------
TOTAL 3,816,195
83
EXHIBIT E 1
INVENTION AND TRADE SECRET
AGREEMENT
THIS AGREEMENT is executed effective ____________, 198__, by and between
the undersigned employee ("Employee"), and MOTION CONTROL, INC. ("MCT")/JMW
ACQUISITION CO. ("JMW").
MCT's/JMW's activities and business utilize trade secrets, confidential
information, including but not limited to business plans, projections and
financial information, and other intellectual property (the "Intellectual
Property"), to which the Employee will have access. In consideration of
Employee's continued or future employment, the Employee and MCI/JMW mutually
agree to the following:
1. Nondisclosure. During the term of employment, and at all times
thereafter, the Employee will not, except in promoting the business of MCI/JMW
and performing the duties of his employment, directly or indirectly, use or
disclose any of MCI'S/JMW's Intellectual Property without MCI's/JMW's written
consent. As used in this Agreement, Intellectual Property includes information
disclosed to or known by the Employee as a consequence of his employment by
MCI/JMW which is not generally known to the public or in the industry in which
MCI/JMW is, or may become engaged, concerning MCI's/JMW's products, processes,
formulas, designs, plans, projections, financial position and services,
including, but not limited to, information relating to research, development,
inventions, manufacturing, purchasing, engineering and marketing information.
Upon termination of employment, all documents, records, notebooks and
other repositories of Intellectual Property, including copies thereof, then in
the Employee's or a related party's possession, whether prepared by him or
others, will
84
be returned to MCI/JMW. Related parties shall include family members or any
other person or entity associated with the Employee at the time employment is
terminated.
2. Inventions. The Employee hereby agrees to keep MCI/JMW informed of
any and all inventions, designs, formulas, works of authorship, compositions of
matter and discoveries (the "Inventions") made, conceived of or developed by the
Employee, alone or with others, which result from any work the Employee may do
for MCI/JMW, or which relates to MCI's/JMW's activities or to those of its
affiliated companies. The Inventions shall be and shall remain the property of
MCI/JMW or its nominees, whether patented, copyrighted or not, and the Employee
shall, without charge to MCI/JMW, assign (and does hereby assign) to MCI/JMW
all right, title and interest in and to the Inventions. Upon request, the
Employee will execute, acknowledge, and deliver any instruments confirming
MCI's/JMW's complete ownership of the Inventions.
The Employee will keep and maintain adequate and current written
records of all the Inventions, in the form of notes, sketches, drawings and
reports relating thereto, which records shall be and remain the property of, and
shall be made available at all times to MCI/JMW.
3. Agreement Not to Compete. During his employment with MCI/JMW, and for
twelve (12) months after the termination of employment, the Employee will not
participate directly or indirectly, as an owner, agent or employee of a
business engaged in activities that are in competition with the activities of
MCI/JMW. Upon the expiration of the twelve (12) month period, and at all times
thereafter, the Employee may associate with a competitive business and make use
of his general knowledge and experience, but the Employee shall not
2
85
use any Intellectual Property nor approach current employees of MCI/JMW
concerning their rendition of services for a competitive business.
The parties hereto acknowledge that this Agreement not to compete
is reasonable and necessary to protect the Intellectual Property and goodwill
of MCI/JMW.
4. Representations and Warranties of the Employee. The Employee
hereby represents and warrants to MCI/JMW and specifically agrees that:
(a) Neither the execution of this Agreement by the Employee nor
the performance by the Employee of his duties of employment constitute a breach
of any covenant not to compete, confidentiality agreement or any other binding
contract to which the Employee may be subject.
(b) MCI/JMW shall have the right to disclose the obligations
imposed upon the Employee by this Agreement to future or prospective employees
and/or business associates of the Employee.
(c) The representations, warranties and agreements of the
Employee, as set forth herein, shall survive the termination of this Agreement.
5. Remedies. In the event of a breach or threatened breach of this
Agreement, MCI/JMW shall be entitled to an injunction restraining the Employee
from disclosing any Intellectual Property and/or from rendering any services to
a competitive business and/or from using any Invention in a way which is
inconsistent with MCI's/JMW's ownership thereof. MCI/JMW may pursue any other
remedies available for such breach or threatened breach, including the recovery
of damages from the Employee.
6. Binding Effect. This Agreement shall be binding upon the parties
hereto and upon their respective executors, administrators, legal
representatives,
3
86
successors and assigns.
7. Applicable Law. This Agreement shall be governed by the laws of the
State of Utah, without giving effect to the choice of law rules thereof. If any
provision of this Agreement is declared void, the remaining provisions shall
remain in full force and effect.
8. Confidential Relationship. Both parties acknowledge that the
services which the Employee will render to MCI/JMW are unique and extraordinary
and the employment arrangement creates a confidential and fiduciary
relationship between the Employee and MCI/JMW.
9. Final Agreement. This Agreement supersedes all previous agreements,
written or oral, relating to the subject matter hereof and shall not be changed
orally. This Agreement will not be affected by any present or future policy
statement issued by MCI/JMW.
10. Attorney's Fees. If either party engages an attorney in connection
with a breach or threatened breach of this Agreement, or to enforce its terms,
the prevailing party in the controversy shall be entitled to recover his or its
reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement effective on
the date set forth above.
MOTION CONTROL, INC./JMW ACQUISITION CO.
By
----------------------------------------
Its
----------------------------------------
EMPLOYEE
--------------------------------------------
4
87
EXHIBIT E 2
INVENTION AND TRADE SECRET
AGREEMENT
THIS AGREEMENT is executed effective _____________, 198__, by and between
the undersigned consultant ("Consultant"), and MOTION CONTROL, INC. ("MCI")/JMW
ACQUISITION CO. ("JMW").
MCI's/JMW's activities and business utilize trade secrets, confidential
information, including but not limited to business plans, projections and
financial information, and other intellectual property (the "Intellectual
Property"), to which the Consultant will have access. In consideration of
Consultant's continued or future consulting relationship with MCI/JMW the
Consultant and MCI/JMW mutually agree to the following:
1. Nondisclosure. During the term of the consulting relationship, and at
all times thereafter, the Consultant will not, except in promoting the
business of MCI/JMW and performing his consulting duties, directly
or indirectly, use or disclose any of MCI's/JMW's Intellectual Property without
MCI's/JMW's written consent. As used in this Agreement, Intellectual Property
includes information disclosed to or known by the Consultant as a consequence
of his consulting relationship with by MCI/JMW which is not generally known to
the public or in the industry in which MCI/JMW is, or may become engaged,
concerning MCI's/JMW's products, processes, formulas, designs, plans,
projections, financial position and services, including, but not limited to,
information relating to research, development, inventions, manufacturing,
purchasing, engineering and marketing information.
88
Upon termination of the consulting relationship, all documents, records,
notebooks and other repositories of Intellectual Property, including copies
thereof, then in the Consultant's or a related party's possession, whether
prepared by him or others, will be returned to MCI/JMW. Related parties shall
include family members or any other person or entity associated with the
Consultant at the time the consulting relationship is terminated.
2. Inventions. The Consultant hereby agrees to keep MCI/JMW informed of
any and all inventions, designs, formulas, works of authorship, compositions of
matter and discoveries (the "Inventions") made, conceived of or developed by the
Consultant, alone or with others, which result from any work the Consultant may
do for MCI/JMW, or which relates to MCI's/JMW's activities or to those of its
affiliated companies. The Inventions shall be and shall remain the property of
MCI/JMW or its nominees, whether patented, copyrighted or not, and the
Consultant shall, without charge to MCI/JMW, assign (and does hereby assign) to
MCI/JMW all right, title and interest in and to the Inventions. Upon request,
the Consultant will execute, acknowledge, and deliver any instruments confirming
MCI's/JMW's complete ownership of the Inventions.
The Consultant will keep and maintain adequate and current written records
of all the Inventions, in the form of notes, sketches, drawings and reports
relating thereto, which records shall be and remain the property of, and shall
be made available at all times to MCI/JMW.
3. Agreement Not to Compete. During the term of the Consultant's
consulting relationship with MCI/JMW, and for twelve (12) months after the
termination of such relationship, the Consultant will not participate directly
or
2
89
indirectly, as an owner, agent or consultant of a business engaged in
activities that are in competition with the activities of MCI/JMW. Upon the
expiration of the twelve (12) month period, and at all times thereafter, the
Consultant may associate with a competitive business and make use of his
general knowledge and experience, but the Consultant shall not use any
Intellectual Property nor approach current consultants of MCI/JMW concerning
their rendition of services for a competitive business.
The parties hereto acknowledge that this Agreement not to compete is
reasonable and necessary to protect the Intellectual Property and goodwill of
MCI/JMW.
4. Representations and warranties of the Consultant. The Consultant
hereby represents and warrants to MCI/JMW and specifically agrees that:
(a) Neither the execution of this Agreement by the Consultant nor
the performance by the Consultant of his consulting duties constitute a breach
of any covenant not to compete, confidentiality agreement or any other binding
contract to which the Consultant may be subject.
(b) MCI/JMW shall have the right to disclose the obligations imposed
upon the Consultant by this Agreement to future or prospective employers and/or
business associates of the Consultant.
(c) The representations, warranties and agreements of the
Consultant, as set forth herein, shall survive the termination of this
Agreement.
5. Remedies. In the event of a breach or threatened breach of this
Agreement, MCI/JMW shall be entitled to an injunction restraining the
Consultant
3
90
from disclosing any Intellectual Property and/or from rendering any services to
a competitive business and/or from using any Invention in a way which is
inconsistent with MCI's/JMW's ownership thereof. MCI/JMW may pursue any other
remedies available for such breach or threatened breach, including the recovery
of damages from the Consultant.
6. Binding Effect. This Agreement shall be binding upon the
parties hereto and upon their respective executors, administrators, legal
representatives, successors and assigns.
7. Applicable Law. This Agreement shall be governed by the laws of
the State of Utah, without giving effect to the choice of law rules thereof. If
any provision of this Agreement is declared void, the remaining provisions
shall remain in full force and effect.
8. Confidential Relationship. Both parties acknowledge that the
consulting services which the Consultant will render to MCI/JMW are unique and
extraordinary and the employment arrangement creates a confidential and
fiduciary relationship between the Consultant and MCI/JMW.
9. Final Agreement. This Agreement supersedes all previous
agreements, written or oral, relating to the subject matter hereof and shall
not be changed orally. This Agreement will not be affected by any present or
future policy statement issued by MCI/JMW.
10. Attorney's Fees. If either party engages an attorney in
connection with a breach or threatened breach of this Agreement, or to enforce
its terms, the prevailing party in the controversy shall be entitled to recover
his or its reasonable attorney's fees.
4
91
IN WITNESS WHEREOF the parties have executed this Agreement effective
on the date set forth above.
MOTION CONTROL, INC./JMW ACQUISITION CO.
By______________________________________
Its_____________________________________
CONSULTANT
________________________________________
5
92
EXHIBIT E 3
NON DISCLOSURE AGREEMENT
The undersigned, an employee of Motion Control, Inc. ("MCI")/JMW
Acquisition Co. ("JMW") hereby agrees with MCI/JMW, in consideration of the
undersigned's continued employment, that:
1. As a result of may activities as an employee of MCI/JMW, I may receive
information and materials concerning, and have access to certain aspects of,
MCI'S/JMW'S know-how, trade secrets, manufacturing processes and other
proprietary processes, including but not limited to matters subject to
protection by patent, copyright or otherwise, confidential business plans,
confidential financial data and confidential management information, ideas,
strategies and proposals (all of the foregoing together with all similar
information, are collectively referred to herein as the "Trade Secrets"). The
Trade Secrets are and shall at all times be and remain the exclusive, valuable,
unique and proprietary assets and property of MCI/JMW. I shall not, without the
prior written consent of MCI/JMW, either during or after the term of my
employment with MCI/JMW, disclose all or any portion of the Trade Secrets to any
person, firm, corporation, partnership or other entity (other than MCI/JMW) for
any reason or purpose whatsoever, nor shall I make use of any of the Trade
Secrets for my personal benefit or for the benefit of any person, firm,
corporation, partnership or entity other than MCI/JMW under any circumstances
during or after my employment with MCI/JMW. Upon the expiration of may
employment with MCI/JMW, I shall promptly return to MCI/JMW any and all
originals or copies of any of the Trade Secrets which may be in my possession.
