-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fq706BRTHf3+dwCfokYXOJA83LVs1IlNBlcXYO0yKSogfePQqOUJm0HZeclfsH9/ dF3dtX7lBL86g8EaqVRSgg== 0000950147-01-500525.txt : 20010312 0000950147-01-500525.hdr.sgml : 20010312 ACCESSION NUMBER: 0000950147-01-500525 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIMENSIONAL VISIONS INC/ DE CENTRAL INDEX KEY: 0000836809 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 232517953 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-56804 FILM NUMBER: 1565293 BUSINESS ADDRESS: STREET 1: 2301 WEST DUNLAP STREET 2: SUITE 207 CITY: PHOENIX STATE: AZ ZIP: 85021 BUSINESS PHONE: 6029971990 MAIL ADDRESS: STREET 1: 8855 N. BLACK CANYON HWY STREET 2: STE 2000 CITY: PHOENIX STATE: AZ ZIP: 85021 SB-2 1 e-6188.txt FORM SB-2 OF DIMENSIONAL VISIONS INCORPORATED As filed with the Securities and Exchange Commission on March 9, 2001 Registration No. 333-_______ ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- Form SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- DIMENSIONAL VISIONS INCORPORATED (Name of small business issuer in its charter) Delaware 2759 23-2517953 (State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) ---------- 2301 W. Dunlap Avenue, Suite 207 2301 W. Dunlap Avenue, Suite 207 Phoenix, Arizona 85021 Phoenix, Arizona 85021 (602) 997-1990 (602) 997-1990 (Address and telephone number of (Address and telephone number of principal executive office) principal place of business) Prentice Hall Corporation System, Inc. 1013 Centre Road Wilmington, DE 19805 (302) 998-0595 (Name, address and telephone number of agent for service) ---------- COPIES TO: Lynne Bolduc, Esq. Sean Palumbo Meulemans, LLP 18301 Von Karman Avenue, Suite 850 Irvine, CA 92618 (949) 453-0300 ---------- Approximate Date of Proposed Sale to the Public. As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] ================================================================================ CALCULATION OF REGISTRATION FEE
======================================================================================================== Proposed Maximum Proposed Maximum Amount of Title of Each Class of Number of Shares Offering Price Aggregate Registration Securities to be Registered to be Registered Per Share(1) Offering Price Fee - -------------------------------------------------------------------------------------------------------- Common Stock, $0.001 par value 25,222,207(2) $0.255 $6,431,662.79 $1,607.92 Common Stock, $0.001 par value, underlying debt securities 1,500,000(3) $0.255 $ 382,500.00 $ 95.63 Common Stock, $0.001 par value, underlying warrants 6,959,000(4) $0.255 $1,774,545.00 $ 443.64 - -------------------------------------------------------------------------------------------------------- Total 33,681,207 $8,588,707.79 $2,147.19 ========================================================================================================
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) and based upon the average of the bid and asked prices for the common stock on March 6, 2001, as reported by the OTC Bulletin Board. (2) Represents 25,000,000 shares to be sold from time to time by Swartz Private Equity, LLC; and 222,207 shares to be sold from time to time by other Selling Shareholders. (3) Represents common stock issuable upon conversion of Dimensional Visions' debt securities. (4) Represents 1,309,000 shares underlying warrants to be sold from time to time by Swartz Private Equity, LLC; 4,900,000 shares underlying warrants to be sold from time to time by the employee's of the Company if the Company is profitable at June 30, 2000 or upon the discretion of the Board of Directors; and 750,000 shares underlying warrants to be sold from time to time by Dale Riker and Russ Ritchie pursuant to an investment agreement. Pursuant to Rule 416 promulgated under the Securities Act of 1933, this Registration Statement also covers any additional common shares which may become issuable by reason of the antidilution provisions of the Warrants. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED MARCH 6, 2001 PROSPECTUS DIMENSIONAL VISIONS INCORPORATED 33,681,207 SHARES OF COMMON STOCK ($0.001 PAR VALUE) THE OFFERING: This Offering relates to the possible sale, from time to time, by certain stockholders of Dimensional Visions Incorporated of up to 33,681,207 shares of common stock of Dimensional Visions. MARKET FOR THE SHARES: The common stock of Dimensional Visions is traded in the over-the-counter electronic bulletin board system, also called the Bulletin Board, under the symbol "DVUI." The closing bid and asked prices for the common stock on March 6, 2001, as reported by the Bulletin Board were $0.24 and $0.27 per share, respectively. - -------------------------------------------------------------------------------- THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 4. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IF TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- THE DATE OF THIS PROSPECTUS IS MARCH 6, 2001 PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD ALSO READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND FINANCIAL STATEMENTS. DIMENSIONAL VISIONS INCORPORATED OFFICES: Dimensional Visions' office and principal place of business is located at 2301 West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, and its telephone number is (602) 997-1990. OUR BUSINESS: Dimensional Visions creates and delivers LIVING IMAGE(TM) Solutions for products, packaging and marketing communications. LIVING IMAGE(TM) Solutions are multi-dimensional (commonly known as "3-D") and/or animated visual effects. These effects are created by viewing multiple images through a series of lenses incorporated into a plastic sheet called lenticular. Viewed in one direction, the lenses allow an individual to see stereo, i.e. multiple, views of an image simultaneously. Stereo views are interpreted by the brain as being in three dimensions. Alternatively, viewed in the other direction, the lenses restrict the view to a particular image that changes as the piece is moved creating an animation effect (i.e., it appears that the picture is moving). Images are printed directly on the lenticular and then incorporated into or onto other products. For example, the images can be applied on products such as mouse pads, children's backpacks, business cards and notebooks. They may also be used on product packaging such as cereal boxes to differentiate the item from other similar products by adding a three-dimensional or animated component to attract the buyer's attention. OUR OBJECTIVE: Our objective is to become a dominant marketer, developer and producer of the LIVING IMAGE(TM) in the United States and internationally. COMPETITION: Currently Dimensional Visions has two major competitors who produce similar products. However, we have applied for a patent to protect our particular process. OUR STRATEGY: Our LIVING IMAGE(TM) Solutions offer multi-dimensional and/or animated images for the promotion marketing industry, advertising and graphic design industry, and original equipment manufacturers throughout the United States. Interested original equipment manufacturers include manufacturers making products that our images can be affixed to or included in their packaging to alter the traditional flat design. OUR FINANCIAL POSITION: The Company has sustained recurring losses through December 31, 2000 of $22,427,533. As of June 30, 2000, total assets exceeded total liabilities by $365,921. As of December 31, 2000, total liabilities exceeded total assets by $41,718. Three customers accounted for 82% and four customers accounted for 79% of the Living ImageTM revenue for the fiscal year ended June 30, 2000, and the six months ended December 31, 2000, respectively. Our independent auditors, Kopple & Gottlieb, LLP, expressed substantial doubt regarding the company's ability to continue as a going concern in the year ended June 30, 2000, financial statements. SECURITIES TO BE ISSUED TO SWARTZ PRIVATE EQUITY, LLC This prospectus has been prepared to register the sale from time to time of 25,000,000 shares of common stock and 6,190,000 shares underlying warrants held by Swartz Private Equity, LLC. These shares may be issued to Swartz in the future pursuant to our investment agreement with Swartz that provides us with put options valued at up to $20,000,000. SELLING Stockholders: This prospectus has also been prepared to register shares of common stock and shares underlying warrants to various individuals. A list of the shares being registered in this prospectus and the people and entities that own them appears in the "Selling Stockholders" section of this prospectus. THE OFFERING Common stock outstanding on March 6, 2001 10,339,873 If converted fully diluted common stock 17,594,034 outstanding Common stock offered by selling stockholders 33,681,207 Risk Factors An investment in our shares is very risky, and you should be able to bear a complete loss of your investment. See "Risk Factors" for a detailed discussion of the risks and uncertainties concerning Dimensional Visions' common stock. OTC Bulletin Board Symbol DVUI.ob 2 SUMMARY FINANCIAL INFORMATION The following table presents selected historical financial data for Dimensional Visions derived from our Financial Statements. The following data should be read with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements of Dimensional Visions and the notes to the Financial Statements included elsewhere in this prospectus.
SIX MONTHS ENDED FISCAL YEAR ENDED DECEMBER 31, JUNE 30, ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- --------- --------- (UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED) ----------- ----------- --------- --------- Statement of Operations Data: Revenue $ 162,996 $ 300,418 $ 1,008,862 $ 741,901 Net loss $(598,780) $(459,051) $(1,021,145) $(1,465,812) Net loss per share per share of common stock* $ (0.07) $ (0.09) $ (0.18) $ (0.39) DECEMBER 31, 2000 JUNE 30, 2000 ----------------- ------------- (UNAUDITED) (AUDITED) Balance Sheet Data: Working capital surplus (deficiency) $(206,620) $205,284 Total assets $ 373,429 $885,033 Total liabilities $ 415,147 $519,112 Stockholder's equity (deficiency) $ (41,718) $365,921
* The calculation of earnings per share considers the accumulative dividends in arrears on preferred stock as paid. 3 RISK FACTORS THE SHARES OFFERED IN THIS PROSPECTUS ARE VERY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THESE SHARES SHOULD BE PURCHASED ONLY BY PEOPLE WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. BEFORE PURCHASING THESE SHARES, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION CONCERNING DIMENSIONAL VISIONS AND ITS BUSINESS CONTAINED IN THIS PROSPECTUS. DIMENSIONAL VISIONS HAS INCURRED LOSSES SINCE INCEPTION AND MAY CONTINUE TO INCUR LOSSES IN THE FUTURE. Dimensional Visions has operated at a loss for all of the periods for which financial statements are included in this prospectus. We must be able to garner market share from our competitors and/or establish new markets for our products. As lenticular products are more expensive alternatives to traditional flat images, we must establish market acceptance of the products while simultaneously generating sales into this market. The likelihood of our success depends on our ability to develop and produce multi-dimensional and/or animated print products in various formats and at competitive prices. Difficulties and delays in developing new formats using various lenticulars and new technologies for their application may affect our ability to successfully produce marketable products. Failure to overcome any of the above difficulties may have a materially adverse effect upon our business and could force us to reduce or close operations. No assurance can be given that Dimensional Visions can or will ever operate profitably. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business of Dimensional Visions--Market and Penetration" and "--Competition." THE INDEPENDENT AUDITORS HAVE ISSUED A GOING CONCERN OPINION FOR THE FISCAL YEARS ENDED JUNE 30, 2000 AND 1999. The company's independent auditors have included an explanatory paragraph regarding the company's ability to continue as a going concern for each of the fiscal years ended June 30, 2000 and 1999. Among the factors cited by the accountants that raised substantial doubt as to the company's ability to continue as a going concern are the company's continued recurring losses from operations and limited sales of its products. DIMENSIONAL VISIONS IS DEPENDENT ON A LIMITED PRODUCT LINE AND HAS DECLINING RESOURCES ALLOCATED TO THE DEVELOPMENT OF NEW PRODUCTS. The company's product line is composed solely of lenticular-based products. If the company's share of the market for these products fails to develop to a level sufficient to make the company profitable, there are no other products available for sale. In this case, the company would be forced to reduce or close operations. Additionally, the resources allocated to the development of new products have been declining, further reducing the availability of new products to market. DIMENSIONAL VISIONS RELIES ON A FEW CUSTOMERS FOR THEIR SALES. WITHOUT REPEAT ORDERS FROM OUR CUSTOMERS, DIMENSIONAL VISIONS WOULD HAVE TO REDUCE OR CLOSE OPERATIONS. For the fiscal year ended June 30, 2000, and the six months ended December 31, 2000, three customers accounted for 82% and four customers accounted for 79% of the LIVING IMAGE(TM) revenue respectively. In addition, two customers accounted for 98% and 100% of the InfoPak, Inc. revenue for the fiscal year ended June 30, 2000, and the six months ended December 31, 2000. If Dimensional Visions were to lose their repeat customers, then the company would have to significantly curtail or close operations. WE CANNOT GUARANTEE THAT OUR PRODUCTS WILL SELL SUCCESSFULLY THUS GENERATING SUFFICIENT REVENUE TO CONTINUE OPERATIONS. There can be no assurance that our marketing and sales strategies will be effective and that consumers will buy our products. Our failure to penetrate our targeted markets would have a material adverse effect upon our operations. Market acceptance of our products will depend in part upon our ability to demonstrate the advantages of three-dimensional and/or animated products over similar or competing products described under the next risk factor of competition. In addition, our sales strategy contemplates sales to markets that are unfamiliar with multi-dimensional printed images and may not be accepting of these new products. Currently, we don't have any distribution agreements for any of our products in place. See "Business of Dimensional Visions--Market and Penetration" and "--Competition." 4 THERE IS COMPETITION FOR OUR PRODUCTS, AND THERE CAN BE NO ASSURANCE THAT CUSTOMERS WILL CHOOSE OUR PRODUCTS OVER THOSE OF OUR COMPETITORS. CUSTOMERS MAY CHOOSE LESS EXPENSIVE, CONVENTIONAL PRINTS OVER OUR PRODUCTS. We compete with other established businesses that market similar products. Many of these companies have greater capital, marketing and other resources than we do. Also, other means of viewing three-dimensional and/or animated images exist. These other methods may be less expensive or easier to incorporate into other products. Further, traditional printed images are less expensive than our products and may be favored in many, if not most, illustration and promotion contexts. See "Business of Dimensional Visions--Competition." DIMENSIONAL VISIONS DEPENDS ON KEY PERSONNEL FOR CRITICAL MANAGEMENT DECISIONS AND THESE KEY PERSONNEL MAY LEAVE DIMENSIONAL VISIONS IN THE FUTURE. Our success depends, to a significant extent, upon a number of key employees, including our C.E.O./President, John McPhilimy, and our Senior Vice President, Bruce D. Sandig. The loss of services of one or more of these employees could have a material adverse effect on our business. We believe that our future success will also depend in part upon our ability to attract, retain, and motivate qualified personnel. Competition for such personnel is intense. There can be no assurance that we can attract and retain such personnel. We have "key person" life insurance on both Mr. McPhilimy and Mr. Sandig. See "Management." DIMENSIONAL VISIONS MAY REQUIRE ADDITIONAL FINANCING FOR ITS BUSINESS THAT COULD DILUTE THE OWNERSHIP OF EXISTING STOCKHOLDERS AND FORCE DIMENSIONAL VISIONS TO CURTAIL OR CLOSE OPERATIONS. Our future cash requirements will depend significantly on generating sufficient cash flow from operations to cover our cost of goods sold and operating costs or "burn rate" of approximately $70,000 per month. To continue operations, the Company must obtain sufficient funds from the Swartz equity line agreement and/or the line of credit from the investor group. Any equity financings could result in dilution to our stockholders. Also, if the price of our common stock declines or the trading volume in our common stock is low, we will only be able to utilize the current line of credit per the investor group agreement. Once the credit line is used, we would only have the Swartz equity agreement for additional financing. However, the future market price and volume of trading our common stocks limits the rate at which we can obtain money under the Swartz equity line agreement. UP TO 33,681,207 SHARES OF COMMON STOCK OF DIMENSIONAL VISIONS WILL BECOME ELIGIBLE FOR PUBLIC SALE THAT COULD HAVE A DEPRESSIVE EFFECT ON THE STOCK. When our registration statement, of which this prospectus is a part, is declared effective by the SEC, 222,207 shares of our common stock will be eligible for immediate resale on the public market and 2,559,000 shares of our common stock underlying warrants and convertible debt, upon their exercise or conversion, will be eligible for immediate resale on the public market for our common stock. Also 25,000,000 shares will be available for sale upon the issuance of stock to Swartz based on limitations of our trading volume and stock price. The remaining 4,900,000 shares underlying warrants will be available upon ongoing profitability of the Company beginning on June 30, 2001 or upon the discretion of the Board of Directors and 250,000 shares underlying warrants upon the Company borrowing from their line of credit with an investor group. Additionally, If a significant number of shares are offered for sale simultaneously, it would have a depressive effect on the trading price of our common stock on the public market. If and when we exercise our put rights and sell shares of our common stock to Swartz, if and to the extent that Swartz sells the common stock, our common stock price my decrease due to the additional shares in the market. 5 DIMENSIONAL VISIONS' COMMON STOCK IS CURRENTLY CLASSIFIED AS A "PENNY STOCK" WHICH COULD CAUSE INVESTORS TO EXPERIENCE DELAYS AND OTHER DIFFICULTIES IN TRADING IN THE STOCK MARKET. Dimensional Visions' common stock is quoted and traded on the Over-the-Counter Bulletin Board ("Bulletin Board"). As a result, an investor could find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, the stock. In addition, trading in the common stock is covered by what is known as the "Penny Stock Rules." The Penny Stock Rules require brokers to provide additional disclosure in connection with any trades involving a stock defined as a "penny stock," including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. The regulations governing penny stocks could limit the ability of brokers to sell the shares offered in this prospectus and thus the ability of the purchasers of this Offering to sell these shares in the secondary market. Dimensional Visions' stock will be covered by the Penny Stock Rules until it has a market price of $5.00 per share or more, subject to certain shares exceptions. THE OFFERING PRICE OF THESE SHARES MAY NOT HAVE ANY RELATIONSHIP TO OUR NET OR WORTH FUTURE TRADING VALUE. The shares being registered in this prospectus were offered at the market price prevailing at the time of the offer. The market price of these shares may have a limited relationship, or no relationship, to our assets, book value, results of operations, or other established criteria of value. The offering price also may not be indicative of the prices that will prevail in the subsequent trading market for our securities. NO DIVIDENDS HAVE BEEN PAID ON COMMON STOCK AND MAY NEVER BE PAID. REQUIRED DIVIDENDS IN ARREARS ON ON PREFERRED STOCK MUST BE PAID BEFORE ANY DIVIDENDS ARE PAID ON COMMON STOCK. Dimensional Visions has never paid dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. Dimensional Visions is in dividends required to be paid on its Series A Preferred Stock and Series B Preferred Stock. The unpaid cumulative dividends total arrears approximately $74,225 and must be paid before dividends on common stock can be declared or paid. See "Dividend Policy" and Note 10 of Notes to Consolidated Financial Statements. ALTHOUGH DIMENSIONAL VISIONS HAS PATENTS, THIRD PARTIES MAY DEVELOP SIMILAR OR COMPETITIVE TECHNOLOGY. DIMENSIONAL VISIONS CAN GIVE NO ASSURANCE THAT ITS OWN TECHNOLOGY DOES NOT INFRINGE ON EXISTING PATENTS. Dimensional Visions enters into confidentiality agreements with all persons and entities who or which may have access to our technology. However, no assurance can be given that such agreements, the patents, or any additional patents that may be issued to Dimensional Visions will prevent third parties from developing similar or competitive technology. There can be no assurance that the patents will provide us with any significant competitive advantages, or that challenges will not be instituted against the validity or enforceability of its patents, or if instituted that any such challenges will not be successful. The cost of litigation to uphold the validity and prevent infringement can be substantial. In addition, no assurance can be given that we will have sufficient resources to either institute or defend any action, suit or other proceeding by or against our company with respect to any claimed infringement of patent or other proprietary rights. In the event that we should lose, in the near future, the protection afforded by the patents and any future patents, such event could have a material adverse effect on our operations. Furthermore, there can be no assurance that our own technology will not infringe patent or other rights owned by others or licenses to which may not be available to us. DIMENSIONAL VISIONS RELIES ON THIRD PARTY PRINTERS THAT COULD RESULT IN A DELAY OF OUR PRODUCT TO OUR CUSTOMERS AND SUBSTANTIALLY DECREASE OUR SALES IF OUR PRINTERS BECAME UNABLE TO FULFILL OUR ORDERS. Dimensional Visions relies on two large lithographic printers and one photographic printer for most of its printing needs. If we were unable to use these printers, it could delay the sales orders to our customers. We would have to find another printer which may require additional time to schedule production. Even though the majority of our print jobs are completed at our printer in Minneapolis, MN, we can now rely on another printer in Los Angeles, CA. 6 USE OF PROCEEDS The primary use of proceeds raised through the issuance of stock registered in this prospectus will be for working capital, sales and marketing expenses and other general corporate purposes. Of the 25,222,207 shares of common stock being registered, 222,207 are already issued and outstanding. The remaining 25,000,000 are to establish a credit line sufficient to meet these current expenses and allow for the growth of the company. If an advantageous acquisition opportunity presents itself and the stock price is sufficiently high to make an acquisition reasonable, additional proceeds may also be used to make such an acquisition. THE SWARTZ INVESTMENT AGREEMENT OVERVIEW On December 13, 2000, we entered into an investment agreement with Swartz Private Equity, LLC. The investment agreement entitles us to issue and sell up to $20 million of our common stock to Swartz, subject to a formula based on stock price and trading volume, from time to time over a three year period beginning on the date that this registration statement is declared effective. We refer to each election by us to sell stock to Swartz as a put right. PUT RIGHTS In order to invoke a put right, we must have an effective registration statement on file with the SEC registering the resale of the common shares which may be issued as a consequence of the invocation of that put right and we must be trading on at least the Over-The-Counter Bulletin Board. Additionally, we must give at least ten but not more than twenty business days' advance notice to Swartz of the date on which we intend to exercise a particular put right and we must indicate the number of shares of common stock we intend to sell to Swartz. At our option, we may also designate a maximum dollar amount of common stock not to exceed $2 million which we will sell to Swartz during the put and/or a minimum purchase price per common share, if applicable, at which Swartz may purchase shares during that put. The designated minimum purchase price per common share, if we chose to specify one, shall be no greater than the lesser of (i) 80% of the closing bid price of our common stock on the business day prior to the date of the advance put notice or (ii) the closing bid price of our common stock on the business day prior to the date of the advance put notice, minus $.125. The number of common shares sold to Swartz in a given put may not exceed the lesser of: - 15% of the aggregate daily reported trading volume, excluding any block trades