93
2. I shall not, either during or after the term of my employment with
MCI/JMW cause or permit to be published, for compensation or otherwise, any
material which involves the Trade Secrets, the actual or proposed business or
operations of MCI/JMW, the research conducted by MCI/JMW, or the products which
are, or may in the future be manufactured or sold by MCI/JMW, without first
obtaining the written consent of MCI/JMW to such publication.
3. I shall not, either during or after the term of my employment with
MCI/JMW, utilize the Trade Secrets or any other information concerning MCI/JMW
or its actual or proposed business or operations in any manner or for any
purpose which is directly or indirectly competitive with the business of
MCI/JMW.
4. This Agreement shall be governed by the laws of the State of Utah. If
I breach this Agreement, I shall pay all costs, expenses and attorneys' fees
incurred by MCI/JMW, as well as all damages which result from such breach.
IN WITNESS WHEREOF, the undersigned employee of MCI/JMW has executed this
Non Disclosure Agreement upon this _____ day of ________________, 198__.
_______________________________________
_______________________________________
_______________________________________
(Name and Address of Employee)
94
Page 1 of 4
EXHIBIT F.(a)
CONTRACTS & AGREEMENTS
MOTION CONTROL, INC.
June 30, 1987
Property & Equipment Type of Agreement Description Date of Agreement Date of Termination
-------------------- ----------------- ----------- ----------------- -------------------
F. C Stanql Building Lease Present Facilities: $ 5,300 Per Month 12/4/86 12/90
254,400 Over Life
Zions Leasing Co. Office Equipment Lease Telephone Equipment: $257.89 Per Month 11/86 11/91
$15,473.40 Over Life
Secured by Deposit
Associated Leasing Office Equipment Lease Canon Copier: $357.02 Per Month 9/85 8/88
$17,136.96 Over Life
Consulting & Equipment
----------------------
Xxxxxxx X. Xxxxxxxx Employment Agreement $1,250 Per Month/$15,000 Per Year 12/95 12/31/87
(or 90 Days Notice)
Xxxxxx Xxxxxxx Consulting Agreement Accounting & Finance Consultant 6/87 6/88
$1,250 Per Month/$15,000 Per year (or 30 Days Notice)
DFG Associates Consulting Agreement F.D.A. Consulting 7/87 7/88
$1,500 Per Month/$18,000 Per Year (or 30 Days Notice)
Ctr. for Engineering No Written Agreement General Research & Development - -
Design University $13,500 Per Quarter/$54,000 per Year
of Utah
Ctr. for Engineering No Written Agreement Drug Delivery Fund - -
Design (Provides Compensation for
R. Stephen, MD) $9,000 Per Month/
$108,000 Per Year
Biomaterials License Exclusive license on P.E.G. coating used 9/25/84 Patent Duration
International in S.P.A.D. No royalty is applicable.
Already covered under S.P.A.D. Agreement
with University.
95
Page 2 of 4
EXHIBIT F.(a)
CONTRACTS & AGREEMENTS
MOTION CONTROL, INC.
June 30, 1987
Property & Equipment Type of Agreement Description Date of Agreement Date of Termination
-------------------- ----------------- ----------- ----------------- -------------------
University of Utah License Royalty on Phoresor/Electrode 8/12/76 Duration of Last
**** of Sales (Adjusted) Patent
University of Utah License Royalty on Utah Arm Sales 7/29/77 Duration of Last
**** of Sales (Adjusted) Patent
Multiple Parties Royalty Sharing Royalty on Phoresor Unit Sales 7/7/77 12/31/87 (Reverts to
S. C. Xxxxxxxx **** (Flat Payment Per Month) 2.59% of Unit Sales)*
X. X. Xxxxxxx **** (Flat Payment Per Month) 8/10/77 8/10/87 (Reverts to
2.59% of Unit Sales)*
X. X. Xxxxx **** of Unit Sales (Adjusted) 8/12/76 *See Note
X. X. Xxxxxxx **** of Unit Sales (Adjusted) 8/12/76 *See Note
X. X. Xxxxx **** of Unit Sales (Adjusted) 8/12/76 *See Note
X. Xxxxxx **** of Unit Sales (Adjusted) 8/17/76 *See Note
Note: All royalty payments are subject *Note: Royalties
to reduction when certain unit continue for
sales have been reached. duration of
last Patent
on unit.
University of Utah License Royalty on S.P.A.D. Sales 8/27/80 Duration of Last
**** of Sales (Adjusted) Patent
X. X. Xxxxxxx, M.D. Royalty Royalty on S.P.A.D. Sales 7/1/64 Duration of Patent
**** of Sales (Adjusted( or or 20 Years
**** of Any Amount from Sub-
License of S.P.A.D.
Sales Representation Agreements
-------------------------------
Multiple Partners 16 Independent Mfr's. Territory representation establishes Variable, 30 Days With Cause
Representative territory, quotas and commission. 1-Year Terms 120 Days w/o Cause
Agreements Rates: **** to **** Phoresor and
Disposables
96
Page 3 of 4
EXHIBIT F.(a)
CONTRACTS & AGREEMENTS
MOTION CONTROL, INC.
June 30, 1987
****
97
Page 4 of 4
EXHIBIT F.(a)
CONTRACTS & AGREEMENTS
MOTION CONTROL, INC.
June 30, 1987
III. Prosthetics &
Orthotics Extended Warranty Covers Utah Arm repairs. 3/14/87 3/14/88
Sabolich Prosthetics Extended Warranty Covers Utah Arm repairs. 3/1/87 3/1/88
Pacific Indemnity Extended Warranty Covers Utah Arm repairs. 10/2/86 10/2/89
****
98
MOTION CONTROL, INC.
BALANCE SHEETS
June 30, 1986 and 1985
Unaudited
ASSETS 1986 1985
------ ---------- -----------
Current assets:
Cash $ 227,869 $ 38,395
Accounts receivable, less allowance
for doubtful accounts of $53,000
($42,000 in 1985) 409,005 496,500
Inventories (Note 2) 648,748 587,366
Prepaid expenses 14,095 --
---------- ----------
Total current assets 1,299,717 1,122,261
Equipment and furniture, at cost
(Note 2):
Office furniture and equipment 81,188 78,659
Manufacturing equipment 284,997 232,417
Leasehold improvements 39,074 28,176
---------- ----------
405,259 339,252
Less accumulated depreciation
and amortization 238,723 165,308
---------- ----------
Net equipment and furniture 166,536 173,944
Equity issuance costs
(Note 2) 140,654 --
Other assets 4,016 7,195
---------- ----------
$1,610,923 $1,303,400
========== ==========
Unaudited
LIABILITIES AND STOCKHOLDERS' DEFICIT 1986 1985
------------------------------------- ---------- -----------
Current liabilities:
Notes payable (Note 7):
To a financial institution $ 750,000 $ 740,000
To Cordis Corporation -- 1,360,000
Accounts payable 238,049 196,973
Accrued liabilities 78,663 114,822
---------- -----------
1,066,712 2,411,795
Long-term debt payable to
Cordis Corporation (Note 8) 1,950,933 --
Commitments and contingencies
(Notes 2, 3, 4, and 5)
Stockholders' deficit (Note 1):
Preferred stock, $.50 par value;
100,000 shares authorized
and unissued
Common stock, $.01 par value;
10,000,000 shares authorized;
3,587,875 (3,582,875 in 1985)
shares issued and outstanding
(Note 4) 35,879 35,829
Additional paid-in capital 2,038,306 2,038,306
Accumulated deficit (3,479,907) (3,181,530)
---------- -----------
(1,405,722) (1,107,395
Treasury stock, 100,000 shares
of common stock, at cost (1,000) (1,000)
---------- -----------
Total stockholders' deficit (1,406,722) (1,108,395)
---------- -----------
$ 1,610,923 $ 1,303,400
========== ===========
See accountant's review report and accompanying notes.
99
EXHIBIT F.(b)
PATENT & TRADEMARK SUMMARY
Registration No. Product Coverage & Status
---------------- ------- -----------------------------------------------------
1,147,111 Phoresor U. S. Trademark "Phoresor"
2/17/81
1,301,441 Phoresor U. S. Trademark "Phoresor" and Logo
10/23/84
* 4,141,359 Phoresor U. S. Patent issued approving 9 claims covering con-
2/27/79 cepts and circuitry of the iontophoresis device -
many embodied in current product line.
** 4,419,092 Phoresor U. S. Patent issued approving 12 claims covering
12/ 6/83 details of iontophoretic electrode structure - many
embodied in current product line.
** 4,416,274 Phoresor U. S. Patent issued approving 13 claims covering
11/22/83 iontophoretic electrode structure alternatives.
* 4,166,457 Phoresor U. S. Patent issued approving 16 claims covering
9/ 4/79 iontophoretic electrode structure alternatives.
** 4,250,878 Phoresor U. S. Patent issued approving 14 claims covering
2/17/81 iontophoretic electrode structure alternatives.
* 4,405,305 SPAD U. S. Patent issued approving 33 claims covering SPAD
9/20/83 structure and materials.
* 4,400,169 SPAD U. S. Patent issued approving 16 claims covering SPAD
8/23/83 structure materials and function - including "subcu-
taneously implantable conduit for injecting a drug
into a peritoneal cavity."
* 4,557,724 SPAD U. S. Patent applied for covering coatings used to
12/10/85 prevent tissue overgrowth on the flange of the SPAD.
* In Process SPAD European Patent Office filing including all claims in
all three SPAD patent applications listed above.
* 4,521,924 Utah Arm U. S. Patent approved covering 28 claims for features
6/11/85 of the design of the Utah Artificial Arm.
In Process Utah Arm Trademark registration applied for.
In Process SPAD Trademark registration application initiated.
* 4,613,331 Utah Arm U. S. Patent approved covering 32 claims for six
9/23/86 degree mobility prosthetic voluntary locking articu-
lated wrist.
* 4,559,033 SPAD U. S. Patent issued approving 56 claims covering
12/17/85 apparatus and methods for minimizing peritoneal
injection catheter obstruction.
In Process Phoresor U. S. Patent filed on 33 claims covering methods and
apparatus for long-term (hours) application of ionto-
phoresis at a controlled Ph (ion exchange process and
flow-through process).
In Process Phoresor U. S. Patent filed on 14 claims covering alternate
methods of controlling Ph during long-term ionto-
phoresis (resin process).
* The use of these patents are covered under licensing Agreements with the
University of Utah [see Exhibit F,(a)].
** Assignee: Motion Control, Inc.
100
EXHIBIT G
FINANCIAL STATEMENTS
for
MOTION CONTROL, INC.
and
JMW ACQUISITION COMPANY
101
EXHIBIT G.1.2
MOTION CONTROL INC.
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1986
with
ACCOUNTANT'S REVIEW REPORT
(Unaudited)
and
YEAR ENDED JUNE 30, 1985
with
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
102
[XXXXXX XXXXX LETTERHEAD]
The Board of Directors and Stockholders
Motion Control, Inc.
We have reviewed the accompanying balance sheet of Motion Control, Inc. at June
30, 1986 and the related statements of operations, changes in stockholders'
deficit and changes in financial position for the year then ended, in
accordance with standards established by the American Institute of Certified
Public Accountants.
We have examined the balance sheet of Motion Control, Inc. at June 30, 1985 and
the related statements of operations, changes in stockholders' deficit and
changes in financial position for the year then ended. Our examination was made
in accordance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
All information included in the June 30, 1986 financial statements is the
representation of the management of Motion Control, Inc.
As explained in Note 1, Motion Control, Inc. incurred net losses of $298,377 and
$405,914 during the years ended June 30, 1986 and 1985, respectively, and, as
of June 30, 1986 had an accumulated deficit of $1,406,722. These factors, among
others, as discussed in Note 1, indicate that the Company may be unable to
continue as a going concern.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
examination in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
103
The Board of Directors and Stockholders
Motion Control, Inc.
Page - 2 -
Based on our review, we are not aware of any material modifications that should
be made to the June 30, 1986 financial statements in order for them to be in
conformity with generally accepted accounting principles.
In our opinion, subject to the effects on the financial statements of the
ultimate resolution of the matters discussed in the fourth paragraph in this
letter, the financial statements as of June 30, 1985 and for the year then
ended present fairly the financial position Motion Control, Inc. at June 30,
1985 and the results of operations and changes in financial position for the
year then ended, in conformity with generally accepted accounting principles
applied on a basis consistent with that of the preceding year.
XXXXXX XXXXX & COMPANY
August 15, 1986 as to penultimate
August 1, 1985 as to the last paragraph
104
MOTION CONTROL, INC.
STATEMENTS OF OPERATIONS
Years ended June 30, 1986 and 1985
Unaudited
1986 1985
----------- ----------
Net sales $2,221,856 $1,674,380
Cost of goods sold (Note 3) 1,095,493 874,040
---------- ----------
1,126,363 800,340
Operating expenses:
Marketing 586,340 456,731
Research and development 173,344 87,911
General and administrative:
Administrative salaries and wages 196,804 195,876
Legal and accounting 59,517 66,821
Taxes 38,593 24,272
Utilities 40,672 42,114
Bad debts 38,509 47,944
Supplies 14,010 23,940
Contract services 24,050 15,951
Insurance 19,816 15,060
Other 55,327 36,376
---------- ----------
1,246,982 1,012,996
---------- ----------
Loss from operations 120,619 212,656
Interest expense - net 177,518 193,258
---------- ----------
Net loss $ 298,377 $ 405,914
========== ==========
See accountant's review report and accompanying notes.
105
MOTION CONTROL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Years ended June 30, 1986, and 1985
Common stock Additional
----------------- paid-in Accumulated Treasury
Shares Amount capital deficit stock
--------- ------- ---------- ----------- --------
Balance at
June 30, 1984 3,582,875 $35,829 $2,038,306 $(2,775,616) $(1,000)
Net loss -- -- -- (405,914) --
--------- ------- ---------- ----------- -------
Balance at
June 30, 1985 3,582,875 35,829 2,038,306 (3,181,530) (1,000)
Issuance of common
stock 5,000 50 -- -- --
Net loss -- -- -- (298,377) --
--------- ------- ---------- ----------- -------
Balance at
June 30, 1986 3,587,875 $35,879 $2,038,306 $(3,479,907) $(1,000)
========= ======= ========== =========== =======
106
MOTION CONTROL, INC.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
Years ended June 30, 1986 and 1985
1986
(Unaudited) 1985
----------- ---------
Financial resources were used by:
Operations:
Net loss $ 298,377 $ 405,914
Items not affecting working
capital during the period:
Depreciation and amortization (73,415) (49,664)
Issuance of common stock as
a donation (50) --
----------- ---------
Working capital used by
operations 224,912 356,250
Purchase of equipment and furniture 66,007 115,688
Net increase to equity issuance
costs and other assets 137,475 5,940
----------- ---------
428,394 477,878
----------- ---------
Financial resources were provided by:
Reclassification of advances from
Cordis to long-term debt pursuant
to reorganization agreement 1,680,933 --
Working capital advances from Cordis
obtained subsequent to the
reorganization agreement 200,000 --
Increase in line of credit due to Cordis 70,000 --
----------- ---------
1,950,933 --
----------- ---------
Increase (decrease) in working capital $ 1,522,539 $(477,878)
=========== =========
Changes in components of working capital:
Increase (decrease) in current assets:
Cash $ 189,474 $ (36,362)
Accounts receivable (87,495) 240,439
Inventories 61,382 64,465
Prepaid expenses 14,095 --
----------- ---------
177,456 268,542
Increase (decrease) in current liabilities:
Notes payable (1,350,000) 664,000
Accounts payable 41,076 35,673
Accrued liabilities (36,159) 46,747
----------- ---------
(1,345,083) 746,420
----------- ---------
Increase (decrease) in working capital $ 1,522,539 $(477,878)
=========== =========
See accountant's review report and accompanying notes.
107
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
1. Nature and organization of business
Motion Control, Inc. (the "Company") was organized as a Utah
corporation on June 18, 1974, to engage in the research, manufacture,
production and marketing of prosthetic, drug delivery, and other medical
devices. Cordis Corporation (Cordis) owns approximately 84% of the
outstanding common stock of the Company.
Effective February 1, 1986, the Company entered into an agreement with
an acquisition company and Cordis, whereby Cordis' 2,913,750 shares of
common stock will be exchanged for 5,000 shares of $.10 par value
convertible preferred (Class A) stock valued at $250 per share. Upon the
closing of this agreement, the Company and the acquisition company will
merge, leaving the present minority shareholders and the acquisition
company shareholders with 100 percent of the voting common stock before
considering the dilution associated with new investors. In consideration
for this conversion, Cordis will forgive advances totalling $1,680,933,
convert the $200,000 advanced as an operating subsidy at June 30, 1986 and
an additional operating subsidy of $30,000 that was provided in July, 1986
to paid in capital and provide a $70,000 line of credit (see Note 8).
The closing of the above-described transaction is contingent upon the
ability of the Company to raise a minimum of $750,000 from new investors
within 24 months of the date of the agreement.
On the following page is an unaudited pro forma balance sheet showing
the impact of this transaction upon closing, assuming the Company has
raised the required funds, which are presently anticipated to be $750,000
to $1,250,000 ($1,000,000 convertible preferred stock assumed for pro
forma).
See accountant's review report.
108
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
1. Nature and organization of business (continued)
June 30, Pro forma
1986 Pro forma post-closing
(unaudited) adjustments balances
----------- -------------- ------------
Cash $ 227,869 $ 30,000 (1) $ 1,187,869
$ 1,000,000 (2) --
(70,000)(6) --
Accounts receivable 409,005 -- 409,005
Inventory 648,748 -- 648,748
Equipment and furniture 166,536 -- 166,536
Other assets 158,765 -- 158,765
----------- ---------- -----------
Total assets $ 1,610,923 $ 960,000 $ 2,570,923
=========== =========== ===========
Accounts payable/accrued
liabilities $ 316,712 -- 316,712
Note payable to bank(4) 750,000 -- 750,000
Note payable to Cordis 1,950,933 30,000 (1)
(1,680,933)(3)
(230,000)(5)
(70,000)(6)
----------- ----------- -----------
Total liabilities 3,017,645 (1,950,933) 1,066,712
Convertible preferred
stock (A)* -- 1,680,933 (3) 1,680,933
Convertible preferred
stock (B)* -- 1,000,000 (2) 1,000,000
Common stock* 2,073,185 230,000 (5) 2,303,185
Accumulated deficit (3,479,907) -- (3,479,907)
----------- ---------- -----------
Total liabilities and
equity $ 1,610,923 $ 960,000 $ 2,570,923
=========== ========== ===========
--------------------
* Includes additional paid in capital.
(1) Obtain $30,000 in July 1986 for the final installment on the $230,000
operating subsidy.
(2) Obtain equity capital of $1,000,000 through issuance of Convertible
Preferred Stock (Class B).
(3) Obtain forgiveness of payable to Cordis in return for the issuance of
preferred stock.
(4) This note payable is guaranteed by Cordis and may, at the Company's
option, be paid off.
(5) Operating subsidy converted to paid capital.
(6) The $70,000 line of credit will be paid off upon the closing of the
transaction.
See accountant's review report.
109
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
1. Nature and organization of business (continued)
The preceding table is before consideration of interim results of
operations except for the Cordis subsidy provided in July.
The 5,000 shares of convertible preferred stock which will be issued
to Cordis (referred to as "Class A" stock) are nonvoting with cumulative
annual dividends equal to $25 per share. Such preferred stock is redeemable
at the option of the Company for $250 per share plus accrued dividends,
until October 1, 1990. On that date, and on each anniversary thereof,
shares must be redeemed at the rate of 16.66% to 16.70% per year, of the
shares outstanding on October 1, 1990.
The preferred Class A shares are convertible (at the holder's option)
into common stock at rates ranging from 48 to 80 shares of common stock per
preferred share. The rate will increase in proportion to the time required
by the Company to release Cordis's guarantee of $750,000 line of credit
with a bank (up to five years from the closing date of the agreement).
Liquidation rights on the Class A shares are $250 per share.
As reflected in the accompanying financial statements, the Company
incurred net losses of $298,377 in 1986 and $405,914 in 1985. As of June
30, 1986, the balance sheet reflected an accumulated deficit of $3,479,907
($3,181,530 at June 30, 1985). Cordis has guaranteed notes payable to a
financial institution in the amount of $750,000 on behalf of the Company
and has provided advances totaling $1,950,933 as of
See accountant's review report.
110
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
1. Nature and organization of business (continued)
June 30, 1986 (see Note 8). The continuation of the Company as a going
concern is dependent upon its ability to obtain a satisfactory level of
profitable operations or to obtain sufficient working capital to finance
operations.
2. Summary of significant accounting policies
Inventories -- Raw materials inventory is stated at the lower of cost
(first-in, first-out method) or market. Work-in-process and finished goods
are stated at the lower of standard cost, which approximates actual cost
(first-in, first-out method) or market. Components of inventories are as
follows:
1986 1985
-------- --------
Raw materials $377,268 $345,646
Work-in-process 100,201 132,975
Finished goods 171,279 108,745
-------- --------
$648,748 $587,366
========= ========
Equipment and furniture -- Equipment and furniture are depreciated or
amortized on the straight-line method over the following estimated useful
lives:
Years
-----
Office furniture and equipment 3-10
Manufacturing equipment 3- 7
Leasehold improvements 3-10
Equity issuance costs -- The Company incurred legal and consulting
fees (see Note 9) in formalizing the agreement
See accountant's review report.
111
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
2. Summary of significant accounting policies (continued)
outlined in Note 1. These costs will be reclassified to contributed capital
when the reorganization is completed or expensed if the reorganization is
not executed.
Warranty reserve -- The Company recognizes the estimated cost of
warranty obligations at the time the related products are sold.
3. Royalty agreements
The Company is the licensee under several royalty agreements with
inventors, founders and the University of Utah (see Note 9). These
agreements provide for the payment of royalties to the licensors at various
percentages **** of net sales of the product under royalty. The term of the
royalty agreement for any product is equal to the life of the latest patent
to be issued which covers that product. Patents on the various products
covered by royalty agreements expire between 1996 and 2002.
During 1986 and 1985 the Company incurred **** and **** respectively of
royalty expense. This expense is included in the financial statements as
part of cost of goods sold.
Two of the agreements with stockholders provided for the payment of
minimum annual royalties regardless of sales through 1981 and also provide
that royalties payable to such individuals cannot exceed certain maximums
in any one year. Prior to
See accountant's review report.
112
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
3. Royalty agreements (continued)
1981 the combined minimum annual commitments under these agreements ranged
from $2,100 to $48,000. Since 1981, the Company has paid the $48,000
annually. The maximum annual commitment under these two agreements is
$115,000.
Royalties in the amount of approximately $80,000 and $75,000 were
paid to officers and/or stockholders during 1986 and 1985, respectively.
4. Stock options and warrants outstanding
The Company has established an incentive stock option (ISO) plan as
defined in the Economic Recovery Tax Act of 1981. Under the plan, options
to acquire 593,000 shares have been granted to certain officers and
employees. In addition to the foregoing, the Company has granted options
not under the ISO to acquire 145,400 shares to certain stockholders,
employees and consultants.
Options outstanding were granted at the estimated fair market value as
determined by the Board of Directors ranging from $.50 to $1.50,
aggregating $434,600. Options for 707,400 shares were exercisable at June
30, 1986. Options generally expire 10 years from the date of grant.
All options granted under the ISO provide a "right of relinquishment,"
which permits the optionee, in lieu of purchasing the entire number of
shares under option to exchange all or any part of the unexercised portion
of the option for shares of common stock as determined by the plan.
See account's review report.
113
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
4. Stock options and warrants outstanding (continued)
The Company has issued warrants to purchase a total of 278,133 shares
of common stock ratably to all stockholders of record on February 11, 1983
except Cordis Corporation. The warrants are exercisable on or after August
1, 1986 at prices of $1.00 per share until July 31, 1988, and $1.50 per
share thereafter and expire July 31, 1990. Had all options and warrants
been exercised as of June 30, 1986, the effect would have been to reduce
Cordis' percentage ownership in the Company from 84% to 65%.
5. Lease agreement
The Company's facilities are leased under an agreement which expires
in January, 1988. Annual rent expense under this agreement is approximately
$12,000.