of 20,000 or more shares of common stock, during a period which begins on the business day immediately following the day we invoked the put right and ends on and includes the day which is twenty business days after the date we invoked the put right, excluding, however, certain days where the common shares trade below a minimum price specified by us. - 15% of the sum aggregate daily reported trading volumes, excluding block trades of 20,000 or more shares of common stock, for the twenty business days immediately preceding the put date. - The intended put amount, specified in our put notice, - The number of our shares, which when multiplied by the put share price, equals $2 million, - An amount of put shares, which when added to the number of put shares acquired by the investor during the 61 days preceding the put date would exceed 9.99% of the number of common shares outstanding on a fully diluted basis. For each common share, Swartz will pay us the lesser of: - the market price for the applicable pricing period, minus $.075 or - 91% of the market price for the applicable pricing period. Market price is defined as the lowest closing bid price for common stock during the pricing period. The pricing period is the period beginning on the business day immediately following the put date and ending on and including the date which is twenty business days after such put date. 7 We are registering 25,000,000 shares to be sold to Swartz in puts. Therefore, in order for the Company to receive $20,000,000, the average sale price of these shares would need to be $.80. Unless our share price increases drastically, we will need to register additional shares in order to access the $20,000,000 maximum. Our closing price on the Over-The-Counter Bulletin Board as of March 6, 2001 was $.27. The maximum allowable number of shares per put under the Investment Agreement is 1,500,000 shares. Assuming our trading price remained at its current level, even if we put the maximum allowable shares per put to Swartz under the investment agreement, each put would yield only $292,500 in proceeds to us. The restrictions discussed, such as the restriction limiting the put amount to a percentage of our aggregate trading volume, may operate to prevent us from putting the maximum allowable number of shares. The 30,000,000 shares that Swartz may sell under this prospectus would represent 74.37% of the Company if they were all issued assuming that we don't issue any other shares in the future. WARRANTS We have delivered to Swartz warrants to purchase 1,309,000 shares of our common stock at anytime for seven years. The warrants will have semi-annual reset provisions. Each warrant will be immediately exercisable and have a term beginning on the date of issuance and ending seven years thereafter. All shares underlying these warrants are being registered in this prospectus. LIMITATIONS AND CONDITIONS PRECEDENT TO OUR PUT RIGHTS Our ability to put shares of our common stock, and Swartz's obligation to purchase the shares, is subject to the satisfaction of certain conditions. These conditions include: - We have satisfied all obligations under the agreements entered into between us and Swartz in connection with the Swartz investment agreement; - Our common stock is listed and traded on Nasdaq, the O.T.C. Bulletin Board, or an exchange; - Our representations and warranties in the Swartz investment agreement are accurate as of the date of each put; - We have reserved for issuance a sufficient number of shares of our common stock to satisfy our obligations to issue shares under any put and upon exercise of warrants; - The registration statement for the shares we will be issuing to Swartz must remain effective as of the put date and no stop order with respect to the registration statement is in effect; - If the number of shares to be put to Swartz, together with any previously put to Swartz, would equal 20% of all shares of our common stock that would be outstanding upon completion of the put, we must obtain shareholder approval of such excess issuance as required by Nasdaq rules. Swartz is not required to acquire and pay for any common shares with respect to any particular put for which during the period beginning on the date of the advance put notice and ending on the last day of the pricing period: - We have announced or implemented a subdivision or combination of our common stock; - We have paid a common stock dividend; - We have made a distribution of all or any portion of our assets between the put notice date and the date the particular put closes; or - We have consummated a major transaction between the advance put notice date and the date the particular put closed. SHORT SALES Swartz and its affiliates are prohibited from engaging in short sales of our common stock, except that after they have received a put notice, they may sell a number of the shares in long sales or short sales, up to the number of shares specified in the put notice. 8 CANCELLATION OF PUTS We must cancel a particular put if between the date of the advance put notice and the last day of the pricing period: - We discover an undisclosed material fact that would require the registration statement to be amended or supplemented in order to remain current and effective; - The registration statement registering resales of the common shares becomes ineffective; or - Shares are delisted from the then primary exchange. NON-USAGE FEE On the last business day of each one year period following the effectiveness of the registration period, if we have not put $1,000,000 of our stock to Swartz, we will be required to pay Swartz a non-usage fee equal to the difference of $50,000 and 10% of the aggregate put amounts to Swartz during the first one year period and $100,000 and 10% of the aggregate put amounts to Swartz during the remaining year periods thereafter. TERMINATION OF INVESTMENT AGREEMENT We may terminate our right to initiate further puts or terminate the investment agreement by providing Swartz with notice of such intention to terminate; however, any such termination will not affect any other rights or obligations we have concerning the investment agreement or any related agreement. RIGHT OF FIRST REFUSAL During the term of the investment agreement and for 60 days after its termination, we are prohibited from issuing or selling any capital stock or securities convertible into our capital stock for cash in private capital raising transactions, without obtaining the prior written approval of Swartz. In addition, Swartz has the option to for 10 days after receiving notice to purchase such securities on the same terms and conditions. SWARTZ'S RIGHT OF INDEMNIFICATION We are obligated to indemnify Swartz, including their affiliates, stockholders, officers, directors, employees and agents, from all liability and losses resulting from any misrepresentations or breaches we made in connection with the investment agreement, our registration rights agreement, other related agreements, or the registration statement. 9 MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS Dimensional Visions' common stock has been quoted on the Bulletin Board under the symbol "DVUI.ob" since January 12, 1998. Prior to January 12, 1998, Dimensional Visions' common stock traded under the symbol "DVGL." The following table sets forth the quarterly high and low bid prices of Dimensional Visions' common stock for the periods indicated, after adjusting such prices for Dimensional Visions' 1-for-25 reverse common stock split which was effective January 15, 1998. Bid quotations represent interdealer prices without adjustment for retail markup, markdown and/or commissions and may not necessarily represent actual transactions. HIGH LOW ---- --- FISCAL 1999 First Quarter..................................... 1 11/32 27/64 Second Quarter.................................... 21/32 1/4 Third Quarter..................................... 7/16 3/16 Fourth Quarter.................................... 27/32 3/16 FISCAL 2000 First Quarter..................................... 2 3/16 3/8 Second Quarter.................................... 1 23/32 27/32 Third Quarter..................................... 2 3/32 13/16 Fourth Quarter.................................... 2 9/32 3/8 FISCAL 2001 First Quarter..................................... 17/32 17/64 Second Quarter.................................... 7/16 1/8 Third Quarter (through March 6, 2001)............. 5/16 1/8 HOLDERS As of March 5, 2001, the number of stockholders of record was 469, not including beneficial owners whose shares are held by banks, brokers and other nominees. Dimensional Visions estimates that it has approximately 3,500 stockholders in total. DIVIDEND POLICY Dimensional Visions has paid no dividends on its common stock since its inception and does not anticipate or contemplate paying cash dividends in the foreseeable future. Pursuant to the terms of Dimensional Visions' Series A Convertible Preferred Stock, a 5% annual dividend is due and owing. Pursuant to the terms of Dimensional Visions' Series B Convertible Preferred Stock, an 8% annual dividend is due and owing. As of June 30, 2000, Dimensional Visions has not declared dividends on Series A or B preferred stock. The unpaid cumulative dividends totaled approximately $74,225. See Note 10 of Notes to Consolidated Financial Statements. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion regarding the financial statements of Dimensional Visions should be read in conjunction with the financial statements of Dimensional Visions included herewith. OVERVIEW Dimensional Visions is engaged in the business of manufacturing multi-dimensional marketing promotional products. SELECTED CONSOLIDATED FINANCIAL DATA You should read the selected consolidated financial data set forth below along with "Management's Discussion and Analysis" and our consolidated financial statements and the related notes. We have derived the consolidated financial data for 1996, 1997, 1998, 1999 and 2000 from our audited consolidated financial statements. We believe the unaudited financial data shown in the table below include all adjustments consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of such information. Operating results for the six months ended December 31, 2000, are not necessarily indicative of the results that may be expected for all of 2001. Potentially dilutive common shares have been excluded from the shares used to compute earnings per share in each loss year because their inclusion would be antidilutive.
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996 ------------- ------------- ------------- ------------- ------------- Operation revenue $ 1,008,862 $ 741,901 $ 609,392 $ 551,517 $ 1,083,897 Net Loss $(1,021,145) $(1,465,812) $(421,659) $(2,162,134) $(2,035,647) Net Loss per share of common stock* $ (.18) $ (.39) $ (.14) $ (1.14) $ (3.34) Balance Sheet Data: Working Capital (deficit) $ 205,284 $ (603,946) $(235,920) $ (107,952) $ 9,528 Total Assets $ 885,033 $ 397,185 $ 920,841 $ 529,520 $ 1,408,919 Total Liabilities $ 519,112 $ 1,118,740 $ 713,539 $ 613,947 $ 673,058 Stockholders' equity (deficiency) $ 365,921 $ (721,555) $ 207,302 $ (84,427) $ 735,861 SIX MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 (UNAUDITED) (UNAUDITED) ----------- ----------- Operation revenue $ 162,996 $ 300,418 Net Loss $(598,780) $ (459,051) Net Loss per share of common stock* $ (.07) $ (.09) Balance Sheet Data: Working Capital (deficit) $(206,620) $ 176,478 Total Assets $ 373,429 $ 1,021,112 Total Liabilities $ 415,147 $ 1,027,988 Stockholders' Deficiency $ (41,718) $ (6,876)
* The calculation of earnings per share considers the accumulative dividends in arrears on preferred stock as paid. 11 PLAN TO ADDRESS GOING CONCERN OPINION The company's independent certified public accountants' report on the company's consolidated financial statements for the year ended June 30, 2000 contains an explanatory paragraph regarding the company's ability to continue as a going concern. Among the factors cited by the accountants that raised substantial doubt as to the company's ability to continue as a going concern are the company's continued recurring losses from operations and limited sales of its products. The accountants state that the company's ability to continue as a going concern is subject to the attainment of profitable operations or obtaining necessary funding from outside sources. The company has developed a plan to achieve profitability and allay doubts as to its ability to continue as a going concern. This plan includes: (1) increased marketing of its existing products to increase sales; and (2) utilize long term financing through securities offerings. INCREASED MARKETING. As indicated in the Use of Proceeds, the company will use a portion of the proceeds to expand its sales force and fund product marketing. The company believes these efforts will result in increased sales of its products. LONG TERM FINANCING THROUGH SECURITIES OFFERINGS. The company has established an equity line agreement with Swartz Private Equity of up to $20,000,000 with common shares and shares underlying warrants registered under this prospectus. This investment agreement is subject to a formula based on our stock price and trading volume. See "The Swartz Investment Agreement". Management believes that proceeds from any offerings using this line, together with our anticipated cash flow from sales of the company's products, will be sufficient to support currently anticipated working capital requirements. FISCAL YEAR ENDED JUNE 30, 2000, AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1999 RESULTS OF OPERATIONS The net loss for the fiscal year ended June 30, 2000, was $1,021,145 compared with a net loss of $1,465,812 for the fiscal year ended June 30, 1999. The gross margin increased from $179,190, representing 24% of fiscal year 1999 operating revenue, to $346,841, representing 34% of fiscal year 2000 operating revenue. Approximately $175,000 of the increase in general and administrative expenses was the result of the amortization of one time consulting contracts paid through the issuance of the Company's common stock. Other general and administrative expense categories that increased significantly were salary, lease expense and stock/proxy related expenses. Marketing expenses decreased from $301,630 in fiscal year 1999, to $110,270 in fiscal year 2000. Marketing salary and commissions decreased by approximately $110,000 and travel and entertainment by $13,000. Management believes that marketing expenses will increase in the fiscal year 2001, as a result of hiring of new sales staff and the beginning of a nationwide marketing campaign. Of the $173,878 of interest expense for the fiscal year 2000, approximately $49,572 was paid with the Company's common stock on June 19, 2000. An additional $116,215 was simultaneously converted with their associated interest. Revenue for the fiscal year ended June 30, 2000, was $1,008,862 compared to revenue of $741,901 for the fiscal year ended June 30, 1999. Approximately $980,000 or 97% of total revenue for the fiscal year ended June 30, 2000, was from print products compared to $614,000 or 83% of total revenue for the fiscal year ended June 30, 1999. Sales of products and licensing fees for InfoPak, Inc., which include the palm-top computers and associated database software, are continuing to diminish. Management plans to continue to focus its efforts on growing the revenue generated from the 3D/animated print products. 12 LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2000, the Company had a working capital of $205,284 compared with a working capital deficiency of $603,946 as of June 30, 1999. The increase in working capital is largely attributable to the increase in cash of approximately $258,000, an increase in account receivable of $270,000, and the conversion of short-term debt and accrued interest into shares of the Company's common stock. During the period ended June 30, 2000,the Company raised a total of $1,050,000 before expenses of approximately $94,500 through the sale of its Series D and Series E Preferred Stock. The Company extended an offer to its debenture holders and certain creditors to convert their debt to equity in the Company. The offer, which expired on October 15, 1999, permitted the conversion of debt into shares of the Company's common stock at prices ranging from $.25 to $.375 per share. Interest on the debentures accrued at 12% per annum through January 31, 2000. Additionally, certain accounts payable were offered the opportunity to convert their receivables into shares of Dimensional Visions' common stock at $.375 per share. On June 19, 2000, following the effective date of the registration statement, the entire outstanding balance of $720,000 of debentures and $60,748 of accounts payable were converted into shares of the Company's common stock. A total of 2,601,021 shares were issued to convert the accounts payable and the debentures including accrued interest. Dimensional Visions plans to become profitable through increased sales of its LIVING IMAGE(TM) products while maintaining current or higher gross margins. The Company has a strong relationship with its printer which includes preferential treatment, the ability to quickly produce products requested by customers, and the resources to significantly expand production without a commensurate increase in expenses. Our current customers are reordering products on a regular basis which reduces our cost of sales. For the fiscal year ended June 30, 1999, eight customers ordered additional products compared to ten customers for the fiscal year ended June 30, 2000. These customers are also increasing their order quantities indicating a growing acceptance of our 3D/animated products in the market place. The Company's three largest customers ordered $64,940, $31,844 and $175,574 worth of products in the fiscal year 1999 compared to $119,571, $159,748 and $538,653 for the fiscal year ended June 30, 2000. The Company's independent auditors report contained an explanatory paragraph regarding the ability of the Company to continue as a going concern. SIX MONTHS ENDED DECEMBER 31, 2000, AS COMPARED TO SIX MONTHS ENDED DECEMBER 31, 1999 RESULTS OF OPERATIONS The net loss for the six months ended December 31, 2000 was $598,780, compared to a net loss of $459,051 for the six months ended December 31, 1999. The Company's marketing expenses for the six months ended December 31, 2000 increased by approximately $95,000. This increase is due to the addition of two salesmen along with their travel expenses. The Company's engineering expenses for the six months ended December 31, 2000 increased by approximately $57,000 over the same period last year. This increase was attributed to the increase in the Company's design staff. The Company also increased their general and administrative expenses for the six months ended December 31, 2000 by $44,000 over the six months ended December 31, 1999. The Company attributes this increase to an arbitration settlement of disputed invoices for commissions and the increase in the administrative staff. Revenue for the six months ended December 31, 2000 was $162, 996 compared to revenue of $300,418 for the six months ended December 31, 1999. Revenue for the six months ended December 31, 1999 was boosted by $103,000 through the sale of Pokemon products that are no longer being ordered. Generally, the sales volume for the six months ended December 31, 2000 without Pokemon was down approximately $34,000. As a result of the decline in revenue, the Company has reduced its fixed overhead costs by reducing the number of personnel employed by the Company. As of December 31, 2000, the Company's work force has been reduced by six employees which will result in a savings of approximately $100,000 through June 30, 2001. 13 LIQUIDITY AND CAPITAL RESOURCES During the six months ended December 31, 2000, the Company collected approximately $310,000 of accounts receivable. Substantially all the cash received and cash on hand was used to support operations. The Company will utilize the secured line of credit to sustain operations until its sales will support the Company's operations and growth. The Company is continually focusing on expanding its customer base through its marketing and sales campaign. As of December 31, 2000 the Company's financial position is precarious. The Company needs funding in order to maintain current operations and to support growth and sales. The Company has secured a $500,000 line of credit on January 12, 2000 that was obtained by an investor group of existing shareholders of the Company secured by the Company's assets. Additionally, the Company finalized an equity line with Swartz Private Equity, LLC to provide funding through the sale of the Company's common stock. The Company has the right at its sole discretion to put common stock to Swartz, subject to certain limitations and conditions based upon trading volume of the Company's common stock. However, due to the current limited trading volume of the Company's common stock, the Company would not be able to raise significant funding from this arrangement. The put to the investment firm is based upon trading volume and cannot exceed 10% of the volume per trade day. FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY Annual and quarterly fluctuations in Dimensional Visions' results of operations may be caused by the timing and composition of orders from Dimensional Visions' customers and distribution channels. Dimensional Visions' future results also may be affected by a number of factors, including its ability to offer products at competitive prices and to anticipate customer demands. Dimensional Visions' results may also be affected by economic conditions in the geographical areas in which Dimensional Visions operates. All of the foregoing may result in substantial unanticipated quarterly earnings shortfalls or losses. Due to all of the foregoing, Dimensional Visions believes that period-to-period comparisons of its results of operations are not necessarily meaningful and should not be relied upon as indicative of future performance. AVAILABLE INFORMATION Dimensional Visions is presently subject to the reporting requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). Dimensional Visions has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form SB-2 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Act") with respect to the securities offered hereby. This prospectus, which constitutes a part of the Registration Statement, omits certain information contained in the Registration Statement on file with the Commission pursuant to the Act and the rules and regulations of the Commission thereunder. The Registration Statement, including the exhibits thereto, may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of such material may be obtained by mail at prescribed rates from the Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. Dimensional Visions' securities are currently listed on the over-the-counter bulletin board and trading under the symbol "DVUI." 14 BUSINESS OF DIMENSIONAL VISIONS GENERAL Dimensional Visions creates and delivers LIVING IMAGE(TM) Solutions for products, packaging and marketing communications. LIVING IMAGE(TM) Solutions are multi-dimensional (commonly known as "3-D") and/or animated visual effects. These effects may be produced in varying sizes to specified customer applications for companies who want to differentiate their products from the competition. The visual effects are created by viewing multiple images through a series of lenses incorporated into a plastic sheet called lenticular. These lenses work as a viewer which self adjusts to whatever distance the viewer is from the image. Viewed in one direction, the lenses allow the individual to see multiple views of an image simultaneously. These multiple views are seen as being in three dimensions. Alternatively, viewed in the other direction, the lenses restrict the view to a particular image that changes as the piece is moved, thus creating an animation effect (i.e., the picture appears to be moving). Our objective is to become a dominant marketer, developer and producer of the LIVING IMAGE(TM) in the United States and internationally. Our LIVING IMAGE(TM) Solutions offer multi-dimensional and/or animated images for the promotion marketing industry, advertising and graphic design industry and original equipment manufacturers throughout the United States. InfoPak, Inc. is our one active subsidiary company. InfoPak manufactures and markets a hardware/software PACKAGED product line called the "InfoPakSystem(TM)." This system was designed to handle substantial offline information and databases that may require frequent updating. We have decided to focus all of our resources on our LIVING IMAGE(TM) product line. During Fiscal Year 1999, we retained Chapman Associates, an investment banking firm, to assist us in the sale of our InfoPak, Inc. subsidiary. To date, we have not found a buyer. We will continue to support the operations of InfoPak until it is sold or our Board of Directors decides to discontinue its operations. Dimensional Visions office and principal place of business is located at 2301 West Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, and its telephone number is (602) 997-1990. OUR HISTORY FISCAL YEARS 1988-1994 In 1988 Dimensional Visions Group, Ltd. (Bulletin Board: DVGL) was incorporated in the state of Delaware. Dimensional Visions was headquartered in Philadelphia, Pennsylvania. At that time, Dimensional Visions created its three-dimensional effects by building model sets and photographing these sets using a robotic controlled camera. These photographed images were then prepared for lithographic printing. The process utilized during this timeframe was very expensive and extremely difficult to consistently reproduce quality images. Throughout this period Dimensional Visions tried unsuccessfully to perfect the robotic camera process. FISCAL YEARS 1995-1997 In 1995 Dimensional Visions acquired InfoPak, Inc. of Phoenix, Arizona ("InfoPak") which is currently our wholly owned subsidiary. InfoPak manufactures and markets a hardware/software package called the "InfoPakSystem(TM)". This system takes existing databases and prepares them for use on a palm-top computer manufactured by InfoPak. It is particularly useful to individuals who need access to information while away from a computer terminal. Therefore, it is marketed to mobile business professionals in the automobile appraisal and real-estate businesses. Automobile appraisal guides are available on the palm-top unit for access at automobile auctions or at car dealership lots. Multiple listing data is similarly available for real estate agents for field access to the home listings. 