6. Income taxes
The Company files and will continue to file until the closing of the
recapitalization transaction discussed in footnote 1, consolidated federal
and state tax returns with Cordis Corporation and, therefore, does not have
any direct obligation for the payment of income taxes. However, the Company
has entered into a tax sharing agreement with Cordis where payments are
made to or received from Cordis in much the same way as if the Company
filed separate federal and state returns. Tax operating losses incurred by
the Company subsequent to June 30, 1982 (the date when consolidation for
taxes commenced) total approximately $1,232,000. These losses are available
to offset
See accountant's review report.
114
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
6. Income taxes (continued)
future payments to Cordis under the terms of the tax sharing agreement and
expire between 1998 and 2001.
Prior to June 30, 1982, the Company filed separate federal and state
tax returns. Cumulative losses at June 30, 1982 were approximately
$1,952,000. These losses are available to offset future taxable income of
the Company, if any, and expire between 1991 and 1997. Tax credit
carryovers for periods prior to June 30, 1982 total $22,000 and expire
between 1991 and 1997.
7. Note payable
The demand note payable to a financial institution carries an interest
rate at 2% above prime, (10.5% at June 30, 1986 and 11.5% at June 30, 1985)
and is guaranteed by Cordis Corporation.
8. Long-term debt
Cordis Corporation has made advances to the Company for working
capital needs. The total outstanding at June 30, 1986 is comprised of the
following amounts:
Working capital advances made prior to the
reorganization agreement executed in
February, 1986. These advances were
formerly classified as current notes
payable, but have been reclassified
pursuant to the reorganization $1,680,933
See accountant's review report.
115
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
8. Long-term debt (continued)
Working capital advances paid to the
Company as required by the reorgan-
ization agreement over the period
from February, 1986 to June, 1986 200,000
Line of credit 70,000
----------
$1,950,933
==========
These advances bore interest at 2% above prime (10.5% at June 30, 1986
and 12.25% at June 30, 1985). Interest was paid monthly on the outstanding
balances through January, 1986. Beginning in February, 1986, as outlined in
the reorganization agreement, interest is only being changed on the $70,000
line of credit. All other amounts outstanding at that time and all
subsequent advances are non-interest bearing. Interest expense on advances
from Cordis was $103,940 in 1986 ($122,274 in 1985) and accrued interest on
these advances was $2,257 at June 30, 1986 ($14,801 at June 30, 1985).
9. Related party transactions
The Chairman of the Board of Directors, a stockholder and founder of
the Company, conducts certain research and development activities at the
University of Utah. These activities include work on devices which are
currently being produced and marketed by the Company as well as devices
which are included in future production and marketing plans. The Company
made donations of $54,000 in 1986 and 1985 to the University of Utah
designated for the Chairman's Laboratory.
See accountant's review report.
116
MOTION CONTROL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1986 (Unaudited) and 1985
9. Related party transactions (continued)
During 1986, payments for consulting services of approximately $67,000
were made by the Company to a firm owned by a member of the Company's Board
of Directors. Approximately $7,000 is payable to this firm at June 30,
1986.
See accountant's review report.
117
EXHIBIT G.1.1
MOTION CONTROL, INC.
May 31, 1987
Financial Statements
(Unaudited Interim Statements)
118
EXHIBIT ___
MOTION CONTROL
CONSOLIDATED BALANCE SHEET
FOR MONTH ENDED MAY 31, 1987
ASSETS
CURRENT ASSETS
CASH 393,917.17
ACCOUNTS RECEIVABLE 417,725.24
INVENTORY 582,427.87
PREPAIDS 29,527.69
PROPERTY & EQUIPMENT
OFFICE EQUIPMENT 48,655.02
LEASEHOLD IMPROVEMENTS 20,830.02
PRODUCTION EQUIPMENT 87,931.75
-------------
TOTAL PROPERTY & EQUIP 157,416.79
-------------
1,581,014.76
TOTAL CURRENT ASSETS
OTHER ASSETS
OTHER ASSETS 159,442.62
-------------
TOTAL OTHER ASSETS 159,442.62
-------------
TOTAL ASSETS $1,740,457.38
=============
LIABILITIES & EQUITY
CURRENT LIABILITIES
NOTES PAYABLE 2,730,932.64
ACCOUNTS PAYABLE 185,161.68
ACCRUALS 83,240.48
-------------
TOTAL CURRENT LIABILITIES 2,999,334.80
STOCKHOLDERS EQUITY
STOCKHOLDERS EQUITY -1,406,722.38
CURRENT EARNINGS 147,844.96
-------------
TTL STOCKHOLDERS EQUITY -1,258,877.42
-------------
TTL LIABILITIES & EQUITY $1,740,457.38
=============
UNAUDITED - REVISED 7/10/87
119
Page 1
MOTION CONTROL
DETAIL BALANCE SHEET
FOR MONTH ENDED MAY 31, 1987
ASSETS
CURRENT ASSETS
CASH
CASH FIRST SECURITY 114,198.70
MONEY MASTER ACCOUNT 264.20
XXXXX CASH 500.00
1st SECURITY SAVINGS ACCOUNT 264,849.30
1st SECURITY - IMPRESS ACC'T 3,104.97
ZIONS CORPORATION - ESCROW ACCT 11,000.00
-------------
TOTAL CASH 393,917.17
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE 436,647.54
NOTE RECEIVABLE - DENTELECT 20,000.00
OTHER RECEIVABLES 2,941.48
UNAPPLIED PAYMENTS -562.53
ALLOW FOR DOUBTFUL ACCTS -31,996.28
INTEREST INCOME ACCTS RECVBL -9,304.97
-------------
TOTAL ACCOUNTS RECEIVABLE 417,725.24
INVENTORY
ARM INVENTORY
RAW MATERIAL ARM 167,225.03
LABOR ARM 42,431.24
OVERHEAD ARM 62,622.12
DEMO'S & LOANERS ARM - MTL 34,971.64
DEMO'S & LOANERS ARM - LBR 20,794.93
DEMO'S & LOANERS ARM OVERHEAD 29,112.91
-------------
TOTAL ARM INVENTORY 357,157.87
PHORESOR INVENTORY
RAW MATERIAL - PHORESOR 82,371.60
LABOR - PHORESOR 2,527.59
OVERHEAD PHORESOR 478.64
DEMO'S & LOANERS PHORESOR MTL 13,241.54
DEMO'S & LOANERS PHORESOR LBR 3,272.18
DEMO'S & LOANERS PHORESOR OH 3,327.42
-------------
TOTAL PHORESOR INVENTORY 105,218.97
ELECTRODE INVENTORY
RAW MATERIAL ELECTRODE 45,618.56
LABOR - ELECTRODE 10,233.52
OVERHEAD - ELECTRODE 3,516.49
UNAUDITED - REVISED 7/10/97
120
MOTION CONTROL
DETAIL BALANCE SHEET Page 2
FOR MONTH ENDED MAY 31, 1987
-------------
TOTAL ELECTRODE INVENTORY 59,368.57
SPAD INVENTORY
RAW MATERIAL - SPAD 25,005.75
LABOR - SPAD 7,199.49
OVERHEAD - SPAD 13,647.50
-------------
TOTAL SPAD INVENTORY 45,852.74
PREAMP INVENTORY
RAW MATERIAL - PREAMP 14,079.47
LABOR - PREAMP 264.53
OVERHEAD - PREAMP 303.12
-------------
TOTAL PREAMP INVENTORY 14,647.12
MYOLAB INVENTORY
RAW MATERIAL MYOLAB 52,344.18
LABOR MYOLAB 4,718.82
OVERHEAD MYOLAB 6,902.66
DEMO'S & LOANERS MYOLAB MTL 7,580.49
DEMO'S & LOANERS MYOLAB LBR 1,685.92
DEMO & LOANERS MYOLAB OVERHEAD 1,960.43
-------------
TOTAL MYOLAB INVENTORY 75,192.50
MED/D INVENTORY
RAW MATERIAL MED/D 20,702.23
-------------
TOTAL MED/D INVENTORY 20,702.23
INVENTORY RESERVE
IDENTIFIED OBSOLESCENCE 56,836.52
UNIDENTIFIED OBSOLESCENCE -152,548.65
-------------
TOTAL INVENTORY RESERVE -95,712.13
INVENTORY OVERHEAD
INVENTORY OVERHEAD -278,913.85
OVERHEAD ARM SUPPLIES 4,570.91
OVERHEAD PHORESOR SUPPLIES 7,873.03
OVERHEAD ELECTRODE SUPPLIES 5,185.06
OVERHEAD MYOLAB SUPPLIES 571.34
OVERHEAD PREAMP SUPPLIES 963.59
OVERHEAD SPAD SUPPLIES 3,492.08
OVERHEAD MACHINE SHOP SUPPLIES 20,327.95
OVERHEAD SHIP/RECEIVE SUPPLIES 13,741.53
OVERHEAD REPAIRS & MAIN. BLDG. 501.65
OVERHEAD REPAIRS & MAIN. EQUIP. 2,957.22
OVERHEAD DEPRECIATION 49,558.70
UNAUDITED - REVISED 7/10/87
121
Page 3
MOTION CONTROL
DETAIL BALANCE SHEET
FOR MONTH ENDED MAY 31, 1987
OVERHEAD PAYROLL TAXES 22,453.25
OVERHEAD RENT 12,316.01
OVERHEAD SUPERVISORY LABOR 52,791.99
LEASED SHOP EQUIPMENT 10,363.57
PRODUCT LIABILITY INSURANCE 29,971.79
O H HEALTH, LIFE & DIS. INS. 21,498.42
OVERHEAD BONUS 1,516.75
OVERHEAD FREIGHT - INCOMING 1,235.79
OVERHEAD UTILITIES 10,143.14
HOLIDAY, SICK & VACATION PAY 3,811.51
OVERHEAD PROPERTY TAXES 3,068.57
--------------
TOTAL INVENTORY OVERHEAD 0.00
--------------
TOTAL INVENTORY 582,427.87
PREPAIDS
PREPAID INSURANCE 21,733.25
PREPAID ROYALTY 7,000.00
PREPAID WAGES 794.44
--------------
TOTAL PREPAIDS 29,527.69
--------------
TOTAL CURRENT ASSETS 1,423,597.97
PROPERTY, PLANT & EQUIP
OFFICE EQUIPMENT
OFFICE EQUIPMENT 103,892.13
ACC DEPR - OFFICE EQUIPMENT -55,237.11
--------------
TOTAL OFFICE EQUIPMENT 48,655.02
LEASEHOLD IMPROVEMENTS
LEASEHOLD IMPROVEMENTS 23,859.49
ACC DEPR LEASEHOLD IMPMTS -6,780.13
LEASEHOLD IMPROVEMENTS - MED/D 3,974.41
ACC DEPR LSHLD IMP - MED/D -223.75
--------------
TTL LEASEHOLD IMPROVEMENTS 20,830.02
SHOP EQUIPMENT
SHOP EQUIPMENT 37,479.91
ACC DEPR - SHOP EQUIPMENT -26,799.87
PROSTHETIC SHOP EQUIPMENT 1,269.22
ACC DEPR PROS SHOP EQUIPMENT -1,185.12
--------------
TOTAL SHOP EQUIPMENT 10,764.14
ASSY/PROD EQUIP-ARM
ASSEMBLY EQUIPMENT ARM 14,670.84
UNAUDITED - REVISED 7/10/87
122
MOTION CONTROL
DETAIL BALANCE SHEET Page 4
FOR MONTH ENDED MAY 31, 1987
ACC DEPR, ASSY EQUIP ARM -10,648.82
PRODUCTION TOOLING ARM 74,964.38
ACC DEPR PROD TOOLING - ARM -61,961.85
----------
TTL ASSY/PROD EQUIP-ARM 17,024.55
ASSY/PROD EQUIP-PHORESOR
ASSEMBLY EQUIPMENT PHORESOR 17,568.08
ACC DEPR ASSY EQUIP PHORESOR -10,245.66
PRODUCTION TOOLING PHORESOR 52,229.38
ACC DEPR PROD TLG PHORESOR -44,267.39
----------
TTL ASSY/PROD EQUIP PHORESOR 15,284.41
ASSY/PROD EQUIP-ELECTRODE
ASSEMBLY EQUIPMENT ELECTRODE 23,672.95
ACC DEPR ASSY EQUIP ELECTRODE -11,011.27
PRODUCTION TOOLING ELECTRODE 27,942.99
ACC DEPR - PROD TLG ELECTRODE -22,291.40
----------
TTL ASSY/PROD EQUIP ELECTROD 18,313.27
ASSY/PROD EQUIP-SPAD
ASSEMBLY EQUIPMENT SPAD 29,485.19
ACC DEPR ASSY EQUIP SPAD -19,238.07
PRODUCTION TOOLING SPAD 9,516.58
ACC DEPR PROD TLG SPAD -4,907.14
----------
TTL SSY/PROD EQUIP-SPAD 14,856.56
ASSY/PROD EQUIP PREAMP
ASSEMBLY EQUIPMENT PREAMP 1,442.40
PRODUCTION TOOLING PREAMP 2,108.21
ACC DEPR PROD TLG PREAMP -670.05
----------
TTL ASSY/PROD EQUIP PREAMP 2,880.56
ASSY/PROD EQUIP MYOLAB
ASSEMBLY EQUIPMENT - MYOLAB 7,463.27
ACC DEPR ASSY EQUIP MYOLAB -3,995.63
PRODUCTION TOOLING MYOLAB 13,915.00
ACC DEPR PROD TLG MYOLAB -8,574.38
----------
TTL ASSY/PROD EQUIP MYOLAB 8,808.26
PROSTHETIC TOOLING
----------
TOTAL PROSTHETIC TOOLING 0.00
----------
TTL PROP, PLANT & EQUIP 157,416.79
OTHER ASSETS
UNAUDITED - REVISED 7/10/87
123
MOTION CONTROL
DETAIL BALANCE SHEET Page 5
FOR MONTH ENDED MAY 31, 1987
ORGANIZATION COSTS 6,550.66
COST ASSCT'D W/REORGANIZATION 145,859.55
COMMERCIAL DEPOSITS 7,032.41
------------
TOTAL OTHER ASSETS 159,442.62
-------------
TOTAL ASSETS $1,740,457.38
=============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
NOTES PAYABLE
NOTE PAYABLE CORDIS 1,980,932.54
NOTE PAYABLE CONTINENTAL BANK 750,000.10
------------
TOTAL NOTES PAYABLE 2,730,932.64
ACCOUNTS PAYABLE
ACCOUNTS PAYABLE 71,156.11
FEDERAL & FICA PAYABLE -118.72
STATE WITHHOLDING PAYABLE 6,378.72
FEDERAL U/C PAYABLE 1,138.18
STATE U/C PAYABLE 312.07
WORKERS COMP PAYABLE 2,431.99
BEEHIVE C/U PAYABLE -5.00
SALES TAX PAYABLE -9.97
USE TAX PAYABLE 1,218.82
INTEREST PAYABLE CORDIS 8,445.46
INTEREST PAYABLE CONTINENTAL 11,279.84
COMMISSION PAYABLE - CINO 204.38
T&E PAYABLE - CINO 19,691.95
INT'L COMM/BROKER ELECTRODES 6,519.79
R&D ARM PAYABLE 9,000.00
ROYALTIES PAYABLE 9,254.36
PAID WARRANTY 1,100.00
COMMISSION PAYABLE - MCI 6,154.93
COMMISSION PAYABLE - MED/D 3,565.70
COMMISSION PAYABLE - DISTRIB'S 27,443.07
------------
TOTAL ACCOUNTS PAYABLE 185,161.68
ACCRUALS
AUDIT ACCRUAL 17,500.00
INSURANCE ACCRUAL 4,797.68
PAYROLL ACCRUAL 14,547.15
WARRANTY ACCRUAL ARM 86 & B4 -9,533.47
WARRANTY ACCRUAL ARM 87 27,355.57
WARRANTY ACCRUAL MYOLAB 86 & B4 67.59
WARRANTY ACCRUAL MYOLAB 87 966.68
UNAUDITED - REVISED 7/10/87
124
MOTION CONTROL, INC.
DETAIL BALANCE SHEET Page 6
FOR MONTH ENDED MAY 31, 1987
WARRANTY ACCRUAL OTHER 86 & 84 2,713.93
WARRANTY ACCRUAL OTHER 87 747.46
WARRANTY ACCR'L PHORESOR 86&84 5,622.66
WARRANTY ACCRUAL PHORESOR 87 20,150.22
WARRANTY FREIGHT -1,694.99
------------
TOTAL ACCRUALS 83,240.00
-------------
TOTAL CURRENT LIABILITIES 2,999,334.80
STOCKHOLDERS EQUITY
COMMON STOCK 35,878.75
TREASURY STOCK -1,000.00
PAID IN CAPITAL EXCESS OF PAR 2,038,305.50
RETAINED EARNINGS -3,480,906.63
CURRENT EARNINGS 147,844.96
-------------
TTL STOCKHOLDERS EQUITY -1,258,877.42
-------------
TTL LIABILITIES & EQUITY $1,740,457.38
=============
UNAUDITED -- REVISED 7/10/87
125
MOTION CONTROL
CONSOLIDATED INCOME STATEMENT Page 7
FOR MONTH ENDED MAY 31, 1987
Current Period Year to Date
-------------- ------------
SALES REVENUE
SALES UTAH ARM 80,103.27 745,074.33
SALES PHORESOR/ELECTRODE 155,132.55 1,460,171.87
SALES MYOLAB 2,077.50 49,180.82
SALES OTHER 10,812.38 244,627.28
----------- -------------
TOTAL SALES REVENUE 248,125.70 2,499,054.30
COST OF GOODS SOLD
COST OF SALES UTAH ARM 26,214.81 324,121.88
COST OF SALES PHOR/ELECT 56,750.76 586,604.30
COST OF SALES MYOLAB 1,871.37 18,330.04
COST OF SALES SPAD 0.00 130.18
COST OF SALES OTHER 13,359.97 123,362.05
----------- -------------
TOTAL COST OF GOODS SOLD 98,196.91 1,052,548.45
----------- -------------
GROSS MARGIN $149,928.79 $1,446,505.85
=========== =============
OPERATING EXPENSES
GENERAL & ADMINISTRATIVE
SALARIES & WAGES 19,134.64 213,325.19
LEGAL & ACCOUNTING 4,691.62 69,647.17
DEPRECIATION 2,177.86 32,960.68
MISC. GENERAL & ADMIN 14,020.10 140,992,96
----------- -------------
TTL GENERAL & ADMINISTRATIVE 40,024.22 456,926.00
RESEARCH & DEVELOPMENT
RESEARCH & DEVELOPMENT 19,047.30 165,201.53
----------- -------------
19,047.30 165,201.53
SELLING
SALARIES & COMMISSIONS 40,290.11 394,938.88
TRAVEL & ENTERTAINMENT ARM 1,832.49 18,843.96
TRAVEL & ENTER. PHOR/ELEC 2,174.41 20,772.94
TRAVEL & ENTER. SPAD 0.00 0.00
TRAVEL & ENTER MYOLAB 0.00 0.00
TRAVEL/ENTERTAINMENT INT'L 1,097.42 22,901.95
TRAVEL/ENTERTAINMENT ADMIN 1,312.99 29,693.12
ADVERTISING/PROMOTION ARM -2,070.04 24,390.00
ADVER/PROM PHOR/ELEC 1,882.61 96,482.69
ADVER/PROM OTHER -398.14 10,062.14
----------- -------------
TOTAL SELLING 46,121.85 667,451.88
----------- -------------
UNAUDITED
126
MOTION CONTROL
CONSOLIDATED INCOME STATEMENT Page 8
FOR MONTH ENDED MAY 31, 1987
Current Period Year to Date
-------------- ------------
TOTAL OPERATING EXPENSES $105,193.37 $1,249,579.41
----------- -------------
OPERATING INCOME 44,735.42 196,926.44
INTEREST
INTEREST 6,018.59 49,081.48
----------- -------------
TOTAL INTEREST 6,018.59 49,081.48
----------- -------------
NET PROFIT OR LOSS $ 38,716.83 $ 147,844.96
=========== =============
UNAUDITED
127
EXHIBIT G.2
JMW ACQUISITION COMPANY
BALANCE SHEET
FOR MONTH ENDED MAY 31, 1987
Balances Only: Yes
Department: All
Reporting Period: Year-do-Date
128
JMW ACQUISITION COMPANY
BALANCE SHEET
FOR MONTH ENDED MAY 31, 1987
Page 1
ASSETS
CURRENT ASSETS
CASH
CASH 818.59
CSB CASH - CELL CULTURE 6,841.95
CSB CASH - IONTOPHORESIS 0.00
XXXXX CASH - CELL CULTURE 200.00
--------
TOTAL CASH 7,860.54
---------
TOTAL CURRENT ASSETS
PROPERTY, PLANT & EQUIPMENT
RESEARCH EQUIP - CELL CULTURE 0.00
ACC DEPR - CELL CULTURE 0.00
--------
TTL PROP, PLANT & EQUIPMENT 0.00
--------
OTHER ASSETS 0.00
TOTAL OTHER ASSETS 0.00
---------
TOTAL ASSETS $7,860.54
=========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
NOTES PAYABLE 0.00
--------
TOTAL NOTES PAYABLE 0.00
ACCOUNTS PAYABLE
TRADE PAYABLES - CELL CULTURE 0.00
TRADE PAYABLES - IONTOPHORESIS 0.00
--------
TOTAL ACCOUNTS PAYABLE 0.00
---------
TOTAL CURRENT LIABILITIES 0.00
STOCKHOLDERS EQUITY
COMMON STOCK 1,000.00
RETAINED EARNINGS -11.11
CURRENT EARNINGS 6,871.65
---------
TTL STOCKHOLDERS EQUITY 7,860.54
---------
UNAUDITED
129
JMW ACQUISITION COMPANY
BALANCE SHEET
FOR MONTH ENDED MAY 31, 1987
Page 2
TTL LIABILITIES & EQUITY $7,860.54
---------
UNAUDITED
130
EXHIBIT G.2
JMW ACQUISITION COMPANY
INCOME STATEMENT
FOR MONTH ENDED MAY 31, 1987
Balances Only: Yes
Department: All
Reporting Period: Current
131
Page 1
INCOME STATEMENT
FOR MONTH ENDED MAY 31, 1987
Current Period Year to Date
-------------- ------------
REVENUE
RESEARCH GRANTS
RESEARCH GRANTS - CELL CULTURE 18,168.00 18,168.00
RESEARCH GRANTS - IONTOPHORESIS 0.00 0.00
---------- ----------
TOTAL RESEARCH GRANTS 18,168.00 18,168.00
---------- ----------
TOTAL REVENUE
COST OF GOODS
MTL & CONS SUPPLIES - CELL 140.00 140.00
MTL & CONS SUPPLIES - IONTOPH 0.00 0.00
---------- ----------
TOTAL COST OF GOODS 140.00 140.00
OPERATING EXPENSES
GENERAL & ADMINISTRATIVE
ACCOUNTING SERV - CELL CULTURE 500.00 500.00
DEPRECIATION - CELL CULTURE 0.00 0.00
CONTRACT SERV - CELL CULTURE 8,747.00 8,747.00
OFFICE SUPPLIES - CELL CULTURE 445.92 445.92
BANK CHARGES 170.30 170.30
BANK CHARGES - CELL CULTURE 0.00 0.00
OTHER TAXES & LICENSE 0.00 0.00
CONSULTING - CELL CULTURE 1,000.00 1,000.00
---------- ----------
TOTAL G & A 10,863.22 10,863.22
RESEARCH & DEVELOPMENT 0.00 0.00
---------- ----------
TOTAL RESEARCH & DEVELOPMENT 0.00 0.00
TRAVEL & ENTERTAINMENT
T & E - CELL CULTURE 293.13 293.13
---------- ----------
TTL TRAVEL & ENTERTAINMENT 293.13 293.13
INTEREST 0.00 0.00
---------- ----------
TOTAL INTEREST EXPENSE 0.00 0.00
---------- ----------
TOTAL OPERATING EXPENSES 11,156.35 11,156.35
---------- ----------
NET SBIR OUTSTANDING $ 6,871.65 $ 6,871.65
========== ==========
UNAUDITED
132
EXHIBIT H
SHAREHOLDER AGREEMENT
This Agreement is entered into as of August 4, 1987, by and among JMW
Acquisition Co. a Utah corporation (the "Company"), Xxxxxxx X. Xxxxxxxx and
Xxxxxxx X. Xxxx (hereinafter collectively referred to as "Shareholders", or
sometimes individually referred to as a "Shareholder"), and the individuals and
entities who execute this Agreement as Investors (the "Investors").