15 From 1995 to 1997, Dimensional Visions utilized the software development resources of InfoPak to develop the patent-pending software and systematic digital process for its LIVING IMAGE(TM) Solutions. FISCAL YEARS 1998-2000 In January 1998 we established our current headquarters in Phoenix, Arizona. Under the leadership of a new executive management team, Dimensional Visions was completely restructured including changing our corporate name to Dimensional Visions Incorporated and changing our stock trading symbol from DVGL to DVUI. At the end of 1997, the company needed to complete private placements of debt and equity to continue operations. As a prerequisite, our investment banking firm, Capital West Investment Group, required the company to replace the upper level management and effect a 1 for 25 reverse stock split. During this timeframe we sold all of the original robotic photographic equipment to concentrate on the new LIVING IMAGE(TM) (utilizing very high-end Intel based graphic design computers). Our management team believes that the new process is much more cost effective, reproducible, and has a shorter production cycle than the photographic process formerly used by the company. We also believe that it better meets the demands of today's market which requires quick turn around of products from inception to delivery. STRATEGY MARKET & PENETRATION Multi-dimensional and/or animated images are being utilized today by Dimensional Visions' clients. The images are used because they combine depth and movement to attract the consumer's attention and potentially increase their sales. LIVING IMAGE(TM) solutions have and will be (a) integrated onto products (for example: affixed to yearbooks, children's portfolio cover's, etc), (b) integrated onto product packaging (for example: affixed to cereal boxes, CD packages, etc), and (c) integrated onto marketing communications for products and services (for example: affixed to annual reports, etc). We define the market for our LIVING IMAGE(TM) as the following major markets in the United States: * Specially selected Original Equipment Manufacturers * Specially selected Promotional Marketing Firms * Specially selected Advertising & Graphics Design Firms (less newspaper, radio and TV) Dimensional Visions believes that the market for LIVING IMAGE(TM) is in its infancy particularly with the advent of new high-end Intel based graphic design computers and improved lenticular plastic extrusion capabilities. With these advances, coupled with the best-integrated software methodology and marketing strategy, we believe Dimensional Visions can be a market leader. Dimensional Visions estimates that the market universe for its LIVING IMAGE(TM) is as follows: * ORIGINAL EQUIPMENT MANUFACTURERS: Our revenues for the fiscal year ended June 30, 2000, from the original manufacturers were approximately 91% of our total revenue. * PROMOTION MARKETING INDUSTRY: According to PROMO MAGAZINE article titled The 1998 Annual Report, the estimated 1997 revenue for the promotion marketing industry was $79.5 billion. This article can be found archived on their website at WWW.PROMOMAGAZINE.COM. Dimensional Visions believes that the Premium/Incentives, Point of Purchase, Specialty Printing, and Agencies Net Revenues categories, which account for over $43.7 billion, are potential users of the LIVING IMAGE(TM) Solutions. Our revenues for the fiscal year ended June 30, 2000 from this market were approximately 9%. 16 * ADVERTISING INDUSTRY: According to ADVERTISING AGE article on May 18, 1998, the 1997 advertising revenue in the U.S. totaled over $187.6 billion. The article, titled 1997 U.S. ADVERTISING VOLUME (COEN/MCCANN-ERICKSON), can be found on their website at WWW.ADAGE.COM. We believe that newspapers, magazines, direct mail, business papers, and miscellaneous other advertising methods are potential users of the LIVING IMAGE(TM) Solutions. These categories make up over $116.4 billion or 62% of total advertising revenues. PRODUCTION Dimensional Visions controls or supervises all phases of the production of its LIVING IMAGE(TM) products from the image development and computerized enhancement phases through the color separation and printing phases. Images are provided to us by our clients in many formats including digitally in graphic file formats and photographically in pictures or transparencies. Photographic images are scanned into the computer to be modified and enhanced. Through a proprietary process, several images are composited together to generate a final image that will appear as a three-dimensional and/or animation image when viewed through a lenticular material. "Lenticular" is a plastic optical material that allows the three-dimensional and/or animation image to be viewed without the use of any viewing apparatus such as glasses or hoods. The digital files are forwarded to Travel Tags, our primary printer, or other commercial printer, where, through the lithographic process, the images are printed on a polymer based lenticular material which focuses the multi-dimensional or animation images. Printing is done under the supervision of Dimensional Visions. The lenticular material is supplied by producers in the petrochemical and plastic fabricating industries directly to our printer. Dimensional Visions has no long-term contracts with its printers. COMPETITION Other processes currently are available which allow a viewer to perceive an image in three-dimensions, including those which employ stereoscopic glasses and viewing hoods and other processes, and holograms and other three-dimensional image systems which do not require the use of viewing apparatus. Dimensional Visions is aware of at least two companies, Optigraphics, Inc. and National Graphics, Inc., which compete with our products. Our products may be more expensive than conventional, high quality, two-dimensional prints and for this reason, high quality, conventional processes and methods may be favored for many, if not most, illustration and promotion contexts. Color lenticular images are less expensive than other forms of three-dimensional prints. PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION The company filed a patent application on February 15, 1999 for its Living Image(TM) software and print system. The company believes that the patent will issue within two years. Dimensional Visions has received trademark registration of DV3D(R) and has submitted a trademark application for Animotion(TM) and LIVING IMAGE(TM) which we believe will issue within the next 24 months as well. EMPLOYEES As of the date of this prospectus, we had six employees, including three in management, one of whom is involved in product development and manufacturing, one in marketing and sales, and one in finance. Dimensional Visions is not a party to any collective bargaining agreements. Dimensional Visions considers its relations with employees to be good. PROPERTIES We lease approximately 3,100 square feet of office space at 2301 W. Dunlap Avenue, Suite 207 in Phoenix, Arizona. This location serves as our principal executive offices and our current design and production facilities. The total lease payments for fiscal year 2001 will be $48,050. The lease also requires us to pay all taxes and insurance and expires on December 31, 2003. 17 LITIGATION To the best knowledge of our management, there are no material litigation matters pending or threatened against us. MANAGEMENT Directors and Executive Officers The directors and officers of Dimensional Visions as of the date of this prospectus are as follows: NAME AGE POSITION ---- --- -------- John D. McPhilimy 57 Director, Chairman of the Board of Directors and Chief Executive Officer Roy D. Pringle 33 Vice President, Chief Financial Officer and Director Bruce D. Sandig 41 Senior Vice President Engineering and Director Susan A. Perlow 50 Director Lisa R. McPhilimy 26 Vice President, Controller Ronald L. Chilston 45 Vice President of Business Development - ---------- Mr. John McPhilimy was appointed as a Director, President, and Chief Executive Officer of Dimensional Visions in November 1997. In January 1998, he was appointed Chairman of the Board. From January 1995 until November 1997, Mr. McPhilimy served as President of Selah Information Systems, Inc., Mesa, Arizona, a company involved in information systems. From March 1992 to December 1995, Mr. McPhilimy served as President of Travel Teller, Inc. Mr. McPhilimy has over 30 years of executive and marketing experience in high-technology industries such as aerospace, air transportation, and electronic telecommunication networks with Bell Helicopter Textron, Aerospatiale, Executive Jet Aviation, Travel Teller Inc., Marketing Works, and Selah Information Systems. Over the last 15 years he has been responsible for implementing marketing strategies of NetJets and Travel Teller, which created the new industries of "nationwide fractional ownership of business jets" and "electronic ticket delivery networks," respectively. Mr. Roy D. Pringle was appointed as Vice President, Chief Financial Officer, and Chief Information Officer of Dimensional Visions in November 1997, and provides overall integrated enterprise-wide financial management systems for Dimensional Visions. Mr. Pringle has worked for InfoPak, Inc. since June 1992. Mr. Pringle holds a master's degree from the American Graduate School of International Management. Prior to joining InfoPak, he was President and founder of a small software company, Signature Software. Mr. Bruce D. Sandig was appointed as a Director of Dimensional Visions in January 1998 and as Senior-Vice President of Creative Design and Production Engineering of Dimensional Visions in November 1997 and provides overall development and integration of the DV3D(R)and Animotion(TM) Multi-Dimensional Images systems. Mr. Sandig was a co-founder of InfoPak in 1992. Mr. Sandig has over 15 years experience in electro-mechanical and software engineering/design with such companies as Universal Propulsion Company, Kroy, Inc., Dial Manufacturing, and Softie, Inc., where he also created several proprietary software games for Nintendo. Ms. Susan A. Perlow has served as Director of Dimensional Visions since January 1998. Since January 1998 she has served as Managing Principal Consultant for Oracle, Inc. She served as Director of Business Processing from March 1995 to December 1997 for AmKor Electronics. Mrs. Lisa R. McPhilimy, daughter-in-law of John McPhilimy, CEO, is Vice President & Controller and provides overall integrated financial management and reporting for the company. She is a Certified Public Accountant and a graduate of Ohio University. She has over 5 years experience in financial management and is responsible for the Securities & Exchange Commission reporting required as a publicly held company. 18 Mr. Ronald L. Chilston is Vice President of Business Development and provides overall integrated sales of our LivingImage(TM) Marketing Communication Solutions for the company. He has over 25 years of sales and operations experience in the photographic printing industry. He is in charge of our national direct sales for the LivingImage(TM) Marketing Communication Solutions, as well as, coordinating the national sales effort of both Anderson Litho and Photobition-Phoenix & their collective 50+ sales people. There is currently one committee on the Board of Directors. The Audit Committee is comprised of Ms. Perlow and Mr. Pringle. Directors serve until the next annual meeting or until their successors are qualified and elected. Officers serve at the discretion of the Board of Directors. EXECUTIVE COMPENSATION The following table sets forth the total compensation earned by or paid to Dimensional Visions' Chief Executive Officer for the fiscal year ended June 30, 2000. No officer of Dimensional Visions earned more than $100,000 in the fiscal year ended June 30, 2000.
LONG TERM COMPENSATION ------------------------------------------ ANNUAL COMPENSATION AWARDS PAYOUTS ----------------------------------- --------------------------- ----------- OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER COMPEN- STOCK UNDERLYING LTIP COMPEN- YEAR SALARY($) BONUS($) SATION($) AWARDS($) OPTIONS/SARS(#) PAYOUTS($) SATION($) ---- --------- -------- --------- --------- --------------- ---------- --------- John D. McPhilimy 1999 $89,250 $ 0 $0 $0 -- $0 $0 2000 $90,000 $7,500 $0 $0 -- $0 $0 OPTIONS/SAR GRANTS IN THE FISCAL YEAR 2000 INDIVIDUAL GRANTS NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS/SARS GRANTED OPTION/SARS TO EMPLOYEES IN EXERCISE OR BASE EXPIRATION NAME YEAR GRANTED(#) FISCAL YEAR PRICE ($/SHARE) DATE ---- ---- ---------- ----------- --------------- ---- John D. McPhilimy 2000 550,000 41.9 .25 1/27/05 AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 2000 AND FY-END OPTION/SAR VALUES NUMBER OF SECURITIES VALUE OF UNDERLYING EXERCISED UNEXERCISED SHARES OPTIONS/SARS AT FY-END(#) IN-THE-MONEY ACQUIRED ON VALUE EXERCISABLE/ OPTIONS/SARS NAME YEAR EXERCISE(#) REALIZED UNEXERCISABLE AT FY-END ($) ---- ---- ----------- -------- ------------- ------------- John D. McPhilimy 2000 -- 0 1,000,000(E)/0(U) $147,500
19 EMPLOYMENT AND RELATED AGREEMENTS None. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Certificate of Incorporation and Bylaws of Dimensional Visions provide that Dimensional Visions will indemnify and advance expenses, to the fullest extent permitted by the Delaware General Corporation Law, to each person who is or was a director, officer or agent of Dimensional Visions, or who serves or served any other enterprise or organization at the request of Dimensional Visions (an "Indemnitee"). Under Delaware law, to the extent that an Indemnitee is successful on the merits of a suit or proceeding brought against him or her by reason of the fact that he or she was a director, officer or agent of Dimensional Visions, or serves or served any other enterprise or organization at the request of Dimensional Visions, Dimensional Visions will indemnify him or her against expenses (including attorneys' fees) actually and reasonably incurred in connection with such action. If unsuccessful in defense of a third-party civil suit or a criminal suit, or if such a suit is settled, an Indemnitee may be indemnified under Delaware law against both (i) expenses, including attorneys' fees, and (ii) judgments, fines and amounts paid in settlement if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of Dimensional Visions, and, with respect to any criminal action, had no reasonable cause to believe his other conduct was unlawful. If unsuccessful in defense of a suit brought by or in the right of Dimensional Visions, where the suit is settled, an Indemnitee may be indemnified under Delaware law only against expenses (including attorneys' fees) actually and reasonably incurred in the defense or settlement of the suit if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of Dimensional Visions except that if the Indemnitee is adjudged to be liable for negligence or misconduct in the performance of his or her duty to Dimensional Visions, he or she cannot be made whole even for expenses unless a court determines that he or she is fully and reasonably entitled to indemnification for such expenses. Also under Delaware law, expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by Dimensional Visions in advance of the final disposition of the suit, action or proceeding upon receipt of an undertaking by or on behalf of the officer or director to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified by Dimensional Visions. Dimensional Visions may also advance expenses incurred by other employees and agents of Dimensional Visions upon such terms and conditions, if any, that the Board of Directors of Dimensional Visions deems appropriate. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers or persons controlling Dimensional Visions pursuant to the foregoing provisions, in the opinion of the Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable. CERTAIN TRANSACTIONS The Company entered into loan agreement with John McPhilimy on July 12, 2000. The principle amount of the loan is $5,000 due June 30, 2001 with 6% interest. The Company entered into a loan agreement with Bruce Sandig on July 12, 2000. The principle amount of the loan is $7,000 due June 30, 2001 with 6% interest. STOCK OPTION PLANS 1996 EQUITY INCENTIVE PLAN In June 1996, Dimensional Visions adopted the 1996 Equity Incentive Plan (the "1996 Plan") covering 10,000,000 shares of Dimensional Visions' common stock pursuant to which employees, consultants and other persons or entities who were in a position to make a significant contribution to the success of Dimensional Visions were eligible to receive awards in the form of incentive or non-incentive options, stock appreciation rights, restricted stock or deferred 20 stock. The 1996 Plan will terminate ten years after June 12, 1996, the effective date of the 1996 Plan. The 1996 Plan is administered by the Board of Directors. In its discretion, the Board of Directors may elect to administer the 1996 Plan. Restricted stock entitles the recipients to receive shares of Dimensional Visions' common stock subject to such restriction and condition as the Compensation Committee may determine for no consideration or such considerations as determined by the Compensation Committee. Deferred stock entitles the recipients to receive shares of Dimensional Visions' common stock in the future. As of the date of this prospectus, 5,002,978 shares have been issued pursuant to this plan. The company has decided that it will not issue any additional shares under the 1996 Plan, but will instead issue options under its 1999 Stock Option Plan. 1999 STOCK OPTION PLAN On November 15, 1999, the Board of Directors of Dimensional Visions adopted the 1999 Stock Option Plan (the "1999 Plan"). This plan was approved by a majority of our stockholders at our January 28, 2000, stockholders' meeting. The purpose of the 1999 Plan is to advance the interests of the company by encouraging and enabling acquisition of a financial interest in the company by its officers and other key individuals. The 1999 Plan is intended to aid the company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the company. A maximum of 1,500,000 shares of the company's common stock are available to be issued under the 1999 Plan. The option exercise price will be 100% of the fair market value of the company's common stock on the date the option is granted and will be exercisable for a period not to exceed 10 years from the date of grant. No options have been issued to date. PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding the shares of Dimensional Visions' outstanding common stock beneficially owned as of the date of this prospectus by (i) each of Dimensional Visions' directors and executive officers, (ii) all directors and executive officers as a group, and (iii) each other person who is known by Dimensional Visions to own beneficially more than 5% of Dimensional Visions' common stock. NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF BENEFICIAL OWNERS(1) BENEFICIAL OWNERSHIP(2) OWNERSHIP(2) - ----------------------- ----------------------- ------------ John D. McPhilimy 2,385,000(3) 18.8% 127 W. Fellars Dr Phoenix, AZ 85023 Bruce D. Sandig 1,700,000(4) 14.1% 5801 N 14th St Phoenix, AZ 85014 Roy D. Pringle 1,506,047(5) 12.7% 4915 W. Marco Polo Rd Glendale, AZ 85308 Susan A. Perlow 75,000(6) 0.7% 26210 S. Lime Drive Queen Creek, AZ 85242 Lisa R. McPhilimy 550,000(7) 5.1% 2906 E. Leland St Mesa, AZ 85213 Ronald Chilston 400,000(8) 3.7% 3612 N 21st St Dr Phoenix, AZ 85015 All executive officers and directors as a group (6 persons) 6,616,047 39.1% - ---------- (1) Each person named in the table has sole voting and investment power with respect to all common stock beneficially owned by him or her, subject to applicable community property law, except as otherwise indicated. Except as otherwise indicated, each of such persons may be reached through Dimensional Visions at 2301 W. Dunlap Avenue, Suite 207, Phoenix, Arizona 85021. 21 (2) The percentages shown are calculated based upon the 10,339,873 shares of common stock outstanding as of the date of this prospectus. The numbers and percentages shown include the shares of common stock actually owned as of the date of this prospectus and the shares of common stock that the identified person or group had the right to acquire within 60 days of such date. In calculating the percentage of ownership, all shares of common stock that the identified person or group had the right to acquire within 60 days of the date of this prospectus upon the exercise of options and warrants, or the conversion of preferred stock, are deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by such person or group, but are not deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by any other person. (3) Mr. McPhilimy has warrants to purchase 385,000 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003. He also has warrants to purchase 2,000,000 shares of common stock at an exercise price of $.125 until January 1, 2008, which are zero percent vested. On July 1, 2001, 25% of the warrants will fully vest provided Dimensional Visions has a positive net income for the fiscal year ending June 30, 2001 or upon the discretion of the Board of Directors. The remaining warrants will vest at a rate of 18.75% of the total warrants for each consecutive quarter that the company is profitable. (4) Mr. Sandig ownes 10,000 shares of Dimensional Visions' common stock. Also included in the amount are common stock purchase warrants to purchase 230,000 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003 and warrants to purchase 460,000 shares of common stock at an exercise price of $.25 until January 27, 2005. He also has warrants to purchase 1,000,000 shares of common stock at an exercise price of $.125 until January 1, 2008, which are zero percent vested. On July 1, 2001, 25% of the warrants will fully vest provided Dimensional Visions has a positive net income for the fiscal year ending June 30, 2001 or upon the discretion of the Board of Directors. The remaining warrants will vest at a rate of 18.75% of the total warrants for each consecutive quarter that the company is profitable. (5) Mr. Pringle owns 6,047 shares of Dimensional Visions' common stock. Also included in the amount are common stock purchase warrants to purchase 210,000 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003 and warrants to purchase 290,000 shares of common stock at an exercise price of $.25 until January 27, 2005. He also has warrants to purchase 1,000,000 shares of common stock at an exercise price of $.125 until January 1, 2008, which are zero percent vested. On July 1, 2001, 25% of the warrants will fully vest provided Dimensional Visions has a positive net income for the fiscal year ending June 30, 2001 or upon the discretion of the Board of Directors. The remaining warrants will vest at a rate of 18.75% of the total warrants for each consecutive quarter that the company is profitable. (6) Ms. Perlow has warrants to purchase 40,000 shares of Dimensional Visions' common stock at an exercise price of $.50 until October 28, 2003 and warrants to purchase 35,000 shares of common stock at an exercise price of $.25 until January 27, 2005. (7) Ms. McPhilimy has warrants to purchase 18,334 shares of Dimensional Visions' common stock at an exercise price of $.20 until October 28, 2003 and warrants to purchase 31,666 shares of common stock at an exercise price of $.25 until January 27, 2005. She also has warrants to purchase 500,000 shares of common stock at an exercise price of $.125 until January 1, 2008, which are zero percent vested. On July 1, 2001, 25% of the warrants will fully vest provided Dimensional Visions has a positive net income for the fiscal year ending June 30, 2001 or upon the discretion of the Board of Directors. The remaining warrants will vest at a rate of 18.75% of the total warrants for each consecutive quarter that the company is profitable. (8) Mr. Chilston has warrants to purchase 400,000 shares of common stock at an exercise price of $.125 until January 1, 2008, which are zero percent vested. On July 1, 2001, 25% of the warrants will fully vest provided Dimensional Visions has a positive net income for the fiscal year ending June 30, 2001 or upon the discretion of the Board of Directors. The remaining warrants will vest at a rate of 18.75% of the total warrants for each consecutive quarter that the company is profitable. 