R E C I T A L S
- - - - - - - -
A. Pursuant to that certain Preferred Stock Purchase Agreement to be
entered into by and among the Company, Motion Control, Inc. ("MCI") and the
Investors and dated of even date herewith (the "Purchase Agreement"), the
Investors are purchasing from the Company 67,200 shares of the Company's Series
A Preferred Stock, $0.01 par value per share ("Series A Stock"), 3,942,489
shares of the Company's Series B Preferred Stock, $0.01 par value per share
("Series B Stock") and 172,800 shares of the Company's Series C Preferred Stock,
$0.01 par value per share ("Series C Stock"), in the amounts and series set
forth on Exhibit A to the Agreement. The Series A Stock, Series B Stock and
Series C Stock are hereinafter referred to collectively as the "Preferred
Stock".
B. Upon the Closing (as defined in the Purchase Agreement) Xxxxxxx X.
Xxxxxxxx will own 1,440,000 shares of the Company's Common Stock, and Xxxxxxx X.
Xxxx will own 720,000 shares of the Company's Common Stock.
C. To induce the Investors to purchase the Preferred Stock from the
Company, the Shareholders have agreed (i) to grant to the Investors a right of
first refusal with respect to the shares of the Company's Common Stock to be
owned by them as of the Closing, and any shares of the Company's capital stock
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of such shares (all such shares to be referred to collectively
as the "Shares"), (ii) to grant to the Investors a right of co-sale with respect
to the Shares and (iii) to grant the Investors certain voting rights with
respect to the Shares (the first refusal, co-sale, and voting rights to be
hereinafter referred to as the "Investors' Rights").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. RIGHTS OF FIRST REFUSAL AND CO-SALE.
1.1 Investor Rights. Before any or all of the Shares hold by any
Shareholder may be sold or otherwise
133
transferred (including a transfer by gift or operation of law), the Investors
shall have a right of first refusal to purchase all of such Shares, and a right
of co-sale with respect to such Shares, all on the terms and conditions set
forth in this Section 1.
1.2 Notice of Proposed Transfer. Before any Shareholder may sell or
otherwise transfer any of the Shares, such Shareholder (the "Selling
Shareholder") shall deliver to the Company and to each of the Investors a
written notice (the "Notice") stating (i) the Selling Shareholder's bona fide
intention to sell or otherwise transfer such Shares; (ii) the bona fide number,
class and series of the Shares proposed to be sold or otherwise transferred;
(iii) the name of each proposed purchaser or other transferee; and (iv) the bona
fide cash price or other consideration per share for which the Selling
Shareholder proposes to transfer such Shares (the "Offered Price"). The Shares
proposed to be sold or otherwise transferred shall hereinafter be referred to as
the "Offered Shares".
1.3 Right of First Refusal.
(a) Exercise of Right of First Refusal. The Investors shall have the
first right (the "Right of First Refusal") to purchase all, but not less than
all, of the Offered Shares, at the price determined in accordance with Section
1.3(b) below, according to the following procedure:
(i) Any Investor desiring to purchase any or all of the Offered
Shares shall, within the twenty (20) day period commencing on the date the
Notice is given by the Selling Shareholder (the "Refusal Period"), give notice
to the Selling Shareholder in writing of such Investor's election to purchase
and the number and type of Offered Shares that the Investor desires to purchase.
None of the Investors shall have a right to purchase any of the Offered Shares
unless the Investors, in the aggregate, elect to purchase all of the Offered
Shares.
(ii) If the total number of shares specified in the elections of
Investors exceeds the number of Offered Shares, then (unless the Investors agree
otherwise) each Investor electing to purchase shall have the right to purchase
that number of the Offered Shares that is obtained by multiplying the number of
Offered Shares by a fraction, the numerator of which shall be the sum of the
number of shares of the Company's common stock (the "Common Stock") then held by
such Investor plus the number of shares of Common Stock then issuable upon
conversion or exchange of all securities of the Company then held by such
Investor (including but not limited to Series A Stock, Series B Stock and Series
C Stock) that are
-2-
134
convertible into, or exchangeable for, Common Stock without the payment of any
consideration ("Common Stock Equivalents"), and the denominator of which shall
be the sum of the total number of shares of Common Stock then held by all the
Investors electing to purchase Offered Shares plus the number of shares of
Common Stock then issuable upon conversion or exchange of all Common Stock
Equivalents then held by all the Investors electing to purchase Offered Shares.
(b) Purchase Price. The purchase price per share for the Offered
Shares to be purchased by Investors under this Agreement shall be the Offered
Price. If the Offered Price includes consideration other than cash, the cash
equivalent value of the non-cash consideration shall be conclusively determined
by the Board of Directors of the Company in good faith.
(c) Payment. Payment of the purchase price for the Offered Shares
shall be made within twenty (20) days after expiration of the Refusal Period (if
the Investors have elected to and do purchase all of the Offered Shares).
Payment of the purchase price shall be made, at the option of each Investor
participating in the purchase, (i) in cash (by check), (ii) by cancellation of
all or a portion of any outstanding indebtedness of the Selling Shareholder to
such Investor, or (iii) by any combination of the foregoing.
(d) Rights as a Shareholder. If the Investors exercise their Right
of First Refusal to purchase all of the Offered Shares, then, upon such
exercise, the Selling Shareholder shall have no further rights as a holder of
the Offered Shares except the right to receive payment for the Offered Shares
from the Investors in accordance with the terms of this Agreement, and the
Selling Shareholder shall forthwith cause all certificate(s) evidencing the
Offered Shares to be surrendered to the Company for cancellation and transfer to
the purchasing Investor(s).
1.4 Investors' Right Of Co-Sale.
(a) Exercise of Right of Co-Sale. In addition to the Right of First
Refu al set forth above, each Investor shall have the right to participate in
the Selling Shareholder's sale of the Offered Shares to the proposed purchaser
or other transferee (including sales to other Investors pursuant to Section 1.3)
pursuant to the specified terms and conditions of such sale as set forth in the
Notice and in accordance with the terms and conditions set forth in this Section
1.4 (the "Right of Co-Sale"). To the extent an Investor exercises such Right of
Co-Sale, the number of Offered Shares that the Selling Shareholder may sell
pursuant to the
- 3 -
135
Notice shall be correspondingly reduced. The Right of Co-Sale of each Investor
shall be subject to the following terms and conditions.
(i) If the Offered Shares include shares of Common Stock, then
each Investor may sell all or any part of that number of shares of Common Stock
owned by such Investor (including shares of Common Stock issuable upon the
conversion of the Preferred Stock) that is not in excess of the number obtained
by multiplying (A) the aggregate number of shares of Common Stock included in
the Offered Shares by a fraction, the numerator (B) of which is the sum of the
number of shares of Common Stock then held by such Investor plus the number of
shares of Common Stock then issuable upon the conversion or exchange of all
Common Stock Equivalents then held by such Investor, and the denominator of
which is the sum of (C) the total number of shares of Common Stock, then held by
the Selling Shareholder and all Investors plus (D) the number of shares of
Common Stock then issuable upon the conversion or exchange of all Common Stock
Equivalents then held by the Selling Shareholder and all Investors.
(ii) If the Offered Shares include any shares of any series or
class of the Company's capital stock other than Common Stock, then each
Investor may sell all or any part of the number of shares of such series or
class owned by such Investor that is not in excess of the number obtained by
multiplying (A) the aggregate number of shares of such series or class included
in the Offered Shares by a fraction, the numerator (B) of which is the number
of shares of such series or class owned by such Investor, and the denominator
(C) of which is the total number of shares of such series or class then held by
the Selling Shareholder and all Investors. If the Offered Shares consist of
shares of more than one series or class, then an Investor may participate in
the sale of shares of any or all such series and/or classes, to the extent set
forth in the Section 1.4(a)(i) and this Section 1.4(a)(ii).
(iii) Each Investor may effect its participation in the sale
pursuant to this Section 1.4 by delivering to the Selling Shareholder within
twenty (20) days after receipt of the Notice, a written election to participate
in the sale of the Offered Shares setting forth the number and type of shares
that such Investor elects to include in the sale, accompanied by one or more
certificates, properly endorsed for transfer, representing such shares or
shares convertible or exchangeable for such shares.
(b) Delivery of Stock Certificates and Proceeds. The stock
certificate(s) to be delivered by the Investor pursuant to Section 1.4(a)(iii)
shall be transferred
-4-
136
and delivered to the purchaser or transferee in consummation of the sale of the
Offered Shares pursuant to the terms and conditions specified in the Notice, and
there shall be promptly thereafter remitted to such Investor that portion of the
sale proceeds to which such Investor is entitled by reason of its participation
in such sale.
1.5 Offering Shareholder's Right To Transfer.
If the Investors have not elected to purchase all of the Offered Shares, then
the Selling Shareholder may sell or transfer that portion of the Offered Shares
permitted to be sold by the Selling Shareholder after application of the Right
of Co-Sale contained in Section 1.4 hereof, to any person named as a purchaser
or other transferee in the Notice at the Offered Price, provided that such sale
or other transfer (i) is consummated within 120 days after the date of the
Notice and (ii) is in accordance with all the terms of this Agreement. If the
Offered Shares are sold or transferred in accordance with the terms and
conditions of this Agreement, then the transferee or purchaser of the Offered
Shares shall thereafter hold such Offered Shares free of the Right of First
Refusal and the Right of Co-Sale imposed by this Agreement. If the Offered
Shares are not so sold or otherwise transferred during such 120 day period,
then the Selling shareholder shall not sell or otherwise transfer any of such
Offered Shares without complying again in full with the provisions of this
Agreement.
1.6 Exceptions.
(a) Certain Family Gifts. Notwithstanding any thing in this
Agreement to the contrary, transfers of Shares by a Shareholder by gift to such
Shareholder's immediate family members or to trusts for the exclusive benefit
of such family members, or transfers of Shares by a Shareholder by will or
intestate succession, shall be exempt from the Right of First Refusal and Right
of Co-Sale set forth in this Agreement, provided that each transferee or other
recipient agrees in writing to hold the Shares so transferred subject to all of
the provisions of this Agreement so that such transferee is bound by all
provisions of this Agreement and that there shall be no further transfer of
such Shares except in accordance with the terms of this Agreement. For purposes
of this Section 1.6 the term "immediate family" shall mean spouse, lineal
descendant or antecedent, father, mother, brother or sister of the Shareholder,
the adopted child or adopted grandchild of the Shareholder, or the spouse of any
child, adopted child, grandchild or adopted grandchild of the Shareholder.
(b) Certain Transfers. Notwithstanding anything in this Agreement to
the contrary, the Right of First Refusal
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and Right of Co-Sale shall not apply to any transfer of Shares by a Shareholder
made pursuant to: (i) a statutory merger or statutory consolidation of the
Company with or into another corporation or corporations; (ii) the winding up
and dissolution of the Company; or (iii) an underwritten sale of Common Stock
to the general public pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission under the
Securities Act of 1933, as amended, where the Shares in question have been
registered under such registration statement. Additionally, 360,000 of the
shares held by Xx. Xxxxxxxx, and 180,000 of the Shares held by Xx. Xxxx, as
appropriately adjusted for stock splits, dividends, combinations and the like,
shall be exempt from the provisions of Section 1 of this Agreement and may be
sold or otherwise transferred without complying with such provisions.
2. VOTING AGREEMENT
2.1 Investor's Right to Vote Shares in Certain Transactions.
The Shareholders shall vote the Shares as directed by a representative of the
Investors (the "Investors' Representative") in connection with any proposed
merger, consolidation, liquidation, dissolution, sale of all or substantially
all assets or similar transaction of or by the Company (a "Major Transaction"),
provided, however, that this Section 2.1 shall not apply to a proposed merger
unless all holders of the Company's common stock are entitled to receive
substantially the same consideration per share for their stock in such merger.
2.2 Notice to Shareholders. In the event that the Investors, or
any other person, proposes that the Company enter into a Major Transaction,
the Investors' Representative (who shall be selected by holders of a majority of
the shares of Preferred Stock and Common Stock issued on conversion of the
Preferred Stock) shall inform the Shareholders in writing at least 30 days
prior to the shareholder vote relating to such transaction of the basic terms
of the translation and of how the Shares shall be voted on such matter (the
"Investors' Voting Rights"), and the Shareholders shall so vote the Shares. The
Shareholders shall be required to vote the Shares as directed by the Investors'
Representative whether or not the Major Transaction has been proposed, approved
or considered by the Company's Board of Directors; provided, however, that in
the event the Major Transaction is not proposed by the Investors, then the
Investors shall only be required to provide the Shareholders with such notice
and information about the proposed Major Transaction as is reasonably possible
and available to them. In connection with any proposed Major Transaction, the
Shareholders shall take any and all actions requested by the Investors'
Representative to effect the intention of the Investors' Representative
relating to such transaction, including, without limitation, voting the Shares
for or against the election or removal of a given director or
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directors at the direction of the Investors' Representative to effect the
appropriate Board of Director action relating to such proposed Major
Transaction, or granting the Investors' Representative a proxy to vote the
Shares in connection with such proposed Major Transaction.
2.3 Shareholders' Right to Vote. Notwithstanding the foregoing,
the Shareholders may vote the Shares in connection with a given proposed Major
Transaction if, prior to the vote, the Shareholders have (i) offered, in
writing, to each Investor, to purchase all shares of the Company's capital
stock held by such Investor for an amount in cash equal to the fair market
value of the amount such Investor would receive for such shares in connection
with the proposed Major Transaction, which amount shall be determined by the
Investors' Representative in good faith (the "Fair Market Value Price") and
(ii) provided the Investors (to the reasonable satisfaction of the Investors
Representative) with evidence of the Shareholders' ability to promptly make
the offered payment to any Investor who accepts the Shareholders' offer. Under
no circumstance will the Shareholders be relieved of their obligation to vote
the Shares as directed by the Investors' Representative if they cannot
demonstrate, to the satisfaction of the Investors Representative, their
willingness and ability to purchase the Investors' Shares as set forth in this
Section 2.3.
2.4 Acceptance of Shareholders' Offer. Each Investor may accept
or reject the Shareholders' offer regardless of the decision of other Investors
regarding the offer. Any Investor who accepts such offer shall be paid the Fair
Market Value Price within 20 days of acceptance of the Shareholders' offer. Any
failure to pay the Fair Market Value Price within such period shall reinstate
the Investors' Voting Rights of all Investors relating to the Shares for the
proposed Major Transaction.
2.5 Equitable Relief. The parties hereto agree that the failure
of the Shareholders to vote their Shares as directed by the Investors
Representative in accordance with this Section 2 will cause irreparable harm to
the Investors. Accordingly, it is agreed, that the Investors shall be entitled
to equitable relief (including, without limitation, injunctive relief and/or
specific performance) to enforce the provisions of this Section 2.
3. Termination of Investors' Rights. The Investors' Rights shall
terminate upon the earlier to occur of:
(a) the closing of the first underwritten sale of the Company's
Common Stock to the general public pursuant to a registration statement filed
with, and declared
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effective by, the Securities and Exchange Commission under the Securities Act
of 1933, as amended; or
(b) the date on which this Agreement is terminated by a writing
executed by the Company and holders of 60% of the shares of the Preferred
Stock and Common Stock issued on conversion of the Preferred Stock. No such
action shall be taken that materially and adversely affects Cordis Corporation
in a manner substantially different than the New Investors (as that term is
defined in the Purchase Agreement) without Cordis' approval.
4. REFUSAL TO TRANSFER. Any attempt by any Shareholder to transfer any
of the Shares in violation of any provision of this Agreement shall be void.
The parties hereto agree that the Company shall not be required (i) to transfer
on its books any Shares that have been sold, gifted or otherwise transferred in
violation of any of the provisions set forth in this Agreement, (ii) to treat
as owner of such Shares or to accord the right to vote or pay dividends to any
purchaser, donee or other transferee to whom such Shares may have been so
transferred or (iii) to recognize the vote of any Shares voted in violation of
the provisions of this Agreement.
5. RESTRICTIVE LEGEND AND STOP-TRANSFER ORDERS.
5.1 Legend. Each Shareholder understands and agrees that the Company
shall cause the legend set forth below, or a legend substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RIGHTS OF
FIRST REFUSAL AND CO-SALE, AND VOTING RESTRICTIONS, AS SET FORTH IN A
SHAREHOLDER AGREEMENT DATED AUGUST 4, 1987 ENTERED INTO BY THE ORIGINAL
HOLDER OF THESE SHARES, THE COMPANY, AND CERTAIN OTHER SHAREHOLDERS OF THE
COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND CO-SALE, AND VOTING RESTRICTIONS,
ARE BINDING ON TRANSFEREES OF THESE SHARES.
5.2 Stop Transfer Instructions. Each Shareholder agrees, to insure
compliance with the restrictions referred to herein, that the Company may issue
appropriate "stop transfer" certificates or instructions and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its records.
6. MISCELLANEOUS PROVISIONS.
6.1 Notice. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon the
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earlier of (i) personal delivery or (ii) three (3) business days after deposit
in the U.S. mail by registered or certified mail, with postage prepaid and
properly addressed to the party to be notified at the address set forth below
such party's signature on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice to the other parties
hereto.
6.2 Binding on Successors and Assigns. This Agreement, and the rights
and obligations of the parties hereunder, shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
6.3 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.4 Amendment. Any amendment or modification of this Agreement shall
be effective only if evidenced by a written instrument executed by the Company,
holders of 60% of the shares of Preferred Stock and Common Stock issued on
conversion of the Preferred Stock, and the Shareholders; provided, however,
that any Investor may waive, reduce or release (in whole or in part) any of its
rights hereunder without the consent of any other party hereto. Notwithstanding
the foregoing, no such amendment or modification that materially and adversely
affects Cordis Corporation in a manner substantially different than the New
Investors (as that term is defined in the Purchase Agreement) shall be binding
on Cordis Corporation without their approval. Any waiver by a party of its
rights hereunder shall be effective only if evidenced by a written instrument
executed by a duly authorized representative of such party.
6.5 Exculpation Among Investors. Each Investor shall have the
absolute right to exercise or refrain from exercising any right or rights that
such Investor may have by reason of this Agreement, including without
limitation the right to purchase or participate in the sale of Offered Shares,
to waive any right of such Investor under this Agreement, or to agree to the
amendment of this Agreement, and such Investor shall not incur any liability to
any other Investor, or to any Shareholder or to the Company, with respect to
exercising or refraining from exercising any such right or rights.
6.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Utah, excluding that body of law
pertaining to conflict of laws.
6.7 Obligation of the Company. The Company agrees to use its best
efforts to enforce the terms of this Agreement,
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141
to inform the Investors of any breach hereof and to assist the Investors in the
exercise of their rights and performance of their obligations hereunder.
6.8 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 all such counterparts together shall constitute one and the same
instrument.
6.9 Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and there is no other
agreement or understanding of the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
The Company
JMW Acquisition Co.
By:
--------------------------------
Title:
------------------------------
Address: 0000 Xxxx 0000 Xxxxx, Xxxxx X
Xxxx Xxxx Xxxx, Xxxx 00000
The Shareholders
------------------------------------
Xxxxxxx X. Xxxxxxxx
Address: c/o JMW Acquisition Co.
1290 West 0000 Xxxxx, Xxxxx X
Xxxx Xxxx Xxxx, Xxxx 00000
------------------------------------
Xxxxxxx X. Xxxx
Address: c/o JMW Acquisition Co.
1290 West 0000 Xxxxx, Xxxxx X
Xxxx Xxxx Xxxx, Xxxx 00000
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The Investors
Newtek Ventures,
a California limited partnership
By:
--------------------------------
Title:
------------------------------
Address:
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
MBW Venture Partners Limited Partnership
By: MBW Management, Inc.
By:
--------------------------------
Title:
------------------------------
Address:
000 Xxxxxx Xxxxxx
Xxxxx 0
Xxx Xxxxx, XX 00000
Michigan Investment Fund L.P.
By: MBW Management, Inc.
By:
--------------------------------
Title:
------------------------------
Address:
000 Xxxxxx Xxxxxx
Xxxxx 0
Xxx Xxxxx, XX 00000
Utah Technology Venture Fund
By:
--------------------------------
Title:
------------------------------
Address:
000 Xxxxxx Xxx
Xxxx Xxxx Xxxx, XX 00000
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143
Cordis Corporation
By:
--------------------------------
Title:
------------------------------
Address:
00000 X. Xxxxxxx Xxxxxx
Xxxxx, XX 00000
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EXHIBIT "I"
[XXXXXX & XXXXXXXX LETTERHEAD]
Attorneys at Law
August 5, 1987
To each of the purchasers ("Purchasers") set forth on Exhibit "A" hereto:
We have acted as counsel to the Company and MCI in connection with the
offer and sale of 67,200 shares of the Company's Series A Preferred Stock (the
"Series A Stock"), 3,975,618 shares of the Company's Series B Preferred Stock
(the "Series B Stock") and 172,800 shares of the Company's Series C Preferred
Stock (the "Series C Stock") (the Series A Stock, Series B Stock and Series C
Stock to be referred to collectively as the "Preferred Stock") pursuant to that
certain Preferred Stock Purchase Agreement by and among you, the other
Purchasers, JMW Acquisition Co. (the "Company") and Motion Control, Inc.
("MCI") dated August 4, 1987 (the "Agreement"). All capitalized terms used in
this opinion, unless specifically defined herein, shall have the meaning given
them in the Agreement.
In rendering the opinion contained herein, as required pursuant to
Paragraph 5.13 of Section 5 of the Agreement, we have reviewed and examined the
Articles of Incorporation and Bylaws of the Company and MCI, the Agreement, the
records of corporate action of the Company and MCI, and we have made such other
investigations of law and fact as we have deemed necessary or appropriate under
the circumstances. In our examination of the foregoing, we have assumed the
genuineness of all signatures on original documents, the authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies thereof, the due execution and delivery of
all documents where due execution and delivery are a prerequisite of the
effectiveness thereof, the authority of each person signing any of such
documents on behalf the Purchasers, and the accuracy and completeness of the
factual representations made in all documents referred to herein. In addition,
we have specifically relied upon factual representations as to certain matters
contained in certificates (collectively, the "Officers Certificates") signed by
officers of the Company and MCI and have made no independent investigations
thereof. The Officers Certificates are attached hereto as Exhibits "B" and "C".
As used herein, the phrase "to the best of our knowledge" reflects the fact
that, while we have no reason to believe that the statement of such matter is
inaccurate (based on information we have as a result of representing the
Company and MCI in this and other matters), we have made no independent
investigation with respect to such statement or matter.
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Purchasers
August 5, 1987
Page 2
For the purposes of this opinion, we have further assumed that you have
all requisite power and authority, and have taken any and all necessary
corporate or partnership action, to execute and deliver the Agreement.
The opinions hereinafter expressed are subject to the following
qualifications, as to which we render no opinions: (a) the effect of applicable
bankruptcy, insolvency and other similar laws affecting the rights of creditors
generally; (b) the effect of rules of law governing specific performance,
injunctive relief, and other equitable remedies; (c) the enforceability of
provisions requiring indemnification or contribution in connection with the
offering, issuance or sale of securities; (d) the enforceability of any
self-help, choice of law, evidentiary standard, waiver of remedy or liquidated
damages provisions and (e) as to compliance with any law of the State of
Michigan.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company and MCI are each corporations duly organized and duly
existing under, and by virtue of, the laws of the State of Utah, and are in
good standing under such laws. The Company and MCI have all requisite corporate
power to carry on their respective businesses and to enter into and carry out
the provisions of the Agreement and the transactions contemplated thereby. The
Company and MCI have no subsidiaries or affiliated companies and do not
otherwise directly or indirectly control any other business entity, except
that, upon closing, MCI will be a 95% or greater owned subsidiary of the
Company. Neither the Company nor MCI owns or leases any property outside the
State of Utah and is not required to be qualified to do business in any other
state in which the failure to so qualify would have a material adverse effect
on the business or assets of either the Company or MCI. The Company and MCI
have furnished the Purchasers, or their counsel, with copies of their current
Articles of Incorporation, which copies are true, correct and complete and
contain all amendments through the date of the Agreement. Such Articles are not
in conflict with any provisions of the Utah Business Corporation Act and are
enforceable in accordance with their terms.