22 SELLING STOCKHOLDERS The following table sets forth the number of shares of common stock which may be offered for sale from time to time by the selling stockholders. The shares offered for sale constitute all of the shares of common stock known to Dimensional Visions to be beneficially owned by the selling stockholders. Other than as indicated, to the best of management's knowledge, none of the selling stockholders has or have any material relationship with Dimensional Visions. SHARES OF PERCENTAGE COMMON STOCK OWNED IF MORE NAME OF SELLING STOCKHOLDER OFFERED (1) THAN 1% - --------------------------- ----------- ------- Donald John Casey Family Trust 2,812 -- Kent Casey 3,545 -- Mark Casey 3,125 -- Robert Casey 833 -- Edward Conn 500 -- Keith Denner 1,250 -- Evjen Profit Sharing Plan 15,000 -- Fideltiy Insurance Co. Ltd/B9-2206A 2,500 -- Roy A. Kite 30,000 -- Janice Casey Larsen 312 -- Larry Peery 3,750 -- Dennis & Diane Schlegel 3,250 -- Michael Shapiro 3,125 -- Eugene Snowden 75,000 -- Southwest Ventures 1,250 -- VMR Profit Sharing 9,375 -- Charles Wafer 12,500 -- Mark Ward 2,500 -- Watson Revocable Trust Dated 1/20/99 1,330 -- Pamela Wilson 250 -- Dale Riker (3) 1,150,000 6.3 Russ Ritchie (4) 1,150,000 2.4 Swartz Private Equity, LLC (5) 26,309,000 11.2 John D. McPhilimy (2) (6) 2,000,000 18.8 Bruce D. Sandig (2) (7) 1,000,000 14.1 Roy D. Pringle (2) (8) 1,000,000 12.7 Lisa R. McPhilimy (2)(9) 400,000 5.1 Ron Chilston (2)(10) 400,000 3.7 Michael J. McPhilimy (2)(11) 100,000 5.1 ---------- Total 33,681,207 ========== - ---------- (1) All of these shares are currently restricted under Rule 144 of the Act. (2) Indicates common shares issuable upon exercise of warrants that become vested if the company is profitable for the fiscal year ended June 30, 2001 or upon the discretion of the Board of Directors. (3) Includes 25,000 shares in common stock, 175,000 shares held upon exercise of warrants, 200,000 shares held upon exercise of warrants to be issued pursuant to an investment agreement and 750,000 shares held upon conversion of debt pursuant to an investment agreement. (4) Includes 25,000 shares in common stock, 175,000 shares held upon exercise of warrants, 200,000 shares held upon exercise of warrants to be issued pursuant to an investment agreement and 750,000 shares held upon conversion of debt pursuant to an investment agreement. (5) This number includes 1,309,000 shares of common stock issuable upon exercise of warrants which are currently outstanding. This number also includes (solely for purposes of this prospectus) up to an aggregate of 25,000,000 shares of our common stock that we may sell to Swartz under the Swartz investment agreement. These shares would not be deemed beneficially owned within the meaning of Sections 13(d) and 13(g) of the Exchange Act before their acquisition by Swartz. Eric S. Swartz holds investment and voting control of the shares held by Swartz. (6) John D. McPhilimy is the President and Chief Executive Officer of the company. (7) Bruce D. Sandig is a Senior Vice President of the company. (8) Roy D. Pringle is a Vice President and Chief Financial Officer of the company. (9) Lisa R. McPhilimy is a Vice President and Controller of the company. (10) Ron Chilston is the Vice President of Business Development of the company. (11) Michael J. McPhilimy is an employee of the company. 23 PLAN OF DISTRIBUTION This prospectus involves an offering that relates to: - The possible sale from time to time of 25,000,000 shares and 1,309,000 shares underlying warrants by Swartz Private Equity, LLC pursuant to an investment agreement, - The possible sale from time to time of 50,000 shares, 350,000 shares underlying warrants, 400,000 shares underlying warrants to be issued pursuant to an investment agreement and 1,500,000 shares held upon conversion of debt pursuant to a line of credit investment agreement with an investor group consisting on Dale Riker and Russ Ritchie. - The possible sale from time to time of 4,900,000 shares underlying warrants to be issued to the employees of the Company if we are profitable at June 30, 2001 or upon the discretion of the Board of Directors. - The possible sale from time to time by other selling shareholders of Dimensional Visions, Inc. of up to 172,207 shares of common stock of Dimensional Visions. SWARTZ PRIVATE EQUITY, LLC This prospectus is registering the possible sale from time to time of 25,000,000 shares and 1,309,000 shares underlying warrants by Swartz. Pursuant to our investment agreement with Swartz Private Equity, LLC, we can place puts to them of our common stock of up to $20,000,000. The dollar amount of each sale is limited by our common stock's trading volume and a minimum period of time since the last sale. Each sale will be to Swartz. In turn, Swartz may sell our stock in the open market, place our stock through negotiated transactions with other investors, or hold our stock in their own portfolio. SELLING SHAREHOLDERS The shares will be offered and sold by the selling stockholders for their own accounts. Dimensional Visions will not receive any of the proceeds from the sale of the shares pursuant to this prospectus other than from the exercise of warrants or the conversion of debt. Dimensional Visions will pay all of the expenses of the registration of the shares, but shall not pay any commissions, discounts, and fees of underwriters, dealers, or agents. The selling shareholders and their successors, which term includes their transferees, pledgees or donees or their successors may sell the common stock directly to one or more purchasers (including pledgees) or through brokers, dealers or underwriters who may act solely as agents or may acquire common stock as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed. The selling shareholders may effect the distribution of the common stock in one or more of the following methods: - ordinary brokers transactions, which may include long or short sales; - transactions involving cross or block trades or otherwise on the Nasdaq National Market; - purchases by brokers, dealers or underwriters as principal and resale by such purchasers for their own accounts under this prospectus; - "at the market" to or through market makers or into an existing market for the common stock; - in other ways not involving market makers or established trading markets, including direct sales to purchasers or sales effected through agents; - through transactions in options, swaps or other derivatives (whether exchange listed or otherwise); or - any combination of the above, or by any other legally available means. 24 In addition, the selling shareholders or successors in interest may enter into hedging transactions with broker-dealers who may engage in short sales of common stock in the course of hedging the positions they assume with the selling shareholders. The selling shareholders or successors in interest may also enter into option or other transactions with broker-dealers that require delivery by such broker-dealers of the common stock, which common stock may be resold thereafter under this prospectus. Brokers, dealers, underwriters or agents participating in the distribution of the common stock may receive compensation in the form of discounts, concessions or commission from the selling shareholders and/or the purchasers of common stock for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). Swartz is, and each remaining selling shareholder and any broker-dealers acting in connection with the sale of the common stock by this prospectus may be deemed to be, an underwriter within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and any profit realized by them on the resale of common stock as principals may be underwriting compensation under the Securities Act. Neither the selling shareholders nor we can presently estimate the amount of such compensation. We do not know of any existing arrangements between the selling shareholders and any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the common stock. The selling shareholders and any other persons participating in a distribution of securities will be subject to applicable provisions of the Securities Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M, which may restrict certain activities of, and limit the timing of purchases and sales of securities by, the selling shareholders and other persons participating in a distribution of securities. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions subject to specified exceptions or exemptions. Swartz has, before any sales, agreed not to effect any offers or sales of the common stock in any manner other than as specified in this prospectus and not to purchase or induce others to purchase common stock in violation of Regulation M under the Exchange Act. All of the foregoing may affect the marketability of the securities offered by this prospectus. Any securities covered by this prospectus that qualify for sale under Rule 144 under the Securities Act may be sold under that Rule rather than under this prospectus. We cannot assure you that the selling shareholders will sell any or all of the shares of common stock offered by the selling shareholders. In order to comply with the securities laws of certain states, if applicable, the selling shareholders will sell the common stock in jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states, the selling shareholders may not sell the common stock unless the shares of common stock have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. 25 DESCRIPTION OF SECURITIES The authorized capital stock of Dimensional Visions currently consists of 100,000,000 shares of common stock, $.001 par value, and 10,000,000 shares of preferred stock, $.001 par value. Dimensional Visions' transfer agent is American Stock Transfer & Trust Corporation, 59 Maiden Lane, New York, New York 10007. The following summary of certain terms of Dimensional Visions' securities does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of Dimensional Visions' Articles of Incorporation and Bylaws. COMMON STOCK As of the date of this prospectus, there are 10,339,873 shares of common stock outstanding. Holders of common stock are each entitled to cast one vote for each share held of record on all matters presented to stockholders. Cumulative voting is not allowed; hence, the holders of a majority of the outstanding common stock can elect all directors. Holders of common stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available therefore and, in the event of liquidation, to share pro rata in any distribution of Dimensional Visions' assets after payment of liabilities. The Board of Directors is not obligated to declare a dividend and it is not anticipated that dividends will be paid until Dimensional Visions is profitable. Holders of common stock do not have preemptive rights to subscribe to additional shares if issued by Dimensional Visions. There are no conversion, redemption, sinking fund or similar provisions regarding the common stock. All of the outstanding shares of common stock are fully paid and non-assessable and all of the shares of common stock offered hereby will be, upon issuance, fully paid and non-assessable. PREFERRED STOCK SERIES A PREFERRED STOCK The company's Series A Convertible 5% Preferred Stock, 100,000 shares authorized, is convertible into common stock at the rate of 1.6 shares of common stock for each share of the Series A Preferred. Dividends from date of issue are payable from retained earnings, and have been accumulated on June 30 each year, but have not been declared or paid. The Series A Preferred were issued for the purpose of raising operating funds. As of the date of this prospectus, there are 15,500 shares of Series A Convertible 5% Preferred Stock outstanding. SERIES B PREFERRED STOCK The company's Series B Convertible 8% Preferred Stock, 200,000 shares authorized, is convertible into common stock at the rate of four shares of common stock for each share of the Series B Preferred. Dividends from date of issue are payable from retained earnings, and have been accumulated on June 30 each year, but have not been declared or paid. The Series B Preferred were issued for the purpose of raising operating fund. Shares of Series B Preferred were issued to holders of warrants to purchase such preferred stock. The funding for the exercise of these warrants was the exchange of 1,907,000 of principal amount of secured and unsecured notes. As of the date of this prospectus, there are 3,500 shares of Series B Convertible 8% Preferred Stock outstanding. SERIES C PREFERRED STOCK The company's Series C Convertible Preferred Stock is convertible at a rate of 0.4 shares of common stock per share of Series C Preferred and was issued to certain holders of the company's 10% Secured Notes in lieu of accrued interest. Shares of Series C Preferred were also issued in exchange for $262,750 of interest due under secured and unsecured notes. As of the date of this prospectus, there are 13,404 shares of Series C Convertible Preferred Stock outstanding. 26 SERIES D PREFERRED STOCK The company's Series D Convertible Preferred Stock is convertible at a rate of two shares of common stock per share of Series D Preferred and was issued for the purpose of raising operating funds. As of the date of this prospectus, there are 180,000 shares of Series D Convertible Preferred Stock outstanding. SERIES E PREFERRED STOCK The company's Series E Convertible Preferred Stock is convertible at a rate of one share of common stock per share of Series E Preferred and was issued for the purpose of raising operating funds. As of the date of this prospectus, there are 275,000 shares of Series E Convertible Preferred Stock outstanding. SERIES P PREFERRED STOCK The company's Series P Convertible Preferred Stock is convertible at a rate of 0.4 shares of common stock per share of Series P Preferred. The Series P Preferred was issued on September 2, 1995, to InfoPak stockholders in exchange for (1) all of the outstanding capital stock of InfoPak, (2) as signing bonuses for certain employees and a consultant of InfoPak, and (3) to satisfy InfoPak's outstanding debt obligations to certain stockholders. As of the date of this prospectus, there are 86,640 shares of Series P Convertible Preferred Stock outstanding. WARRANTS AND OPTIONS As of March 6, 2001, there are 10,690,343 warrants issued and outstanding expiring at various times until January 1, 2008. The exercise prices vary from $.10 to $12.50 per share with a weighted average exercise price of $.25 per share. Officers and directors of the company own 6,600,000 of the 10,690,343 issued and outstanding warrants with a weighted average exercise price of $.15 per share. Of these 6,600,000 warrants, 4,900,000 are part of incentive warrants for the officers. On July 1, 2001, 25% of these warrants will fully vest provided Dimensional Visions has a positive net income for the fiscal year ending June 30, 2001. The remaining warrants will vest at a rate of 18.75% of the total warrants for each consecutive quarter that the company is profitable. The warrants would also vest if the Company were to have a change in control before June 30, 2001 or upon the discretion of the Board of Directors. Other individuals or entities own the other 4,090,343 warrants which have a weighted average exercise price of $.42 per share. LEGAL MATTERS The validity of the securities offered hereby will be passed upon for Dimensional Visions by Senn Palumbo Meulemans, LLP, Irvine, California. EXPERTS The Financial Statements of Dimensional Visions for the fiscal years ended June 30, 2000 and June 30, 1999, included herein and elsewhere in the registration statement, have been included herein and in the registration statement in reliance on the reports of Kopple & Gottlieb, LLP and Gitomer & Berenholz, P.C., appearing elsewhere herein, and upon the authority of said firms as experts in accounting and auditing. 27 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY YEARS ENDED JUNE 30, 2000 AND 1999 AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ---- Independent Auditors' Report F-2 Consolidated Financial Statements Balance Sheets F-4 Statements of Operations F-5 Statements of Stockholders' Equity (Deficiency) F-6 Statements of Cash Flows F-10 Notes to Consolidated Financial Statements F-14 F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Dimensional Visions Incorporated and Subsidiary Phoenix, Arizona We have audited the accompanying consolidated balance sheet of Dimensional Visions Incorporated and Subsidiary (the "Company") as of June 30, 2000, and the related consolidated statements of operations, stockholders' equity (deficiency), and cash flows for the period ended June 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dimensional Visions Incorporated and Subsidiary as of June 30, 2000 and the results of their operations and their cash flows for the period ended June 30, 2000 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has financed its operations primarily through the sale of its securities. As described in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has limited sales of its products, which raises substantial doubt about the Company's ability to continue as a going concern. The future of the Company as an operating business will depend on its ability ability to (1) successfully market its products, (2) obtain sufficient capital contributions and/or financing as may be required to sustain its current operations and fulfill its sales and marketing activities, (3) achieve a level of sales adequate to support the Company's cost structure, and (4) ultimately achieve a level of profitability. Management's plan concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Kopple & Gottlieb, LLP KOPPLE & GOTTLIEB, LLP Jenkintown, Pennsylvania September 1, 2000 F-2 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Dimensional Visions Incorporated and Subsidiary Phoenix, Arizona We have audited the accompanying consolidated balance sheet of Dimensional Visions Incorporated and Subsidiary (the "Company") as of June 30, 1999 (not presented herein), and the related consolidated statement of operations, stockholders' equity (deficiency), and cash flows for the year ended June 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dimensional Visions Incorporated and Subsidiary as of June 30, 2000 and the results of their operations and their cash flows for the year ended June 30, 1999 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has financed its operations primarily through the sale of its securities. As described in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has limited sales of its products, which raises substantial doubt about the Company's ability to continue as a going concern. The future of the Company as an operating business will depend on its ability to (1) successfully market its products, (2) obtain sufficient capital contributions and/or financing as may be required to sustain its current operations and fulfill its sales and marketing activities, (3) achieve a level of sales adequate to support the Company's cost structure, and (4) ultimately achieve a level of profitability. Management's plan concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ GITOMER & BERENHOLZ, P.C. Huntingdon Valley, Pennsylvania October 7, 1999 F-3 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, June 30, 2000 2000 ------------ ------------ (Unaudited) ASSETS Current assets Cash $ 14,129 $ 276,333 Notes receivable, net of allowance for bad debts of $443,699 -- -- Notes receivable, officers 12,341 -- Accounts receivable, trade, net of allowance for bad debts of $11,833 116,100 350,493 Prepaid expenses 6,593 9,227 ------------ ------------ Total current assets 149,163 636,053 ------------ ------------ Equipment Equipment 479,972 479,372 Furniture and fixtures 49,329 46,944 ------------ ------------ 529,301 526,316 Less accumulated depreciation 334,624 308,963 ------------ ------------ 194,677 217,353 ------------ ------------ Other assets Patent rights and other assets 29,589 31,627 ------------ ------------ Total assets $ 373,429 $ 885,033 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities Current portion of obligations under capital leases $ 55,559 $ 50,962 Accounts payable, accrued expenses and other liabilities 300,224 379,807 ------------ ------------ Total current liabilities 355,783 430,769 ------------ ------------ Obligations under capital leases, net of current portion 59,364 88,343 ------------ ------------ Total liabilities 415,147 519,112 ------------ ------------ Commitments and contingencies -- -- Stockholders' equity Preferred stock - $.001 par value, authorized 10,000,000 shares; issued and outstanding 574,044 at December 31, 2000, and 1,146,044 shares at June 30, 2000 574 1,146 Additional paid-in capital 953,843 1,474,295 ------------ ------------ 954,417 1,475,441 Common stock - $.001 par value, authorized 100,000,000 shares; issued and outstanding 10,259,873 at December 31, 2000 and 8,934,916 shares at June 30, 2000 10,260 8,935 Additional paid-in capital 21,506,592 20,885,581 Deficit (22,427,533) (21,828,753) ------------ ------------ Total stockholders' equity (deficiency) before deferred consulting contracts 43,736 (541,204) Deferred consulting contracts (85,454) (175,283) ------------ ------------ Total stockholders' equity (deficiency) (41,718) 365,921) ------------ ------------ Total liabilities and stockholders' equity (deficiency) $ 373,429 $ 885,033 ============ ============
See notes to consolidated financial statements. F-4 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended December 31, Year Ended June 30, ----------------------------- --------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Operating revenue $ 162,996 $ 300,418 $ 1,008,862 $ 741,901 Cost of sales 106,475 193,261 662,021 562,711 ----------- ----------- ----------- ----------- Gross profit 56,521 107,157 346,841 179,190 Operating expenses Engineering and development costs 134,562 77,152 169,895 146,480 Marketing expenses 120,116 25,367 129,520 301,630 General and administrative expenses 392,754 348,577 852,140 605,347 ----------- ----------- ----------- ----------- Total operating expenses 647,432 451,096 1,151,555 1,053,457 ----------- ----------- ----------- ----------- Loss before other income (expenses) (590,911) (343,939) (804,714) (874,267) ----------- ----------- ----------- ----------- Other income (expenses) Interest expense (10,627) (120,196) (173,878) (207,727) Interest income 2,758 5,084 14,779 18,188 Bad debt expense on notes receivable -- -- (57,332) (402,006) ----------- ----------- ----------- ----------- (7,869) (115,112) (216,431) (591,545) ----------- ----------- ----------- ----------- Net loss (598,780) (459,051) (1,021,145) (1,465,812) Dividends in arrears on preferred stock (74,225) (88,050) (74,225) (88,050) ----------- ----------- ----------- ----------- Net loss available to common shareholders $ (673,005) $ (547,101) $(1,095,370) $(1,553,862) =========== =========== =========== =========== Loss per share Basic and diluted loss per common share $ (.07) $ (.09) $ (.18) $ (.39) =========== =========== =========== =========== Shares used in computing net loss per share 9,620,342 5,759,686 6,052,835 3,973,118 =========== =========== =========== ===========
See notes to consolidated financial statements. F-5 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred Stock Common Stock $(.001 Par Value) Additional $(.001 Par Value) Additional ---------------- Paid-in ------------------ Paid-in Shares Amount Capital Shares Amount Capital Deficit Total ------- ----- --------- --------- ------ ----------- ------------ ----------- Balance, July 1, 1998 133,321 $ 133 $ 683,278 3,612,101 $3,612 $18,862,075 $(19,341,796) $ 207,302 Conversion of 1,500 shares Series B convertible preferred stock valued at $15,000 into 6,000 shares of the Company's common stock (1,500) (1) (14,999) 6,000 6 14,994 -- -- Conversion of 1,011 shares Series C convertible preferred stock valued at $10,110 into 47,390 shares of the Company's common stock (1,011) (1) (10,109) 403 -- 10,110 -- -- Issuance of 1,519,688 shares of the Company's common stock to consultants for services valued at $320,593 -- -- -- 1,519,688 1,520 319,073 -- 320,593 Issuance of 485,000 warrants to purchase 485,000 shares of the Company's common stock at $.50 per share for a three and a half year period commencing January 16, 1998 in connection with the issuance of convertible debentures due July 31, 2001 Black Scholes option pricing model was used to value the warrants -- -- -- -- -- 310,850 -- 310,850 Issuance of 85,000 warrants to purchase 85,000 shares of the Company's common stock at $.25 per share and issuance of 150,000 warrants to purchase 150,000 shares of the Company's common stock at $.10 per share for a three year period commencing January 25, 1999 in connection with the issuance of convertible debentures due July 1999 through October 1999. The Black Scholes option pricing model was used to value the warrants -- -- -- -- -- 39,300 -- 39,300 Net loss -- -- -- -- -- -- (1,465,812) (1,465,812) Balance, June 30, 1999 130,810 $ 131 $ 658,170 5,138,192 $5,138 $19,556,402 $(20,807,608) $ (587,767)