2. The authorized capital stock of the Company consists of 15,000,000
shares of Common Stock, $0.01 par value, of which 500,000 shares are issued and
outstanding, and 3,316,195 shares are subject to issuance pursuant to executed
subscription agreements that provide for the purchase of such shares at the
Closing, and 4,215,618 shares of Preferred Stock, $0.01 par value (67,200 of
which have been designated Series A Stock, 3,975,618 of which have been
designated Series B Stock, and 172,800 of which have been designated Series C
Stock), none of which Preferred Stock is issued or outstanding immediately
prior to the Closing. All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid for and non-assessable, and
have been issued in compliance with all applicable federal and state securities
laws. To the best of our knowledge, and except as set forth in the Agreement,
there are no options,
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Purchasers
August 5, 1987
Page 3
warrants, conversion privileges or other rights or agreements, with respect to
the issuance thereof, presently outstanding to purchase an of the authorized
but unissued stock of the Company.
3. The authorized capital stock of MCI consists of 100,000 shares of
Preferred Stock, $0.50 par value, none of which is designated, issued or
outstanding, and 10,000,000 shares of Common Stock, $0.01 par value, 3,487,875
shares of which are issued and outstanding. All such issued and outstanding
shares have been duly authorized, validly issued and are fully paid for and
non-assessable. To the best of our knowledge, and except as set forth or
disclosed in the Agreement, there are no options, warrants, conversion
privileges or other rights, or agreements, with respect to the issuance
thereof, presently outstanding to purchase any of the authorized but unissued
stock of MCI.
4. All corporate action on the part of the Company and MCI, and their
respective officers, directors and shareholders, necessary for the sale and
issuance of the shares of Preferred Stock pursuant to the Agreement (and of the
shares of common stock issuable upon conversion of such shares of Preferred
Stock), and the performance of the Company's and MCI's obligations under the
Agreement, has been taken or will be taken prior to the Closing. When executed
and delivered by the Company and MCI, respectively, the Agreement will be a
valid and binding obligation of the Company and MCI, respectively, enforceable
in accordance with its terms. To the best of our knowledge, the shares of
Preferred Stock issued pursuant to the Agreement (and the shares of common
stock issuable upon conversion of such shares of Preferred Stock) are not
subject to any pre-emptive rights or rights of first refusal.
5. To the best of our knowledge, there are no actions, proceedings or
investigations pending, or to the best of our knowledge, any basis therefor or
threat thereof, against or affecting the Company or MCI, that, either in any
case or in the aggregate, might result (i) in any material adverse change in the
business, prospects, condition, affairs or operations of the Company or MCI or
in any of their respective properties of assets, (ii) in any material
impairment of the right or ability of the Company or MCI to carry on their
respective businesses as now conducted or as proposed to be conducted, or (iii)
in any change in the current equity ownership of the Company or MCI, and none
that questions the validity of the Agreement or any action taken or to be taken
in connection therewith.
6. The shares of Preferred Stock to be purchased and sold pursuant to the
Agreement (and the shares of common stock issuable upon conversion of such
shares of Preferred Stock), when issued, sold and delivered in accordance with
the terms and for the consideration expressed in the Agreement, will be duly
and validly issued, fully paid for and non-assessable, and, to the best or our
knowledge, will be free and clear of any liens or encumbrances caused or
created by the Company or MCI. The rights, preferences and privileges of the
Preferred Stock will be as set forth in the Company's Articles of
Incorporation. The Company has
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Purchasers
August 5, 1987
Page 4
reserved the requisite number of shares of its common stock for issuance upon
the conversion of the shares of Preferred Stock to be issued under the
Agreement.
7. All material consents, approvals, orders, authorizations or
registrations, qualifications, designations, declarations or filings with any
federal or state governmental authority on the part of the Company or MCI
required in connection with the consummation of the transactions contemplated
in the Agreement shall have been obtained prior to and be effective as of the
Closing or shall be obtained and be effective in a timely manner after the
Closing. Assuming the accuracy of the representation and warranties of the
Purchasers set forth in Sections 4.1 through 4.7, and sub paragraphs (1)
through (3) of Section 4.8, of the Agreement and the factual representations of
the officers of the Company contained in the Officers Certificate for the
Company, the offer, sale and issuance of the Preferred Stock to the Purchasers
in conformity with the terms of the Agreement is (i) exempt from the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended and (ii) exempt from the qualifications and/or registration
requirements under any applicable state securities laws.
8. Except as set forth in the Schedule of Exceptions contained in the
Agreement, (i) neither the company nor MCI is in, nor to the best of our
knowledge will the conduct of their respective businesses as proposed to be
conducted result in, any violation of any term of their respective Articles of
Incorporation or bylaws, and (ii) to be the best of our knowledge, neither the
Company nor MCI is in nor will the conduct of their respective businesses as
proposed be conducted result in, any violation, breach or default, in any
material respect, of any term or provisions of any mortgage, indenture,
contract, agreement or instrument to which the Company or MCI is a party, any
material federal or state law, rule or regulation, or any material judgment,
decree, or order, applicable to or binding upon the company or MCI. The
execution, delivery and performance of the Agreement, and the issuance of the
shares of Preferred Stock pursuant thereto, will not result in any material
violation of the company's or MCI's Articles of Incorporation or Bylaws, or any
federal or state law, rule or regulation, and to the best of our knowledge will
not violate or constitute a default in any material respect under any mortgage,
indenture, contract, agreement or instrument to which the company or MCI is a
party, or any material judgment, decree or order by which either of them is
bound. To the best or our knowledge, no employee of the Company or MCI is in
violation, nor to the best of our knowledge is there any allegation of such
violation, of any material term of any employment contract, patent or other
proprietary information or nondisclosure agreement, or any other similar
contract or agreement, including, without limitation, any contract or agreement
relating to the right of any such employee to be employed by the Company or MCI
because of the nature of the business conducted or proposed to be conducted by
the company or MCI or for any other reason, and to the best of our knowledge
the continued employment by the Company and MCI of their present employees will
not result in any such violation.
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Purchasers
August 5, 1987
Page 5
9. To the best of our knowledge, and except as set forth in the Agreement
and in the employment and consultation Agreement between MCI and Xxxxxxx X.
Xxxxxxxx dated January 1, 1986, neither the Company nor MCI is presently under
any obligation, including any "piggyback" obligation, to register, as defined
in Section 7 of the Agreement, any of its presently outstanding securities or
any of its securities that may hereafter be issued.
This opinion is solely for your use and is not to be made available to or
relied upon by other persons or entities without our prior written consent.
Please note that we opine only as to the matters expressly set forth herein. No
opinion should be inferred as to any other matters.
Very truly yours,
Xxxxxx & Xxxxxxxx
----------------------------------
Xxxxxx & Xxxxxxxx
149
EXHIBIT J
BYLAWS
OF
JMW ACQUISITION CO.
I. OFFICES
The principal office of the corporation in the State of Utah shall be
located in the City of Salt Lake, County of Salt Lake. The corporation may have
such other offices, either within or without the State of Utah, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the first Tuesday in the month of April in each year, beginning with
the year 1986, at the hour of 10:00 o'clock a.m., or at such other time on such
other day within such month as shall be fixed by the Board of Directors, for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairman of the Board of Directors, the President or by the Board of
Directors, and shall be called by the President at the request of the holders
of not less than one-fifth (1/5) of all outstanding shares of the corporation
entitled to vote at the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Utah, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purposes or purpose
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than fifty (50) days before the
date of the meeting, either personally or by mail, by or at the direction of
the President, or the Secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his address as it appears on
the stock transfer books of the corporation, with postage thereon prepaid.
150
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period, not less than (10) days, but not to exceed, in any case, fifty
(50) days. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than fifty (50) days and, in
the case of a meeting of shareholders, not less than ten (10) days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders.
Section 5. Voting Record. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete record
of the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof.
Section 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his
duly authorized attorney in fact.
Section 9. Voting of Shares. Each outstanding share entitled to vote
shall have the voting rights specified in the Articles of Incorporation of the
corporation.
Section 10. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
2
151
Section 2. Number, Tenure and Qualifications. The number of directors of
the corporation shall be five (5). Each director shall hold office until the
next annual meeting of shareholders and until his successor shall have been
elected and qualified. Directors need not be residents of the State of Utah or
shareholders of the corporation.
Section 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Utah, for the holding of additional regular meetings without other
notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board of Directors,
the President or any two directors. The person or persons authorized to call
special meetings of the Board of Directors may fix any place, either within or
without the State of Utah, as the place for holding any special meeting of
the Board of Directors called by them.
Section 5. Notice. Notice of any special meeting shall be given at least
two (2) days previously thereto by written notice delivered personally or mailed
to each director at his business address or at least one (1) day previously
thereto by actual telephonic notice to each director. Such notice shall be
deemed to be delivered when deposited in the United States mail, so addressed,
with postage thereon prepaid, if by mail, or at the time the call is completed,
if by telephone. Any director may waive notice of any meeting. The attendance of
a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
Section 5. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 7. Merger of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 8. Action Without a Meeting. Any action required or permitted to
be taken by the Board of Directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
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Section 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election of directors by the
shareholders
Section 10. Compensation. By resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a stated salary as director or a fixed
sum for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
IV. OFFICERS
Section 1. Number. The officers of the corporation shall be the Chairman
of the Board of Directors, a President, one or more Vice Presidents, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or
more offices may be held by the same person, except the offices of President
and Secretary.
Section 2. Election and Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of the Board of Directors and,
subject to its direction, shall perform such acts on behalf of the corporation
as he or she determines are appropriate.
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Section 6. President. The President shall be the chief executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and shall also preside at meetings of the Board of Directors
in the absence of the Chairman of the Board of Directors or at the request of
the Chairman. He may sign any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or
executed; and in general shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time.
Section 7. Vice President. In the absence of the President or in
the event of his death, inability or refusal to act, the Vice President (or in
the event there be more than one Vice President, the Vice Presidents, in the
order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may perform such
other duties as from time to time may be assigned to him or her by the
President or by the Board of Directors.
Section 8. Secretary. The Secretary shall: (a) keep the minutes of
the proceedings of the shareholders and of the Board of Directors in one or
more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation; (d) keep
a register of the address of each shareholder; (e) sign with the President, or
a Vice President, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (f)
have general charge of the stock transfer books of the corporation; and (g) in
general perform all of the duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him or her by the
President or by the Board of Directors.
Section 9. Treasurer. The Treasurer shall (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
determined by the Board of Directors; and (c) in general perform all of the
duties incident to the office of Treasurer and such other duties as from time to
time may be assigned to him or her by the President or by the Board of
Directors.
Section 10. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
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duties as shall be assigned to them by the Secretary or Treasurer or by the
President or the Board of Directors.
Section 11. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the corporation.
Section 12. Signature of Checks. Payment for corporate debts made
by check or check vouchers may be signed by any of the officers of the
corporation, or otherwise as the Board of Directors may from time to time by
resolution direct.
V. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing
shares of the corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the President or Vice
President and by the Secretary or an Assistant Secretary and sealed with the
corporate seal or facsimile thereof if such seal has been adopted by the Board
of Directors.
Section 2. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the stock transfer books of the corporation
by the holder of record thereof or by his legal representative, who shall
furnish proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes.
VI. DIVIDENDS
The Board of Directors may, from time to time, declare and the
corporation may pay dividends on its outstanding shares in the manner, and upon
the terms and conditions provided by law and its Articles of Incorporation.
VII. CORPORATE SEAL
The Board of Directors may provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
VIII. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
director of the corporation under the provisions of these Bylaws or under the
provisions of the Utah Business Corporation Act, a waiver thereof in writing
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signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of such
notice.
IX. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may
be adopted by the Board of Directors or by the shareholders at any regular or
special meeting.
X. INDEMNIFICATION
To the full extent permitted by its Articles of Incorporation and by
the Utah Business Corporation Act, the Corporation shall indemnify (and advance
expenses to) its directors, officers and employees in connection with any
action, suit, or proceeding, civil or criminal, to which such persons are made
party by reason of being or having been a director, officer or employee of the
Corporation. Additionally, the Corporation shall provide such indemnification
of, and advancement of expenses to, such of its agents as the Board of
Directors of the Corporation shall, from time to time, deem necessary, required
or appropriate.
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Secretary
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