F-6 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
Preferred Stock Common Stock $(.001 Par Value) Additional $(.001 Par Value) Additional ---------------- Paid-in ------------------ Paid-in Shares Amount Capital Shares Amount Capital Deficit Total ------- ----- --------- --------- ------ ----------- ------------ ---------- Balance, July 1, 1999 130,810 $ 131 $ 658,170 5,138,192 $5,138 $19,556,402 $(20,807,608) $(587,767) Conversion of 4,266 shares Series C convertible preferred stock valued at $42,660 into 1,703 shares of the Company's common stock (4,266) (4) (42,656) 1,703 2 42,658 -- -- Exercise of 135,000 warrants to purchase 135,000 shares of the Company's common stock at $.20 per share -- -- -- 135,000 135 26,865 -- 27,000 Exercise of 355,000 warrants to purchase 355,000 shares of the Company's common stock at $.10 per share -- -- -- 355,000 355 35,145 -- 35,500 Exercise of 30,000 warrants to purchase 30,000 shares of the Company's common stock at $.50 per share -- -- -- 30,000 30 14,970 -- 15,000 Exercise of 32,000 warrants to purchase 32,000 shares of the Company's common stock at $.25 per share -- -- -- 32,000 32 7,968 -- 8,000 Issuance of 166,730 shares of the Company's common stock to settle accounts payable valued at $62,398 -- -- -- 166,730 167 62,231 -- 62,398 Issuance of 544,000 shares of the Company's common stock to consultants for services valued at $341,250 -- -- -- 544,000 544 340,706 -- 341,250 Issuance of 375,000 shares of the Company's Series D Preferred Stock 375,000 375 337,125 -- -- -- -- 337,500 Issuance of 675,000 shares of the Company's Series E Preferred Stock 675,000 675 617,325 -- -- -- -- 618,000 Conversion of 7,500 shares Series A convertible preferred stock valued at $75,000 into 12,000 shares of the Company's common stock (7,500) (8) (74,992) 12,000 12 74,988 -- --
F-7 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
Preferred Stock Common Stock $(.001 Par Value) Additional $(.001 Par Value) Additional ------------------ Paid-in ------------------ Paid-in Shares Amount Capital Shares Amount Capital Deficit Total ------- ------ --------- --------- ------ ----------- ------------ --------- Conversion of 23,000 shares Series D convertible preferred stock valued at $20,700 into 46,000 shares of the Company's common stock (23,000) (23) (20,677) 46,000 46 20,654 -- -- Issuance of 40,000 shares of Company's common stock as payment of a $20,000 commission owed from the sale of Series D Preferred Stock in lieu of a cash payment -- -- -- 40,000 40 19,960 -- 20,000 Conversion of debt of $570,000 and related interest of $97,387 at $.375 pursuant to SB-2 registration statement -- -- -- 1,779,691 1779 665,608 -- 667,387 Conversion of debt of $150,000 and related interest of $13,650 at $.25 pursuant to SB-2 registration statement -- -- -- 654,600 655 162,995 -- 163,650 Professional fees incurred in connection with SB-2 registration statement (15,698) (15,698) Adjustment for long term debt discount of which debt was converted into equity with the SB-2 registration -- -- -- -- -- (116,622) -- (116,622) Adjustment for deferred offering costs associated with the SB-2 registration -- -- -- -- -- (13,249) -- (13,249) Issuance of 323,293 warrants to purchase the Company's common stock at $.10 per share commencing January 2001 in connection with the issuance of convertible debentures -- -- -- -- -- -- -- -- Issuance of 395,000 warrants to purchase the Company's common stock at $.25 per share commencing October 2000 in connection with private placement of the Company's securities -- -- -- -- -- -- -- -- Issuance of 1,397,500 warrants to purchase the Company's common stock at $.25 per share commencing December 2000 through February 2005 for employee incentives and consultants -- -- -- -- -- -- -- --
See notes to financial statements. F-8 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)
Preferred Stock Common Stock $(.001 Par Value) Additional $(.001 Par Value) Additional ------------------- Paid-in -------------------- Paid-in Shares Amount Capital Shares Amount Capital Deficit Total --------- ------- ----------- ---------- ------- ----------- ------------ ----------- Issuance of 917,500 warrants to purchase the Company's common stock at $.50 per share commencing October 2000 through January 2003 in connection with private placement of the Company's securities -- -- -- -- -- -- -- -- Net loss -- -- -- -- -- -- (1,021,145) (1,021,145) --------- ------- ----------- ---------- ------- ----------- ------------ ----------- Balance, June 30, 2000 1,146,044 $ 1,146 $ 1,474,295 8,934,916 $ 8,935 $20,885,581 $(21,828,753) $ 541,204 Exercise of 85,000 warrants to purchase 85,000 shares of the Company's common stock at $.10 per share -- -- -- 85,000 85 8,415 -- 8,500 Exercise of 73,750 warrants to purchase 73,750 shares of the Company's common stock at $.50 per share along with additional common stock per the inducement to exercise -- -- -- 186,125 186 30,470 -- 36,875 Exercise of 250,000 warrants to purchase 250,000 shares of the Company's common stock at $.25 per share along with additional common stock per the inducement to exercise -- -- -- 250,000 250 61,848 -- 55,937 Conversion of 172,000 shares Series D convertible preferred stock valued at $154,800 into 344,000 shares of the Company's common stock (172,000) (172) (154,629) 344,000 344 154,456 -- -- Conversion of 400,000 shares Series E convertible preferred stock valued at $366,222 into 400,000 shares of the Company's common stock (400,000) (400) (365,823) 400,000 400 365,822 -- -- Issuance of 172,207 shares of the Company's common stock as a warrant exercise inducement -- -- -- 172,207 172 Net loss -- -- -- -- -- -- (598,780) (598,780) --------- ------- ----------- ---------- ------- ----------- ------------ ----------- Balance, December 31, 2000 (unaudited) 574,044 $ 574 $ 953,843 10,259,873 10,260 $21,506,592 $(22,427,533) $ 43,736 ========= ======= =========== ========== ======= =========== ============ ===========
F-9 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, Year Ended June 30, -------------------------- -------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Operating activities Net loss $ (598,780) $ (459,051) $(1,021,145) $(1,465,812) Adjustments to reconcile net loss to net cash used in operating activities Allowance for bad debts on notes receivable -- -- 41,663 402,006 Consulting service paid through issuance of warrants and common stock -- 22,500 22,500 65,593 Depreciation and amortization of property and equipment 25,661 17,819 42,299 46,172 Amortization of debt discount 73,041 121,396 112,132 Amortization of other assets and deferred costs 91,867 71,316 262,858 36,811 Interest expense paid through issuance of common stock -- -- 50,400 -- Changes in assets and liabilities which provided (used) cash Accounts receivable, trade 222,052 (108,911) (272,425) 66,552 Inventory (4,772) 4,822 62,464 Prepaid expenses 2,633 8,193 10,748 7,782 Accounts payable, accrued expenses and other liabilities (79,583) (91,616) (31,332) 94,196 ----------- ----------- ----------- ----------- Net cash used in operating activities (336,150) (461,937) (768,216) (572,104) ----------- ----------- ----------- ----------- Investing activities Payment of obligations under capital lease (24,382) (9,779) (49,702) (16,477) Purchase of equipment (2,985) -- (1,071) (57,279) Proceeds from payments on notes receivable -- -- -- 18,169 ----------- ----------- ----------- ----------- Net cash used in investing activities (27,367) (9,779) (50,773) (55,587) ----------- ----------- ----------- -----------
F-10 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Six Months Ended December 31, Year Ended June 30, -------------------------- -------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Financing activities Proceeds from Exercise of warrants 107,875 -- 85,500 -- Sale of Common stock -- -- -- -- Preferred stock net of offering costs of $74,500 -- -- 975,000 -- Preferred stock net of offering costs of $94,500 -- 955,500 -- -- Warrant right -- -- -- -- Short-term borrowings -- -- -- 235,000 Long-term debt -- -- -- 485,000 Reduction in deferred consulting fee contract originally paid in common stock -- 30,000 30,000 100,000 Professional fees incurred in connection with SB-2 registration statement -- -- (15,697) -- Stock issuance costs (6,563) -- -- -- Issuance of common stock in connection with the exercise of warrants -- 40,000 -- -- Proceeds from sale of equipment and supplies -- -- -- -- Borrowings from factor -- -- -- 195,560 Payment of debt obligations -- -- -- (350,060) Disbursement of debt issuance costs -- -- -- (33,700) --------- ---------- ----------- --------- Net cash provided by financing activities 101,313 1,025,500 1,075,303 631,800 --------- ---------- ----------- --------- Net increase (decrease) in cash and cash equivalents (262,204) 553,783 256,314 4,109 Cash, beginning of period 276,333 20,019 20,019 15,910 --------- ---------- ----------- --------- Cash, end of period $ 14,129 $ 573,802 $ 276,333 $ 20,019 ========= ========== =========== ========= Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 6,584 $ 7,152 $ 24,677 $ 34,957 ========= ========== =========== ========= Issuance of common stock in connection with consulting services $ -- $ 210,000 $ 341,250 $ 320,593 ========= ========== =========== =========
F-11 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 (UNAUDITED) Supplemental disclosure of non-cash investing and financing activities for the six months ended December 31, 2000: The Company issued 344,000 of the Company's common stock as a result of the conversion of 172,000 shares of Series D Convertible Preferred Stock valued at $154,800. The Company issued 400,000 shares of the Company's common stock as a result of the conversion of 400,000 shares of Series E Convertible Preferred Stock valued at $366,222. Supplemental disclosure of non-cash investing and financing activities for the fiscal year 2000: The Company recorded capital lease obligations of $86,422 relating to the acquisition of equipment. The Company issued 12,000 shares of the Company's common stock in connection with the conversion of Series A Convertible Preferred Stock valued at $75,000. The Company issued 40,000 shares of its common stock in lieu of cash to settle $20,000 in commissions payable from the Series D Preferred Stock offering. The Company issued 1,703 shares of the Company's common stock in connection with the conversion of Series C Convertible Preferred Stock valued at $42,660. The Company issued 46,000 shares of the Company's common stock in connection with the conversion of Series D Convertible Preferred Stock valued at $20,700. The Company issued 544,000 of the Company's common stock to consultants for services valued at $341,250. The Company issued 166,730 of the Company's common stock to settle accounts payable valued at $62,398. The Company issued 2,434,291 shares of the Company's common stock in connection with the conversion of $720,000 in debt and related accrued interest of $111,037. F-12 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED JUNE 30, 1999 AND 1998 AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999 (UNAUDITED) Supplemental disclosure of non-cash investing and financing activities for fiscal year 1999: The Company issued 6,403 shares of the Company's common stock in connection with the conversion of convertible preferred stock valued at $25,110 as follows: Converted to Value Common Stock ---------- ---------- Series B Convertible Preferred Stock $ 15,000 6,000 Series C Convertible Preferred Stock 10,110 403 ---------- ---------- $ 25,110 6,403 ========== ========== The Company issued 1,519,688 shares of the Company's common stock to consultants for services valued at $320,593. The Company recorded additional paid-in capital of $350,150 with the issuance of warrants to purchase 920,000 shares of the Company's common stock in connection with the short and long-term debenture financing. F-13 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 1: Summary of Significant Accounting Policies Description of Business, Financing and Basis of Financial Statement Presentation Dimensional Visions Incorporated (the "Company" or "DVI") was incorporated in Delaware on May 12, 1988. The Company produces and markets lithographically printed stereoscopic and animation print products. The stockholders of the Company approved a name change effective January 15, 1998 from Dimensional Visions Group, Ltd. to Dimensional Visions Incorporated. The Company, through a wholly-owned subsidiary of InfoPak, Inc. has developed a data delivery system that provides end users with specific industry printed materials by way of a portable hand-held reader. Data is acquired electronically from the data provided by mainframe systems and distributed through a computer network to all subscribers. The Company has financed its operations primarily through the sale of its securities. The Company has had limited sales of its products during the six months ended December 31, 2000 and the years ended June 30, 2000 and 1999. Even though the sales during the past two years have significantly increased over the prior years, the volume of business is not nearly sufficient to support the Company's cost structure. LIQUIDITY AND CAPITAL RESOURCES The Company has incurred losses since inception of $22,427,533 and had working capital deficiency of $206,620 as of December 31, 2000 and had a working capital of $206,544 as of June 30, 2000. The future of the Company as an operating business will depend on its ability to (1) successfully market and sell its products, (2) obtain sufficient capital contributions and/or financing as may be required to sustain its current operations and to fulfill its sales and marketing activities, (3) achieve a level of sales adequate to support the Company's cost structure, and (4) ultimately achieve a level of profitability. Management's plan to address these issues includes (a) redirecting its marketing efforts of the Company's products and substantially increasing sales results, (b) continued exercise of tight cost controls to conserve cash, (c) raising additional long term financing, and (d) selling of its subsidiary. F-14 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 1: Summary of Significant Accounting Policies (Continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) The consolidated financial statements have been prepared on a going concern basis which contemplates the realization and settlement of liabilities and commitments in the normal course of business. The available funds at June 30, 2000, plus the limited revenue is not sufficient to satisfy the present cost structure. Management recognizes that the Company must generate additional resources to enable it to continue operations. Management plans include the continued expansion of the sale of its products and the sale of additional securities. Further, there can be no assurances, assuming the Company successfully raises additional funds that the Company will achieve profitability or positive cash flow from the sale of its products. In the event the Company is not able to secure sufficient funds on a timely basis necessary to maintain its current operations, it may cease all or part of its existing operations and/or seek protection under the bankruptcy laws. CONSOLIDATION POLICY The consolidated financial statements include the accounts of DVI and its wholly-owned subsidiary, InfoPak, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. EQUIPMENT, DEPRECIATION AND AMORTIZATION Equipment is stated at cost. Depreciation, which includes amortization of assets under capital lease is provided by the use of the straight-line method over the estimated useful lives of the assets as follows: Equipment 5 - 7 years Furniture and fixtures 5 years PATENT RIGHTS Costs incurred to acquire patent rights and the related technology are amortized over the shorter of the estimated useful life or the remaining term of the patent rights. In the event that the costs of patent rights and/or acquired technology are abandoned, the write-off will be charged to expenses in the period the determination is made to abandon them. F-15 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 1: Summary of Significant Accounting Policies (Continued) ENGINEERING AND DEVELOPMENT COSTS The Company charges to engineering and development costs items related to bringing improvement to its product. Such costs include salaries and expenses of employees and consultants, the conceptual formulation, design, and testing of the products and creation of prototypes. INCOME TAXES The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. LOSS PER SHARE The Company adopted Statement of Financial Accounting Standards Statement No. 128, "Earnings Per Share" (FAS 128), which is effective for fiscal years ending after December 15, 1997. FAS 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Dilutive earnings per share is very similar to the previously reported fully diluted earnings per share. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. F-16 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 1: Summary of Significant Accounting Policies (Continued) CONCENTRATION OF CREDIT RISK The Company is subject to credit risk through trade receivables. The Company relies on a limited number of customers for its sales. The Company is in the process of building a customer base for its products and, therefore, the degree of risk is substantially higher until the base grows. The Company also relies on several key vendors to supply plastics and printing services. Although there are a limited number of vendors capable of fulfilling the Company's needs, the Company believes that other vendors could provide for the Company's needs on comparable terms. Abrupt changes could, however, cause a delay in processing and a possible inability to meet sales commitments on schedule, or a possible loss of sales, which would affect operating results adversely. STOCK-BASED COMPENSATION The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25") and has adopted the disclosure-only alternative of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The financial statements and all information in these notes as of and for the six months ended December 31, 2000 and 1999 are unaudited, but in the opinion of management, have been prepared on the same basis as the audited consolidated financial statements, and include all adjustments necessary for the fair presentation of the results of the interim period. All adjustments reflected in the consolidated financial statements are of a normal recurring nature. The data disclosed in the notes to the consolidated financial statements for this period is also unaudited. F-17 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 1: Summary of Significant Accounting Policies (Continued) Note 2: Cash The Company considers all highly liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents. The Company maintains its cash in banks located in Arizona. The total cash balances are insured by the FDIC up to $100,000 per financial institution. As of December 31, 2000 and June 30, 2000, there were no uninsured balances. Note 3: Notes Receivable Notes receivable consists of the following: Interest Rate Amount Maturity ---- -------- -------- Sale of Product Line (1) 11% $360,506 September 2001 Sale of InfoReaders (2) 10% 83,163 August 2001 -------- 443,669 Less allowance for bad debts 443,669 -------- $ -- ======== (1) The Company has been unable to collect the required monthly payments. During the year ended June 30, 1999, the Company received three installments and a fee of $10,000 which was included as interest income. Management has determined that they are currently unable to collect the amounts due on the note. Accordingly, management has established a 100% allowance against this note. The Company has determined that it does not make economic sense to take back this product line and operate this aspect of the business. The Company will continue to pursue the collection of this note. As of December 31, 2000 no additional funds have been collected. F-18 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 3: Notes Receivable (Continued) (2) On March 1, 1998, the Company sold InfoReaders (hardware) to a customer for $100,000 and agreed to accept a note for $90,000 with payments commencing on September 1, 1998. The monthly installment is $2,904, including interest at 10% per annum for thirty-six months. The Company has not been able to collect the required monthly payments due on this note. The customer has filed for an arbitration hearing on the basis that the Company failed to provide data to support their customer base and is requesting payment of $1,000,000 for the lost business. The Company made provisions to acquire the data for the customer. However, the customer was unwilling to pay for the acquisition cost of the data and bring their account current. Accordingly, without the updated data and failure to pay the outstanding balance due the Company, there is no reason to support the system. No date has been set for the arbitration hearings. The Company has filed a counter-claim for full payment of the note. The Company has taken a $41,500 allowance against the balance due on the note as of June 30, 1999. The note is personally guaranteed by the sole-shareholder of the customer and the Company expects to collect approximately $50,000 as a result of this personal guarantee. Note 4: Deferred Costs Deferred costs as of December 31, 2000 consist of two consulting contracts totaling $85,454. These costs are accounted for in the equity section as a contra equity account. On April 5, 1999, the Company entered into a contract with a consultant. The fee for services for 36 months is $287,668 $(7,991 per month), or upon signing of the contract, the Company will issue $255,000 of the Company's common stock. The market value of the common stock on April 5, 1999 was $.1875 per share and 1,360,000 shares of registered common stock was issued (registered under Form S-8). In addition, the warrant price on previously issued 500,000 warrants will be reduced to $.10 per share. In accordance with the terms of the agreement either party may terminate or change the terms of this agreement with 30 days written notice. On May 28, 1999 the term of this agreement was modified and the term was reduced to 22 months. Under the provisions of the contract, the consultant is required to either return the shares or the cash equivalency of the reduction. F-19 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 4: Deferred Costs (Continued) Accordingly on May 28, 1999, the Company received a $100,000 payment from the consultant. On August 10, 1999, the Company entered into a contract with a consultant. The fee for services for 36 months is $169,216 $(4,700 per month), or upon signing of the contract, the Company will issue $150,000 of the Company's common stock. The market value of the common stock on August 10, 1999 was $.50 per share and 300,000 shares of registered common stock was issued (registered under Form S-8). In accordance with the terms of the agreement either party may terminate or change the terms of this agreement with 30 days written notice. In accordance with the terms of the agreement either party may terminate or change the terms of this agreement with 30 days written notice. Note 5: Patent Rights and Other Assets December 31, June 30, 2000 2000 -------- -------- Patent rights $ 58,426 $ 58,426 Deposits 4,100 4,100 Trademark 225 225 -------- -------- 62,751 62,751 Less accumulated amortization 33,162 31,125 -------- -------- Total $ 29,589 $ 35,701 ======== ======== Note 6: Accounts Payable, Accrued Expenses and Other Liabilities December 31, June 30, 2000 2000 -------- -------- Accounts payable $281,280 $353,927 Accrued expenses Salaries 13,448 18,523 Payroll taxes payable 5,496 7,357 -------- -------- Total $300,224 $379,807 ======== ======== F-20 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 7: Short-Term Borrowings During January through April 1999, the Company received short-term borrowings of $235,000. The loans were 12% convertible debentures, with due dates ranging from July 25, 1999 through October 29, 1999. The terms of the debenture provide for a three month extension if the debenture is not paid on the original due date. During the extension period, interest is calculated at the stated rate plus 3% through the extended due date (15%). On June 19, 2000 the debentures were converted into 826,667 shares of the Company's common stock. The related accrued interest on the short term borrowings were also converted unto 80,885 shares of the Company's common stock calculated at a 12% interest rate. Note 8: Long-Term Debt During July through September 1998, the Company through a private placement was able to borrow $485,000 through the issuance of Series A 12% convertible secured debentures. The debentures are due July 31, 2001. Interest is accrued and payable on July 31 of each year and the first interest payment is due July 31, 1999. In the event the Company fails to pay the debenture holders any accrued interest or principal the default rate is 16% from the due date through the date paid. On June 19, 2000 all the Series A Convertible secured debentures were converted into 1,293,327 shares of the Company's common stock and the related accrued interest was converted into 233,412 shares of the Company's common stock. Note 9: Leases The company leases certain equipment under a master lease agreement, which are classified as capital leases. The equipment leases have a five year term with an option to acquire the equipment for $1 at the end of the lease term. Leased capital assets included in equipment was as follows: December 31, June 30, 2000 2000 -------- -------- Equipment $225,334 $225,334 Less accumulated amortization 65,658 47,092 -------- -------- $159,676 $178,242 ======== ======== F-21 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 9: Leases (Continued) Future minimum payments, by year and in the aggregate, under noncancellable capital leases and operating leases with terms of one year or more consist of the following: December 30, June 30, 2000 2000 Years Ending -------- -------- June 30, 2000 June 30, Capital Leases Operating Leases -------- --------------------- ---------------- 2001 $ 36,232 $ 72,463 $ 37,000 2002 72,417 72,417 -- 2003 30,527 30,527 -- -------- -------- -------- 139,176 175,407 $ 37,000 ======== Amounts representing interest 24,253 36,102 -------- -------- Present value of net minimum payments 114,923 139,305 Current portion 55,559 50,962 -------- -------- Long-term portion $ 59,364 $ 88,343 ======== ======== The Company's rental expense for operating leases was approximately $74,948 in 2000 and $69,100 in 1999 and for the six months ended December 31, 2000 and 1999 rental expense was $35,598 and $34,247, respectively. Note 10: Commitments and Contingencies There are no other legal proceedings which the Company believes will have a material adverse effect on its financial position. The Company has not declared dividends on Series A or B Convertible Preferred Stock. The cumulative dividends in arrears through December 31, 2000 and June 30, 2000 was approximately $74,225. F-22 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 11: Common Stock As of December 31, 2000, there are outstanding 6,677,410 of non-public warrants to purchase the Company's common stock at prices ranging from $0.10 to $12.50 with a weighted average price of $0.47 per share. As of December 31, 2000, there were 574,044 shares of various classes of Convertible Preferred Stock outstanding which can be converted to 713,818 shares of common stock (see Note 12). During the six months ended December 31, 2000, the Company issued 344,000 shares of its common stock as a result of the conversion of 172,000 shares of Series D Convertible Preferred Stock. During the six months ended December 31, 2000, the Company issued 400,000 shares of its common stock as a result of the conversion of 400,000 shares of Series E Preferred Convertible Preferred Stock. During the six months ended December 31, 2000, the Company issued 580,957 shares of the Company's common stock in connection with the exercise of warrants. The total number of shares of the Company's common stock that would have been issuable upon conversion of the outstanding warrants, options and preferred stock equaled 7,391,228 shares as of December 31, 2000, and would be in addition to the 10,259,873 shares of common stock outstanding as of December 31, 2000. As of June 30, 2000, there were outstanding 6,808,910 of non-public warrants and options to purchase the Company's common stock at prices ranging from $.10 to $12.50 with a weighted average price of $.55 per share. As of June 30, 2000, there were 1,146,044 shares of various classes of Convertible Preferred stock outstanding which can be converted to 1,457,818 shares of common stock (see Note 12). During June 2000, there were $485,000 of secured debentures and related interest that were converted into 1,526,739 shares of the Company's common stock and $235,000 of short-term borrowings and related interest that were converted into 907,552 shares of the company's common stock. F-23 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 11: Common Stock (Continued) The Company issued during August 1999, September 1999, and February 2000, 1,707 shares of its common stock as a result of the conversion of 4,266 shares of series C Convertible Preferred Stock. During February 2000, the Company issued 12,000 shares of its common stock as a result of the conversion of 7,500 shares of Series A Convertible Preferred Stock. The Company issued 40,000 shares of its common stock in lieu of cash to settle $20,000 in commissions from the Series D Preferred Stock offering. During the year ended June 30, 2000, the Company issued 544,000 shares of its common stock to consultants for services valued at $341,250. During August 1999, the Company issued 166,730 shares of its common stock in lieu of cash to settle $62,398 of accounts payable. The Company issued 552,000 shares of its stock during the fiscal year 2000 in connection with the exercise of warrants. The Company issued during the year ended June 30, 1999, 1,519,688 shares of the Company's common stock to consultants for services (including $133,788 as deferred) valued at $320,593 (average price per share $.21). F-24 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 12: Preferred Stock The Company has authorized 10,000,000 shares of $.001 par value per share Preferred Stock, of which the following were issued and outstanding: Outstanding ----------------------- December 31, June 30, Allocated 2000 2000 ---------- -------- ---------- Series A Preferred 100,000 15,500 15,500 Series B Preferred 200,000 3,500 3,500 Series C Preferred 1,000,000 13,404 13,404 Series D Preferred 375,000 180,000 352,000 Series E Preferred 1,000,000 275,000 675,000 Series P Preferred 600,000 86,640 86,640 ---------- -------- ---------- Total Preferred Stock 3,325,000 574,044 1,146,044 ========== ======== ========== The Company's Series A Convertible 5% Preferred Stock ("Series A Preferred"), 100,000 shares authorized, is convertible into common stock at the rate of 1.6 shares of common stock for each share of the Series A Preferred. Dividends from date of issue are payable from retained earnings, and have been accumulated on June 30 each year, but have not been declared or paid (see Note 10). The Company's Series B Convertible 8% Preferred Stock ("Series B Preferred") is convertible at the rate of 4 shares of common stock for each share of Series B Preferred. Dividends from date of issue are payable on June 30 from retained earnings at the rate of 8% per annum and have not been declared or paid (see Note 10). The Company's Series C Convertible Preferred Stock ("Series C Preferred") is convertible at a rate of 0.4 shares of common stock per share of Series C Preferred. The Company's Series D Convertible Preferred Stock ("Series D Preferred") is convertible at a rate of 2 shares of common stock per share of Series D Preferred. The Company's Series E Convertible Preferred Stock ("Series E Preferred") is convertible at a rate of 1 share of common stock per share of Series E Preferred. The Company's Series P Convertible Preferred Stock ("Series P Preferred") is convertible at a rate of 0.4 shares of common stock for each share of Series P Preferred. F-25 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 12: Preferred Stock (Continued) The Company's Series A Preferred and Series B Preferred, Series D Preferred and seiries E Preferred were issued for the purpose of raising operating funds. The Series C Preferred was issued to certain holders of the Company's 10% Secured Notes in lieu of accrued interest and also will be held for future investment purposes. The Series P Preferred was issued on September 12, 1995, to InfoPak shareholders in exchange for (1) all of the outstanding capital stock of InfoPak, (2) as signing bonuses for certain employees and a consultant of InfoPak, and (3) to satisfy InfoPak's outstanding debt obligations to certain shareholders. Shares of Series B Preferred were issued to holders of warrants to purchase such preferred stock. The funding for the exercise of these warrants was the exchange of $1,907,000 of principal amount of secured and unsecured notes. Shares of Series C Preferred were also issued in exchange for $262,750 of interest due under the secured and unsecured notes. The Company raised $375,000 net of offering costs of $37,500 through this issuance of 375,000 shares of its Series D Preferred. These shares were issued for the purpose of raising operating funds. The Company raised $675,000 net of offering costs of $57,000 through this issuance of 675,000 shares of its Series E Preferred. These shares were issued for the purpose of raising operating funds. Note 13: Stock Option Plan and Equity Incentive Plan The Company has adopted a stock option plan (the "Plan") covering 1,500,000 shares post-split (increased from 20,000 post-split by the Board of Directors on January 13, 1998) of the Company's common stock $.001 par value, pursuant to which officers, directors, key employees and consultants of the Company are eligible to receive incentive, as well as non-qualified stock options and Stock Appreciation Rights ("SAR's"). The Plan, which has been extended for 10 years by the Board of Directors on January 13, 1998, and expires September 2008, will be administered by the Board of Directors or a committee chosen therefrom. This plan must be formally approved by the stockholders of the Company. Incentive stock options granted under the Plan are exercisable for a period of up to 10 years from the date of grant at an exercise price, which is not less than the fair market value of the F-26 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 13: Stock Option Plan and Equity Incentive Plan (Continued) common stock on the date of the grant, except that the terms of an incentive stock option granted under the Plan to a stockholder owning more than 10% of the outstanding common stock may not exceed five years and the exercise price of an incentive stock option granted to such a stockholder may not be less than 110% of the fair market value of common stock on the date of the grant. Non-qualified stock options may be granted on terms determined by the Board of Directors or a committee designated by the Board of Directors. SAR's which give the holder the privilege of surrendering such rights for the appreciation in the Company's common stock between the time of grant and the surrender, may be granted on any terms determined by the Board of Directors or committee designated by the Board of Directors. No SAR's have been granted. A summary of transactions under this Plan is as follows: Weighted Average Exercise Price Shares Per Share ---------- ---------- Options outstanding July 1, 1997 -- $ -- Grants 1,300,000 $ .93 Cancelled -- -- ---------- ------- Options outstanding June 30, 1998 1,300,000 .93 Grants -- -- Cancelled (1,300,000) (.93) ---------- ------- Options outstanding June 30, 1999 -- $ -- ========== ======= Options exercisable at end of year -- $ -- ========== ======= F-27 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 13: Stock Option Plan and Equity Incentive Plan (Continued) The Company on June 13, 1996 adopted the 1996 Equity Incentive Plan (the "Plan") covering 10,000,000 shares of the Company's common stock $.001 par value, pursuant to which officers, directors, key employees and consultants of the Company are eligible to receive incentive, as well as non-qualified stock options, SAR's, and Restricted Stock and Deferred Stock. The Plan, which expires in June 2006, will be administered by the Compensation Committee of the Board of Directors. Incentive stock options granted under the Plan are exercisable for a period of up to 10 years from the date of grant at an exercise price, which is not less than the fair market value of the common stock on the date of the grant, except that the terms of an incentive stock option granted under the Plan to a stockholder owning more than 10% of the outstanding common stock may not exceed five years and the exercise price of an incentive stock option granted to such a stockholder may not be less than 110% of the fair market value of common stock on the date of the grant. Non-qualified stock options may be granted on terms determined by the Compensation Committee of the Board of Directors. SAR's which give the holder the privilege of surrendering such rights for the appreciation in the Company's common stock between the time of grant and the surrender, may be granted on any terms determined by the Compensation Committee of the Board of Directors. Restricted stock awards entitle the recipient to acquire shares for no cash consideration or for consideration determined by the Compensation Committee. The award may be subject to restrictions, conditions and forfeiture as the Committee may determine. Deferred stock award entitles recipient to receive shares in the future. Since inception of this plan in 1996 through December 31, 2000, 5,102,978 shares of common stock has been issued. For the year ended June 30, 1999, 1,519,688 shares of common stock had been issued at prices ranging from $.1875 to $.6562 per share. For the year ended June 30, 2000, 544,000 shares of common stock have been issued at prices ranging from $.37 to $.625 per share. In addition, as of December 31, 2000, no options or SAR's have been granted. F-28 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 13: Stock Option Plan and Equity Incentive Plan (Continued) If the Company had elected to recognize compensation expense based on the fair value of stock plans as prescribed by FAS No. 123, the Company's net loss and net loss per share would have been increased to the pro forma amounts indicated below:
Year Ended June 30, Six Months ended -------------------------- December 31, 2000 2000 1999 ----------------- ----------- ----------- Net Loss available to common shareholders $(673,005) $(1,095,370) $(1,553,862) Net Loss - pro forma $(673,005) $(1,095,370) $(1,553,862) Net Loss per share - as reported $ (.07) $ (.18) $ (.39) Net Loss per share - pro forma $ (.07) $ (.18) $ (.39)
The weighted-average fair value at the date of grant for options granted in 2000 was $.25. The fair value of each option grant is estimated on the date of grant using the Black-Scholes Option Pricing Model. The following weighted average assumptions were used: no dividends; expected volatility factor of 140%; risk-free interest of 5%; and an expected life of five years. The compensation expense and pro forma net loss may not be indicative of amounts to be included in future periods. F-29 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 14: Income Taxes The tax effects of significant items comprising the Company's net deferred taxes as of June 30, 2000 were as follows: Deferred tax assets: Goodwill $ 284,000 Net operating loss carryforwards 6,769,000 ----------- 7,053,000 ----------- Deferred tax liabilities Allowance for bad debts 191,000 Equipment 26,000 Patent rights 3,000 ----------- 220,000 ----------- Net deferred tax asset 6,833,000 Valuation allowance (6,833,000) ----------- Net deferred tax asset reported $ -- =========== The change in valuation allowance for the year ended June 30, 1999 was increased by approximately $571,000. There was no provision for current income taxes for the years ended June 30, 2000 and 1999. Additionally there was no provision for current income taxes for the six months ended December 31, 2000 and 1999. The federal net operating loss carryforwards of approximately $19,070,000 expires in various years through 2020. In addition the Company has state carryforwards of approximately $3,175,000. The Company has had numerous transactions in its common stock. Such transactions may have resulted in a change in the Company's ownership, as defined in the Internal Revenue Code Section 382. Such change may result in an annual limitation on the amount of the Company's taxable income which may be offset with its net operating loss carryforwards. The Company has not evaluated the impact of Section 382, if any, on its ability to utilize its net operating loss carryforwards in future years. F-30 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 16: Segment of Business Reporting The operations of the Company are divided into the following business segments for financial reporting purposes. * Lithographically printed stereoscopic prints commonly referred to as three-dimensional prints and litho-graphically printed animation. * Hardware and software information and audio playback systems and method products and programs. There are no intersegment or foreign sales. For the period ended December 31, 2000 four customers accounted for approximately 79% of the lithographic sales and one customer accounted for 100% of the hardware and software information and playback systems. For the year ended June 30, 2000 three customers accounted for approximately 82% of the lithographic sales and two customers accounted for approximately 98% of the hardware and software information and playback systems. For the year ended June 30, 1999 three customers accounted for approximately 47% of the lithographic sales and two customers accounted for approximately 94% of the hardware and software information and playback systems. The Company had retained an investment banking firm to assist in the sale of its subsidiary, InfoPak, Inc., which is responsible for the hardware and software information and audio playback systems. To date, a buyer has not been found. The Company will continue to support the operations of InfoPak until it is sold or the Board of Directors decides to discontinue its operations. In the event that InfoPak, Inc. is sold, management does not expect a loss on the sale. Financial information by business segments is as follows:
Year Ended June 30, 1999 ------------------------------------------ Hardware Lithographic and Software Consolidated ------------ ------------ ------------ Net customer sales $ 613,989 $ 127,912 $ 741,901 Interest income -- 18,188 18,188 Interest expense 207,726 -- 207,726 Operating loss (852,174) (22,093) (874,267) Segment assets 469,526 61,447 530,973 Depreciation and amortization 33,955 12,217 46,172 --------- --------- --------- $ -- $ 402,006 $ 402,006 ========= ========= =========
F-31 DIMENSIONAL VISIONS INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JUNE 30, 2000 AND 1999 (Information pertaining to the six months ended December 31, 2000 and 1999 is unaudited) Note 16: Segment of Business Reporting (Continued)
Year Ended June 30, 2000 ------------------------------------------ Hardware Lithographic and Software Consolidated ------------ ------------ ------------ Net customer sales $ 983,731 $ 25,131 $1,008,862 Interest income 14,182 -- 14,182 Interest expense 173,878 -- 173,878 Operating loss (705,603) (139,132) (844,735) Segment assets 1,051,323 60,893 1,112,216 Depreciation and amortization 42,097 202 42,299 Six Months Ended December 31, 2000 ------------------------------------------ Hardware Lithographic and Software Consolidated ------------ ------------ ------------ Net customer sales $ 161,049 $ 1,947 $ 162,996 Interest income 2,758 -- 2,758 Interest expense 6,853 -- 6,853 Operating loss (582,000) (15,108) (597,108) Segment assets 368,847 4,582 373,429 Depreciation and amortization 126,739 207,885 334,624
F-32 ====================================== ====================================== You should rely only on the information contained in this document or that we have referred to you. We have not authorized anyone to provide Dimensional Visions Incorporated you with information that is different. The delivery of this prospectus and any sale made by this prospectus doesn't imply that there haven't been changes in the affairs of Dimensional Visions since the date of this prospectus. This prospectus does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. ---------- TABLE OF CONTENTS Page 33,681,207 ---- Shares of Common Stock Prospectus Summary 1 Risk Factors 4 Use of Proceeds 7 The Swartz Investment Agreement 7 Market for Common Stock and -------------- Related Stockholder Matters 10 Dividend Policy 10 PROSPECTUS Management's Discussion and Analysis of Financial Condition -------------- and Results of Operations 11 Business of Dimensional Visions 15 Management 18 Employment and Related Agreements 20 Certain Transactions 20 Principal Stockholders 21 Selling Stockholders 23 Plan of Distribution 24 Description of Securities 26 Legal Matters 27 Experts 28 Financial Statements F-1 ---------- DEALER PROSPECTUS DELIVERY OBLIGATION. Until May 3, 2001 (90 days after the date of this prospectus), all dealers effecting transactions in the registered securities, whether or not participating in the distribution, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of March 6, 2001 dealers to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions. ====================================== ====================================== DIMENSIONAL VISIONS INCORPORATED PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The company is required by its Bylaws and Certificate of Incorporation to indemnify, to the fullest extent permitted by law, each person that the company is permitted to indemnify. The company's Charter requires it to indemnify such parties to the fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law. Section 145 of the Delaware General Corporation Law permits the company to indemnify its directors, officers, employees, or agents against expenses, including attorneys fees, judgments, fines and amounts paid in settlements actually and reasonably incurred in relation to any action, suit, or proceeding brought by third parties because they are or were directors, officers, employees, or agents of the corporation. In order to be eligible for such indemnification, however, the directors, officers, employees, or agents of the company must have acted in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the company. In addition, with respect to any criminal action or proceeding, the officer, director, employee, or agent must have had no reason to believe that the conduct in question was unlawful. In derivative actions, the company may only indemnify its officers, directors, employees, and agents against expenses actually and reasonably incurred in connection with the defense or settlement of a suit, and only if they acted in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation. Indemnification is not permitted in the event that the director, officer, employee, or agent is actually adjudged liable to the Corporation unless, and only to the extent that, the court in which the action was brought so determines. The company's Certificate of Incorporation permits the company to indemnify its directors except in the event of: (1) a breach of the duty of loyalty to the company or its stockholders; (2) an act or omission that involves intentional misconduct or a knowing violation of the law and an act or omission not in good faith; (3) liability arising under Section 174 of the Delaware General Corporation Law, relating to unlawful stock purchases, redemptions, or payment of dividends; or (4) a transaction in which the potential indemnity received an improper personal benefit. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers, or persons controlling the company pursuant to the foregoing provisions, the company has been informed that in the opinion of the Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION SEC Registration Fee $ 2,147 Accounting Fees and Expenses $ 3,500 Legal Fees and Expenses $ 10,000 Printing Expenses $ 2,500 Miscellaneous $ 1,853 --------- Total $ 20,000 ========= ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES On April 29, 1999, the company completed a private placement (the "1999 Debt Private Placement") of $235,000 of its short-term debt securities. The loans were 12% convertible debentures with due dates ranging from July 25, 1999, through October 29, 1999. The company also issued to the debenture holders three year warrants which expire January 25, 2002, to purchase the company's common stock at $.25 per share for 85,000 warrants and $.10 per share for 150,000 warrants. The 1999 Debt Private Placement was exempt from the registration provisions of the Securities Act of 1933, as amended (the "Act") by virtue of Section 4(2) of the Act, as transactions by an issuer not involving any public offering. The securities issued pursuant to the 1999 Debt Private Placement were II-1 restricted securities as defined in Rule 144 of the Act. The offering generated net proceeds of approximately $211,500. The Company relied on Rule 506 of Regulation D of the Act in making this private placement. There was no underwriter involved in this private placement. The nine investors in the 1999 Debt Private Placement were accredited investors as that term is defined in Rule 501 of Regulation D adopted under the Act. On September 1, 1999, the company completed a private placement (the "Series D Private Placement") of 375,000 units of its securities (the "Units"), each unit consisting of one share of Series D Convertible Preferred Stock which is convertible into two shares of common stock of the company and one warrant, exercisable at $0.25 and expiring 120 days after the date of effectiveness of a registration statement of the company, at $1.00 per Unit, minimum investment $50,000. The Series D Private Placement was exempt from the registration provisions of the Securities Act of 1933, as amended (the "Act") by virtue of Section 4(2) of the Act, as transactions by an issuer not involving any public offering. The securities issued pursuant to the Series D Private Placement were restricted securities as defined in Rule 144 of the Act. The offering generated net proceeds of approximately $357,500. The Company relied on Rule 506 of Regulation D of the Act in making this private placement. There was no underwriter involved in this private placement. The twenty-one investors in the Series D Private Placement were accredited investors as that term is defined in Rule 501 of Regulation D adopted under the Act. On December 30, 1999, the company completed a private placement (the "Series E Private Placement") of 675,000 units of its securities (the "Units"), each unit consisting of one share of Series E Convertible Preferred Stock which is convertible into one share of common stock of the company and one warrant, exercisable at $0.50 and expiring 120 days after the date of effectiveness of a registration statement of the company, at $1.00 per Unit, minimum investment $50,000. The Series E Private Placement was exempt from the registration provisions of the Securities Act of 1933, as amended (the "Act") by virtue of Section 4(2) of the Act, as transactions by an issuer not involving any public offering. The securities issued pursuant to the Series E Private Placement were restricted securities as defined in Rule 144 of the Act. The offering generated net proceeds of approximately $618,000. The Company relied on Rule 506 of Regulation D of the Act in making this private placement. There was no underwriter involved in this private placement. The thirteen investors in the Series E Private Placement were accredited investors as that term is defined in Rule 501 of Regulation D adopted under the Act. On December 13, 2000, the company entered into an agreement with Swartz Private Equity. Included in the agreement is the possible sale from time to time of 25,000,000 shares and 1,309,000 shares underlying warrants by Swartz Private Equity, LLC. This transaction was exempt from the registration provisions of the Securities Act of 1933, as amended (the "Act") by virtue of Section 4 (2) of the Act, as transactions by an issuer not involving any public offering. On January 12, 2001, the company entered into a line of credit investment agreement with an investor group consisting of Dale Riker and Russ Ritchie. The agreement includes the possible sale from time to time of 50,000 shares, 350,000 shares underlying warrants, 400,000 shares underlying warrants to be issued pursuant to an investment agreement and 1,500,000 shares held upon conversion of debt pursuant to a line of credit investment agreement with an investor group consisting on Dale Riker and Russ Ritchie. This transaction was exempt from the registration provisions of the Securities Act of 1933, as amended (the "Act") by virtue of Section 4 (2) of the Act, as transactions by an issuer not involving any public offering. The two investors were accredited investors as that term is defined in Rule 501 of Regulation D Adopted under the Act. On January 12, 2001, the company formulated an approved incentive plan. The incentives include the possible sale from time to time of 4,900,000 shares underlying warrants to be issued to the employees of the Company if we are profitable at June 30, 2001 or upon the discretion of the Board of Directors. This transaction was exempt from the registration provisions of the Securities Act of 1933, as amended (the "Act") by virtue of Section 4 (2) of the Act, as transactions by an issuer not involving any public offering. II-2 ITEM 27. EXHIBITS EXHIBIT (a) Exhibits 3.1(a) Certificate of Incorporation, dated May 12, 1988 3.2(a) Bylaws 4.1(a) Certificate of Designation of Series A Convertible Preferred Stock, dated December 12, 1992 4.2(a) Certificate of Designation of Series B Convertible Preferred Stock, dated December 22, 1993 4.3(a) Certificate of Designation of Series P Convertible Preferred Stock, dated September 11, 1995 4.4(a) Certificae of Designation of Series S Convertible Preferred Stock, dated August 28, 1995 4.5(a) Certificate of Designation of Series C Convertible Preferred Stock, dated November 2, 1995 4.6(a) Certificate of Designation of Series D and Series E Convertible Preferred Stock, dated August 25, 1999 4.7(a) Form of Warrant Agreement to debt holders, dated January 15, 1998 4.8(a) Form of Warrant Agreement to debt holders, dated April 8, 1998 4.9(a) Form of Warrant Agreement to participants in Private Placement dated April 8, 1998 4.10 Pledge Agreement dated January 11, 2001 4.11 Investment Agreement dated December 13, 2000, with Swartz Private Equity, LLC 5.0 Opinion of Senn Palumbo Meulemans, LLP 10.1(a) 1996 Equity Incentive Plan 10.2(a) 1999 Stock Option Plan 10.3(a) Agreement dated September 25, 1997 by and between InfoPak, Inc., DataNet Enterprises, LLC, and David and Staci Noles 10.4 Lease Agreement, dated October 27, 1997 21.1 Subsidiaries of the Registrant 24.1 Consent of Senn Palumbo Meulemans, LLP (included in their opinion set forth in Exhibit 5 hereto) 24.2 Consent of Gitomer & Berenholz, P.C. 24.3 Consent of Kopple & Gottlieb, LLP 25.1 Power of Attorney (see signature page) - ---------- (a) Incorporated by reference to the Registrant's Registration Statement on Form SB-2 filed with the SEC on June 19, 2000, Registration Number 333-30368. ITEM 28. UNDERTAKINGS The undersigned registrant hereby undertakes to: (1) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of Dimensional Visions pursuant to the foregoing provisions, or otherwise, Dimensional Visions has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Dimensional Visions will, unless in the opinion of its counsel the matter has been settled by controlling precedent submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 (2) File, during any period in which it offers or sells securities, a post effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) Include any additional or changed material information on the plan of distribution. For determining liability under the Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. II-4 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this Registration Statement to be signed on its behalf by the undersigned, in the City of Phoenix, State of Arizona on March 6, 2001. DIMENSIONAL VISIONS INCORPORATED By: /s/ Roy D. Pringle By: /s/ John D. McPhilimy ------------------------------ ------------------------------- Roy D. Pringle, Chief Financial John D. McPhilimy, President, Chief Executive Officer Officer, Director POWER OF ATTORNEY Each person whose signature appears appoints John D. McPhilimy as his agent and attorney-in-fact, with full power of substitution to execute for him and in his name, in any and all capacities, all amendments (including post-effective amendments) to this Registration Statement to which this power of attorney is attached. In accordance with the requirements of the Securities Act of 1933, the following persons in the capacities and on the dates stated signed this Registration Statement. SIGNATURE TITLE DATE --------- ----- ---- /s/ John D. McPhilimy President, Chief Executive March 6, 2001 - ------------------------- Officer, Director John D. McPhilimy /s/ Roy D. Pringle Vice President, Chief Financial March 6, 2001 - ------------------------- Officer, Director, Secretary Roy D. Pringle /s/ Bruce D. Sandig Senior Vice President, Director March 6, 2001 - ------------------------- Bruce D. Sandig /s/ Susan A. Perlow Director March 6, 2001 - ------------------------- Susan A. Perlow II-5 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.10 Pledge Agreement dated January 11, 2001 4.11 Investment Agreement dated December 13, 2000, with Swartz Private Equity, LLC 5.0 Opinion of Senn Palumbo Meulemans, LLP 10.4 Lease Agreement, dated October 27, 1997 21.1 Subsidiaries of the Registrant 24.1 Consent of Senn Palumbo Meulemans, LLP (included in their opinion set forth in Exhibit 5 hereto) 24.2 Consent of Gitomer & Berenholz, P.C. 24.3 Consent of Kopple & Gottlieb, LLP 25.1 Power of Attorney (see signature page) EX-4.10 2 ex4-10.txt PLEDGE AGREEMENT DATED 7/11/01 Exhibit 4.10 PLEDGE AGREEMENT This PLEDGE AGREEMENT (the "AGREEMENT") dated as of January 11, 2000, is made by each undersigned (each, a "PLEDGOR," and collectively, "PLEDGORS") in favor of DIMENSIONAL VISIONS, INC., a Delaware corporation ("Borrower"). RECITALS A. Pursuant to that certain Loan and Security Agreement of even date herewith by and between Borrower and Merrill Lynch ("Lender") (the "LOAN AGREEMENT"), Lender has agreed to make Loans to and incur Letter of Credit Obligations (each as defined in the Loan Agreement) for the direct and indirect benefit of Borrower. B. Each Pledgor is the record and beneficial owner of the assets pledged by it and transferred into the Pledge Account of Lender (the "PLEDGE ACCOUNT"), sufficient to meet the Credit Obligations at all times. C. Each Pledgor is either a direct or indirect beneficiary of the credit facilities made available to Borrower under the Loan Agreement. D. In order to induce Lender to make the Loans and to incur the Letter of Credit Obligations as provided for in the Loan Agreement, each Pledgor has agreed to pledge the Pledged Collateral to Lender in accordance herewith. AGREEMENT NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and to induce the Lender to make Loans and to incur Letter of Credit Obligations under the Loan Agreement, it is agreed as follows: 1. PLEDGE. Each Pledgor hereby pledges to Lender a first priority Lien on all of the assets transferred into the Pledge Account (the "PLEDGED COLLATERAL") including, but not limited to, the Pledged Stock owned by it and the certificates representing such Pledged Stock, and property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Pledged Stock; 2. TERM. The term of this Agreement will be one year, renewable at the option of Borrower provided Borrower is current on its interest obligations to Lender (the "Term"). The renewal terms will be negotiated in good faith at the end of each year. 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Pledged Collateral is security for, the prompt payment and performance in full when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of any kind under or in connection with the Loan Agreement and the other Loan Documents and all obligations of each Pledgor now or hereafter existing under this Agreement or any other Loan Document to which such Pledgor is a party, including all fees, costs and expenses whether in connection with collection actions hereunder or thereunder or otherwise (collectively, the "SECURED OBLIGATIONS"). 1 4. DELIVERY OF PLEDGED COLLATERAL. All certificates and all promissory notes, instruments and letters of credit evidencing the Pledged Collateral shall be delivered to and held by or on behalf of Lender pursuant hereto. All Pledged Stock shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Lender and all promissory notes or other instruments evidencing the Pledged Indebtedness shall be endorsed by the Pledgor pledging such Pledged Indebtedness. 5. CONSIDERATION. In consideration of the Pledge of Pledged Collateral by the Pledgors, Borrower hereby grants to the Pledgors, collectively and not individually, the following (collectively, the "Consideration"): (a) 250,000 warrants to purchase shares of common stock of Borrower for a term of five years with an exercise price of the fair market value of the Borrower's common stock (the "Commitment Warrants"). The fair market value of Borrower's common stock shall be the average closing bid price of Borrower's common stock as quoted on the over-the-counter bulletin board for the last five trading days prior to the date of issue. (b) 50,000 shares of common stock of Borrower, restricted under Rule 144 and bearing the Rule 144 restrictive legend (the "Commitment Shares"). (c) As Borrower receives loans or line of credit advances from Lender, for each dollar borrowed by Borrower, the Pledgors, collectively, shall receive one warrant to purchase shares of common stock (the "Usage Warrants") of Borrower for a term of five years with an exercise price of 25% less than the fair market value of the Borrower's common stock. The fair market value of Borrower's common stock shall be the average closing bid price of Borrower's common stock as quoted on the over-the-counter bulletin board for the last five trading days prior to the date of issue. (d) At any time that there is an outstanding balance under the Loan Agreement, the Pledgors, collectively, can elect to convert the outstanding balance under the Loan Agreement into shares of common stock of Borrower and assume responsibility for paying the outstanding balance existing on the date of conversion under the follow formula: For each dollar borrowed by Borrower, the Pledgors, collectively, shall receive one conversion option to receive three shares of common stock of Borrower, restricted under Rule 144. (e) Pledgors jointly shall have the right, but not the obligation, to nominate one member to the Board of Directors of Borrower (the "Nominee"). The Nominee's appointment shall be subject to shareholder approval as required by Delaware corporate law. The Nominee shall serve on the Board of Directors of Borrower for a term of one year, the term of this Agreement, or until his or her successor has been duly elected, whichever is earliest. (f) Borrower shall register all Commitment Shares and common stock underlying the Commitment Warrants and Usage Warrants on form SB-2 or similar form within six (6) months of the date of this Agreement. 2 6. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and warrants to Borrower that: (a) (i) Such Pledgor is, and at the time of delivery of the Pledged Stock owned by it to Lender will be, the sole holder of record and the sole beneficial owner of such Pledged Collateral pledged by it free and clear of any Lien thereon or affecting the title thereto, except for any Lien created by this Agreement or the other Loan Documents, and (ii) such Pledgor is, and at the time of delivery of the Pledged Indebtedness held by it to Lender will be, the sole owner and holder of such Pledged Collateral free and clear of any Lien thereon or affecting title thereto, except for any Lien created by this Agreement or the other Loan Documents. (b) (i) All of the Pledged Stock owned by such Pledgor have been duly authorized, validly issued and are fully paid and nonassessable, and (ii) the Pledged Indebtedness held by such Pledgor has been duly authorized, authenticated or issued and delivered by, and constitutes the legal, valid and binding obligation of, each Pledged Entity issuing same, and no such Pledged Entity is in default thereunder. (c) Such Pledgor has the right and requisite authority to pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral pledged by such Pledgor to Lender as provided herein. (d) None of the Pledged Stock or Pledged Indebtedness owned or held by such Pledgor has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject. (e) Such Pledgor is the sole owner of the Pledged Stock pledged by it. As of the date hereof, there are no existing options, warrants, calls or commitments of any character whatsoever relating to the Pledged Stock pledged by such Pledgor hereunder. (f) No consent, approval, authorization or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the pledge by such Pledgor of the Pledged Collateral owned or held by it pursuant to this Agreement or for the execution, delivery or performance of this Agreement by such Pledgor, or (ii) for the exercise by Lender of the voting or other rights provided for in this Agreement or the remedies in respect of such Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally. (g) The pledge, assignment and delivery of the Pledged Collateral owned or held by it pursuant to this Agreement will create a valid first priority Lien in favor of Lender upon such Pledged Collateral and the Proceeds thereof, securing the payment of the Secured Obligations, subject to no other Lien. (h) This Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable against such Pledgor in accordance with its terms. 3 (i) None of the Pledged Indebtedness held by such Pledgor is subordinated in right of payment to other Indebtedness (except for the Secured Obligations) or subject to the terms of an indenture. (j) Pledgor has adequate means of providing for current needs and contingencies, has no need for liquidity in the investment, and is able to bear the economic risk of the Pledge and an investment in the Consideration. Pledgor represents that Pledgor is able to bear the economic risk of the Pledge and an investment in the Consideration and at the present time could afford a complete loss of such investment. Pledgor has had a full opportunity to inspect the books and records of the Borrower and to make any and all inquiries of Borrower officers and directors regarding the Borrower and its business as Pledgor has deemed appropriate. (k) Pledgor is an "Accredited Investor" as defined in Regulation D of the Securities Act of 1933 (the "Act") and Pledgor, either alone or with Pledgor's professional advisers who are unaffiliated with, have no equity interest in and are not compensated by Borrower or any affiliate or selling agent of Borrower, directly or indirectly, has sufficient knowledge and experience in financial and business matters that Pledgor is capable of evaluating the merits and risks of an investment in the Consideration offered by Borrower and of making an informed investment decision with respect thereto and has the capacity to protect Pledgor's own interests in connection with Pledgor's proposed investment in the Consideration. (l) Pledgor is acquiring the Consideration solely for Pledgor's own account as principal, for investment purposes only and not with a view to the resale or distribution thereof, in whole or in part, and no other person or entity has a direct or indirect beneficial interest in such Consideration. (m) Pledgor will not sell or otherwise transfer the Consideration without registration under the Act or an exemption therefrom and fully understands and agrees that Pledgor must bear the economic risk of Pledgor's purchase for an indefinite period of time because, among other reasons, the Consideration has not been registered under the Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Act and under the applicable securities laws of such states or unless an exemption from such registration is available. (n) Pledgor has received from Borrower and reviewed documentation and information on the Borrower, which includes business information and audited financial statements of the Borrower. The representations and warranties set forth in this SECTION 7 shall survive the execution and delivery of this Agreement. 7. COVENANTS. Each Pledgor covenants and agrees that for the Term of this Agreement: 4 (a) Without the prior written consent of Borrower, such Pledgor will not sell, assign, transfer, pledge, or otherwise encumber any of its rights in or to any Pledged Collateral owned or held by it, or any unpaid dividends, interest or other distributions or payments with respect to such Pledged Collateral, or grant a Lien on such Pledged Collateral, except as otherwise expressly permitted by the Loan Agreement. (b) Such Pledgor will, at its expense, promptly execute, acknowledge and deliver all such instruments and deliver letters of credit and take all such actions as Lender from time to time may request in order to ensure to Lender the benefits of the Liens upon the Pledged Collateral owned or held by it intended to be created by this Agreement, including the filing of any necessary Uniform Commercial Code financing statements, that may be filed by Lender with or (to the extent permitted by law) without the signature of such Pledgor, and will cooperate with Lender, at such Pledgor's expense, in obtaining all necessary approvals and making all necessary filings under federal, state, local or foreign law in connection with such Liens or any sale or transfer of such Pledged Collateral. (c) Such Pledgor has and will defend the title to the Pledged Collateral owned or held by it and the Liens of Lender on such Pledged Collateral against the claim of any Person and will maintain and preserve such Liens. 8. PLEDGOR'S RIGHTS. So long as no Default or Event of Default shall have occurred and be continuing and until written notice shall be given to any Pledgor in accordance with SECTION 9(A): (a) Each Pledgor shall have the right, from time to time, to vote and give consents with respect to the Pledged Collateral pledged by it hereunder or any part thereof for all purposes not inconsistent with the provisions of this Agreement, the Loan Agreement or any other Loan Document; provided, that no vote shall be cast, and no consent shall be given or action taken, that would have the effect of impairing the position or interest of Lender in respect of the Pledged Collateral or that would authorize, effect or consent to (unless and to the extent expressly permitted by the Loan Agreement): (i) the dissolution or liquidation, in whole or in part, of a Pledged Entity; (ii) the consolidation or merger of a Pledged Entity with any other Person; (iii) the sale, disposition or encumbrance of all or substantially all of the assets of a Pledged Entity, except for Liens in favor of Lender; (iv) any change in the authorized number of shares, the stated capital or the authorized share capital of a Pledged Entity or the issuance of any additional shares of its Stock; or (v) the alteration of the voting rights with respect to the Stock of a Pledged Entity. 5 (b) Each Pledgor shall be entitled, from time to time, to collect and receive for its own use all cash dividends and interest paid in respect of the Pledged Stock and Pledged Indebtedness pledged by it hereunder to the extent not in violation of the Loan Agreement, except for any and all: (i) dividends and other distributions paid or payable in cash in respect of any such Pledged Stock in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in capital of a Pledged Entity; and (ii) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any such Pledged Collateral; provided, that until actually paid all rights to such distributions shall remain subject to the Lien in favor of Lender created by this Agreement and the other Loan Documents. 9. DEFAULTS AND REMEDIES. Upon the occurrence and during the continuation of any Event of Default and after ten (10) days written notice of such Default without remedy by Pledgor, Lender (personally or through an agent) is hereby authorized and empowered to transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral pledged by such Pledgor hereunder, to exchange certificates or instruments representing or evidencing such Pledged Collateral for certificates or instruments of smaller or larger denominations, to exercise the voting and all other rights as a holder with respect thereto, to collect and receive all cash dividends, interest, principal and other distributions made thereon, to sell in one or more sales after ten days' notice of the time and place of any public sale or of the time at which a private sale is to take place (which notice such Pledgor agrees is commercially reasonable) the whole or any part of such Pledged Collateral and to otherwise act with respect to such Pledged Collateral as though Lender were the outright owner thereof. Each Pledgor shall remain liable for any deficiency if the proceeds of any sale or disposition of Collateral are insufficient to pay in full the Secured Obligations. 10. WAIVER. No delay on Lender's part in exercising any power of sale, Lien, option or other right hereunder, and no notice or demand that may be given to or made upon any Pledgor by Lender with respect to any power of sale, Lien, option or other right hereunder, shall constitute a waiver thereof, or limit or impair Lender's right to take any action or to exercise any power of sale, Lien, option, or any other right hereunder, without notice or demand, or prejudice Lender's rights as against any Pledgor in any respect. 11. ASSIGNMENT. Lender may assign, indorse or transfer any instrument evidencing all or any part of the Secured Obligations as provided in, and in accordance with, the Loan Agreement, and the holder of such instrument shall be entitled to the benefits of this Agreement. 12. TERMINATION. Immediately following the Termination Date, Lender shall deliver to each Pledgor (as the case may be) the Pledged Collateral pledged by such Pledgor at the time subject to this Agreement and all instruments of assignment executed in connection therewith, free and clear of the Liens created in favor of Lender under this Agreement and the other Loan Documents and, except as otherwise provided herein, all of such Pledgor's obligations hereunder shall at such time terminate. 6 13. LIEN ABSOLUTE. All rights of Lender hereunder, and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Loan Agreement, any other Loan Document or any other agreement or instrument governing or evidencing any Secured Obligations; (b) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Loan Agreement, any other Loan Document or any other agreement or instrument governing or evidencing any Secured Obligations; (c) any exchange, release or non-perfection of any other Collateral or any release or amendment or waiver of, or consent to departure from any guaranty for, all or any of the Secured Obligations; (d) the insolvency of any Credit Party; or (e) any other circumstance that might otherwise constitute a defense available to, or a discharge of, such Pledgor. 14. RELEASE. Each Pledgor consents and agrees that Lender may at any time, or from time to time, in its discretion: (a) renew, extend or change the time of payment of, or the manner, place or terms of payment of, all or any part of the Secured Obligations; and (b) exchange, release or surrender all or any of the Collateral (including the Pledged Collateral), or any part thereof, by whomsoever deposited, that is now or may hereafter be held by or on behalf of Lender in connection with all or any of the Secured Obligations; all in such manner and upon such terms as Lender may deem proper, and without notice to or further assent from such Pledgor, it being hereby agreed that such Pledgor shall be and remain bound by this Agreement irrespective of the value or condition of any of the Collateral and notwithstanding any such change, exchange, settlement, compromise, surrender, release, renewal or extension, and notwithstanding also that the Secured Obligations may, at any time, exceed the aggregate principal amount thereof set forth in the Loan Agreement or any other agreement governing any Secured Obligations. Each Pledgor hereby waives notice of acceptance of this Agreement, presentment, demand, protest and notice of dishonor of any and all of the Secured Obligations, and any delay by Lender in commencing suit against any party hereto or Person liable hereon, and in giving any notice to or of making any claim or demand hereunder upon such Pledgor. No act or omission of any kind on Lender's part shall in any event affect or impair this Agreement. 15. REINSTATEMENT. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against 7 any Pledgor or any Pledged Entity for liquidation or reorganization, should any Pledgor or any Pledged Entity become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of any Pledgor's or Pledged Entity's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a "voidable preference," "fraudulent transfer," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 16. MISCELLANEOUS. (a) Lender may execute any of its duties hereunder by or through agents or employees and shall be entitled to advice of counsel concerning all matters pertaining to its duties hereunder. (b) Each Pledgor agrees to promptly reimburse Lender for actual out-of-pocket expenses, including reasonable attorneys' fees, incurred by Lender in connection with the administration and enforcement of this Agreement. (c) Neither Lender nor any of its officers, directors, employees, agents or counsel shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. (d) THIS AGREEMENT SHALL BE BINDING UPON EACH PLEDGOR AND ITS SUCCESSORS AND ASSIGNS (INCLUDING A TRUSTEE OR DEBTOR-IN-POSSESSION ON BEHALF OF SUCH PLEDGOR), AND SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY, LENDER AND ITS SUCCESSORS AND ASSIGNS, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON BEHALF OF LENDER AND EACH PLEDGOR. 17. SEVERABILITY. If for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. 18. NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon any other party any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be given in the manner, and deemed received, as provided for in the Loan Agreement. 8 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts, which shall, collectively and separately, constitute one agreement. Execution and delivery may be effected by the transmission of facsimile signatures pages. The parties shall thereafter exchange original signature pages. IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed as of the date first written above. "PLEDGORS" "BORROWER" DIMENSIONAL VISIONS, INC. a Delaware Corporation /s/ Russell H. Ritchie /s/ John D. McPhilimy - ----------------------------------- --------------------------------- /s/ Dale Riker - ----------------------------------- By: John D. McPhilimy -------------------------------- - ----------------------------------- Its: President -------------------------------- "LENDER" MERRILL LYNCH 9 EX-4.11 3 ex4-11.txt INVESTMENT AGREEMENT DATED 12/13/00 Exhibit 4.11 DIMENSIONAL VISIONS INCORPORATED AMENDED AND RESTATED INVESTMENT AGREEMENT THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS. THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE SUCH AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS AS EXHIBIT J. SEE ADDITIONAL LEGENDS AT SECTIONS 4.7. THIS AMENDED AND RESTATED INVESTMENT AGREEMENT (this "Agreement" or "Investment Agreement") is made as of the 2nd day of March, 2001, by and between Dimensional Visions Incorporated, a corporation duly organized and existing under the laws of the State of Delaware (the "Company"), and the undersigned Investor executing this Agreement ("Investor") and amends and restates the Investment Agreement between the parties dated on or about December 22, 2000. RECITALS: WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue to the Investor, and the Investor shall purchase from the Company, from time to time as provided herein, shares of the Company's Common Stock, as part of an offering of Common Stock by the Company to Investor, for a maximum aggregate offering amount of Twenty Million Dollars ($20,000,000) (the "Maximum Offering Amount"); and WHEREAS, the solicitation of this Investment Agreement and, if accepted by the Company, the offer and sale of the Common Stock are being made in reliance 1 upon the provisions of Regulation D ("Regulation D") promulgated under the Act, Section 4(2) of the Act, and/or upon such other exemption from the registration requirements of the Act as may be available with respect to any or all of the purchases of Common Stock to be made hereunder. TERMS: NOW, THEREFORE, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement (including the recitals above), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "20% Approval" shall have the meaning set forth in Section 5.25. "9.9% Limitation" shall have the meaning set forth in Section 2.3.1(f). "Accredited Investor" shall have the meaning set forth in Section 3.1. "Act" shall mean the Securities Act of 1933, as amended. "Advance Put Notice" shall have the meaning set forth in Section 2.3.1(a), the form of which is attached hereto as EXHIBIT E. "Advance Put Notice Confirmation" shall have the meaning set forth in Section 2.3.1(a), the form of which is attached hereto as EXHIBIT F. "Advance Put Notice Date" shall have the meaning set forth in Section 2.3.1(a). "Affiliate" shall have the meaning as set forth Section 6.4. "Aggregate Issued Shares" equals the aggregate number of shares of Common Stock issued to Investor pursuant to the terms of this Agreement or the Registration Rights Agreement as of a given date, including Put Shares and Warrant Shares. "Agreed Upon Procedures Report" shall have the meaning set forth in Section 2.5.3(b). "Agreement" shall mean this Investment Agreement. "Automatic Termination" shall have the meaning set forth in Section 2.3.2. "Bring Down Cold Comfort Letters" shall have the meaning set forth in Section 2.3.7(b). "Business Day" shall mean any day during which the Principal Market is open for trading. "Calendar Month" shall mean the period of time beginning on the numeric day in question in a calendar month and for Calendar Months thereafter, beginning on the earlier of (i) the same numeric day of the next calendar month or (ii) the last day of the next calendar month. Each Calendar Month shall end on the day immediately preceding the beginning of the next succeeding Calendar Month. 2 "Cap Amount" shall have the meaning set forth in Section 2.3.11. "Capital Raising Limitations" shall have the meaning set forth in Section 6.5.1. "Capitalization Schedule" shall have the meaning set forth in Section 3.2.4, attached hereto as EXHIBIT K. "Change in Control" shall have the meaning set forth within the definition of Major Transaction, below. "Closing" shall mean one of (i) the Investment Commitment Closing and (ii) each closing of a purchase and sale of Common Stock pursuant to Section 2. "Closing Bid Price" means, for any security as of any date, the last closing bid price for such security during Normal Trading on the O.T.C. Bulletin Board, or, if the O.T.C. Bulletin Board is not the principal securities exchange or trading market for such security, the last closing bid price during Normal Trading of such security on the principal securities exchange or trading market where such security is listed or traded as reported by such principal securities exchange or trading market, or if the foregoing do not apply, the last closing bid price during Normal Trading of such security in the over-the-counter market on the electronic bulletin board for such security, or, if no closing bid price is reported for such security, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually determined by the Company and the Investor in this Offering. If the Company and the Investor in this Offering are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved by an investment banking firm mutually acceptable to the Company and the Investor in this offering and any fees and costs associated therewith shall be paid by the Company. "Commitment Evaluation Period" shall have the meaning set forth in Section 2.6. "Commitment Period" shall have the meaning set forth in Section 2.3.2(d). "Commitment Warrants" shall have the meaning set forth in Section 2.4.1, the form of which is attached hereto as EXHIBIT U. "Common Shares" shall mean the shares of Common Stock of the Company. "Common Stock" shall mean the common stock of the Company. "Company" shall mean Dimensional Visions Incorporated, a corporation duly organized and existing under the laws of the State of Delaware. 3 "Company Designated Maximum Put Dollar Amount" shall have the meaning set forth in Section 2.3.1(a). "Company Designated Minimum Put Share Price" shall have the meaning set forth in Section 2.3.1(a). "Company Termination" shall have the meaning set forth in Section 2.3.12. "Conditions to Investment Commitment Closing" shall have the meaning as set forth in Section 2.2.2. "Delisting Event" shall mean any time during the term of this Investment Agreement, that the Company's Common Stock is not listed for and actively trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National Market, the American Stock Exchange, or the New York Stock Exchange or is suspended or delisted with respect to the trading of the shares of Common Stock on such market or exchange. "Disclosure Documents" shall have the meaning as set forth in Section 3.2.4. "Due Diligence Review" shall have the meaning as set forth in Section 2.5. "DWAC Put Shares" shall mean Put Shares, in electronic form, without restriction on resale, that are delivered to the Depository Trust Company DWAC account specified by the Investor for the Put Shares. "Effective Date" shall have the meaning set forth in Section 2.3.1. "Equity Securities" shall have the meaning set forth in Section 6.5.1. "Evaluation Day" shall have the meaning set forth in Section 2.3.1(b). "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Excluded Day" shall have the meaning set forth in Section 2.3.1(b). "Extended Put Period" shall mean the period of time between the Advance Put Notice Date until the Pricing Period End Date. "Impermissible Put Cancellation" shall have the meaning set forth in Section 2.3.1(e). "Indemnified Liabilities" shall have the meaning set forth in Section 9. "Indemnities" shall have the meaning set forth in Section 9. "Indemnitor" shall have the meaning set forth in Section 9. "Individual Put Limit" shall have the meaning set forth in Section 2.3.1 (b). 4 "Ineffective Period" shall have the meaning given to it in the Registration Rights Agreement. "Ineffective Registration Payment" shall have the meaning given to it in the Registration Rights Agreement. "Intended Put Share Amount" shall have the meaning set forth in Section 2.3.1(a). "Investment Commitment Closing" shall have the meaning set forth in Section 2.2.1. "Investment Agreement" shall mean this Investment Agreement. "Investment Commitment Opinion of Counsel" shall mean an opinion from Company's independent counsel, substantially in the form attached as EXHIBIT B, or such other form as agreed upon by the parties, as to the Investment Commitment Closing. "Investment Date" shall mean the date of the Investment Commitment Closing. "Investor" shall have the meaning set forth in the preamble hereto. "Key Employee" shall have the meaning set forth in Section 5.17, as set forth in EXHIBIT N. "Late Payment Amount" shall have the meaning set forth in Section 2.3.9. "Legend" shall have the meaning set forth in Section 4.7. "Major Transaction" shall mean and shall be deemed to have occurred at such time upon any of the following events: (i) a consolidation, merger or other business combination or event or transaction following which the holders of Common Stock of the Company immediately preceding such consolidation, merger, combination or event either (i) no longer hold a majority of the shares of Common Stock of the Company or (ii) no longer have the ability to elect the board of directors of the Company (a "Change of Control"); (ii) the sale or transfer of a portion of in excess of $500,000 worth of the Company's assets, not in the ordinary course of business; (iii) the purchase of assets by the Company totaling more than $500,000 in value, not in the ordinary course of business; or (iv) a purchase, tender or exchange offer made to the holders of outstanding shares of Common Stock such that following such purchase, tender or exchange offer, a change in control shall have occurred. "Market Price" shall equal the lowest Closing Bid Price for the Common Stock on the Principal Market during the Pricing Period for the applicable Put. 5 "Material Facts" shall have the meaning set forth in Section 2.3.7(a). "Maximum Put Dollar Amount" shall mean the lesser of (i) the Company Designated Maximum Put Dollar Amount, if any, specified by the Company in a Put Notice, and (ii) $2 million. "Maximum Offering Amount" shall mean have the meaning set forth in the recitals hereto. "NASD" shall have the meaning set forth in Section 6.9. "Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.11. "Non-Usage Fee" shall have the meaning set forth in Section 2.6. "Normal Trading" shall mean trading that occurs between 9:30 AM and 4:00 PM, New York City Time, on any Business Day, and shall expressly exclude "after hours" trading. "Numeric Day" shall mean the numerical day of the month of the Investment Date or the last day of the calendar month in question, whichever is less. "NYSE" shall have the meaning set forth in Section 6.9. "Offering" shall mean the Company's offering of Common Stock and Warrants issued under this Investment Agreement. "Officer's Certificate" shall mean a certificate, signed by an officer of the Company, to the effect that the representations and warranties of the Company in this Agreement required to be true for the applicable Closing are true and correct in all material respects and all of the conditions and limitations set forth in this Agreement for the applicable Closing are satisfied. "Opinion of Counsel" shall mean, as applicable, the Investment Commitment Opinion of Counsel, the Put Opinion of Counsel, and the Registration Opinion. "Payment Due Date" shall have the meaning set forth in Section 2.3.9. "Pricing Period" shall mean, unless otherwise shortened under the terms of this Agreement, the period beginning on the Business Day immediately following the Put Date and ending on and including the date which is 20 Business Days after such Put Date. "Pricing Period End Date" shall mean the last Business Day of any Pricing Period. "Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock. "Proceeding" shall have the meaning as set forth Section 5.1. 6 "Purchase" shall have the meaning set forth in Section 2.3.8. "Put" shall have the meaning set forth in Section 2.3.1(d). "Put Closing" shall have the meaning set forth in Section 2.3.9. "Put Closing Date" shall have the meaning set forth in Section 2.3.9. "Put Date" shall mean the date that is specified by the Company in any Put Notice for which the Company intends to exercise a Put under Section 2.3.1, unless the Put Date is postponed pursuant to the terms hereof, in which case the "Put Date" is such postponed date. "Put Dollar Amount" shall be determined by multiplying the Put Share Amount by the respective Put Share Prices with respect to such Put Shares, subject to the limitations herein. "Put Interruption Date" shall have the meaning set forth in Section 2.3.4. "Put Interruption Event" shall have the meaning set forth in Section 2.3.4. "Put Interruption Notice" shall have the meaning set forth in Section 2.3.4. "Put Notice" shall have the meaning set forth in Section 2.3.1(d), the form of which is attached hereto as EXHIBIT G. "Put Notice Confirmation" shall have the meaning set forth in Section 2.3.1(d), the form of which is attached hereto as EXHIBIT H. "Put Opinion of Counsel" shall mean an opinion from Company's independent counsel, in the form attached as EXHIBIT I, or such other form as agreed upon by the parties, as to any Put Closing. "Put Share Amount" shall have the meaning as set forth Section 2.3.1(b). "Put Share Price" shall have the meaning set forth in Section 2.3.1(c). "Put Shares" shall mean shares of Common Stock that are purchased by the Investor pursuant to a Put. "Registrable Securities" shall have the meaning as set forth in the Registration Rights Agreement. "Registration Opinion" shall have the meaning set forth in Section 2.3.7(a), the form of which is attached hereto as EXHIBIT R. "Registration Opinion Deadline" shall have the meaning set forth in Section 2.3.7(a). 7 "Registration Rights Agreement" shall mean that certain registration rights agreement entered into by the Company and Investor on even date herewith, in the form attached hereto as EXHIBIT A, or such other form as agreed upon by the parties. "Registration Statement" shall have the meaning as set forth in the Registration Rights Agreement. "Regulation D" shall have the meaning set forth in the recitals hereto. "Reporting Issuer" shall have the meaning set forth in Section 6.2. "Restrictive Legend" shall have the meaning set forth in Section 4.7. "Required Put Documents" shall have the meaning set forth in Section 2.3.6. "Right of First Refusal" shall have the meaning set forth in Section 6.5.2. "Risk Factors" shall have the meaning set forth in Section 3.2.4, attached hereto as EXHIBIT J. "Schedule of Exceptions" shall have the meaning set forth in Section 5, and is attached hereto as Exhibit C. "SEC" shall mean the Securities and Exchange Commission. "Securities" shall mean this Investment Agreement, together with the Common Stock of the Company, the Warrants and the Warrant Shares issuable pursuant to this Investment Agreement. "Share Authorization Increase Approval" shall have the meaning set forth in Section 5.25. "Stockholder 20% Approval" shall have the meaning set forth in Section 6.11. "Supplemental Registration Statement" shall have the meaning set forth in the Registration Rights Agreement. "Term" shall mean the term of this Agreement, which shall be a period of time beginning on the date of this Agreement and ending on the Termination Date. "Termination Date" shall mean the earlier of (i) the date that is three (3) years after the Effective Date, or (ii) the date that is thirty (30) Business Days after the later of (a) the Put Closing Date on which the sum of the aggregate Put Share Price for all Put Shares equal the Maximum Offering Amount, (b) the date that the Company has delivered a Termination Notice to the Investor, (c) the date of an Automatic Termination, and (d) the date that all of the Warrants have been exercised. "Termination Fee" shall have the meaning as set forth in Section 2.6. 8 "Termination Notice" shall have the meaning as set forth in Section 2.3.12. "Third Party Report" shall have the meaning set forth in Section 3.2.4. "Trading Volume " shall mean the volume of shares of the Company's Common Stock that trade between 9:30 AM and 4:00 PM, New York City Time, on any Business Day, and shall expressly exclude any shares trading during "after hours" trading. "Transaction Documents" shall have the meaning set forth in Section 9. "Transfer Agent" shall have the meaning set forth in Section 6.10. "Transfer Agent Instructions" shall mean the Company's instructions to its transfer agent, substantially in the form attached as EXHIBIT T, or such other form as agreed upon by the parties. "Trigger Price" shall have the meaning set forth in Section 2.3.1(b). "Unlegended Share Certificates" shall mean a certificate or certificates (or electronically delivered shares, as appropriate) (in denominations as instructed by Investor) representing the shares of Common Stock to which the Investor is then entitled to receive, registered in the name of Investor or its nominee (as instructed by Investor) and not containing a restrictive legend or stop transfer order, including but not limited to the Put Shares for the applicable Put and Warrant Shares. "Use of Proceeds Schedule" shall have the meaning as set forth in Section 3.2.4, attached hereto as EXHIBIT L. "Volume Limitations" shall have the meaning set forth in Section 2.3.1(b). "Warrant Antidilution Agreement" shall mean that certain Warrant Antidilution Agreement entered into by the Company and Investor on even date herewith, in the form attached hereto as EXHIBIT O, or such other form as agreed upon by the parties. "Warrant Shares" shall mean the Common Stock issued or issuable upon exercise of the Warrants. "Warrants" shall mean, the Commitment Warrants. 2. PURCHASE AND SALE OF COMMON STOCK. 2.1 OFFER TO SUBSCRIBE. Subject to the terms and conditions herein and the satisfaction of the conditions to closing set forth in Sections 2.2 and 2.3 below, Investor hereby agrees to purchase such amounts of Common Stock as the Company may, in its sole and absolute discretion, from time to time elect to issue and sell to Investor according to one or more Puts pursuant to Section 2.3 below. 9 2.2 INVESTMENT COMMITMENT. 2.2.1 INVESTMENT COMMITMENT CLOSING. The closing of this Agreement (the "Investment Commitment Closing") shall be deemed to occur when this Agreement, the Registration Rights Agreement, the Commitment Warrant and the Warrant Antidilution Agreement have been duly executed by both Investor and the Company, the Transfer Agent Instructions have been duly executed by both the Company and the Transfer Agent, and the other Conditions to the Investment Commitment Closing set forth in Section 2.2.2 below have been met. 2.2.2 CONDITIONS TO INVESTMENT COMMITMENT CLOSING. As a prerequisite to the Investment Commitment Closing, all of the following (the "Conditions to Investment Commitment Closing") shall have been satisfied prior to or concurrently with the Company's execution and delivery of this Agreement: (a) the following documents shall have been delivered to the Investor: (i) the Registration Rights Agreement (executed by the Company and Investor), (ii) the Commitment Warrant, (iii) the Investment Commitment Opinion of Counsel (signed by the Company's counsel), (iv) the Warrant Antidilution Agreement (executed by the Company and Investor), (v) the Transfer Agent Instructions (executed by the Company and the Transfer Agent), and (vi) a Secretary's Certificate as to (A) the resolutions of the Company's board of directors authorizing this transaction, (B) the Company's Certificate of Incorporation, and (C) the Company's Bylaws; (b) this Investment Agreement, accepted by the Company, shall have been received by the Investor; (c) the Company's Common Stock shall be listed for trading and actually trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National Market, the American Stock Exchange or the New York Stock Exchange; (d) other than continuing losses described in the Risk Factors set forth in the Disclosure Documents (provided for in Section 3.2.4), up through the Investment Commitment Closing there have been no material adverse changes in the Company's business prospects or financial condition since the date of the last balance sheet included in the Disclosure Documents, including but not limited to incurring material liabilities; and (e) the representations and warranties of the Company in this Agreement shall be true and correct in all material respects and the Conditions to Investment Commitment Closing set forth in this Section 2.2.2 shall have been satisfied on the date of such Investment Commitment Closing; and the Company shall deliver an Officer's Certificate, signed by an officer of the Company, to such effect to the Investor. 10 2.3 PUTS OF COMMON SHARES TO THE INVESTOR. 2.3.1 PROCEDURE TO EXERCISE A PUT. Subject to the Individual Put Limit, the Maximum Offering Amount and the Cap Amount (if applicable), and the other conditions and limitations set forth in this Agreement, at any time beginning on the date on which the Registration Statement is declared effective by the SEC (the "Effective Date"), the Company may, in its sole and absolute discretion, elect to exercise one or more Puts according to the following procedure, provided that each subsequent Put Date after the first Put Date shall be no sooner than five (5) Business Days following the preceding Pricing Period End Date: (a) DELIVERY OF ADVANCE PUT NOTICE.At least ten (10) Business Days but not more than twenty (20) Business Days prior to any intended Put Date, the Company shall deliver advance written notice (the "Advance Put Notice," the form of which is attached hereto as EXHIBIT E, the date of such Advance Put Notice being the "Advance Put Notice Date") to Investor stating the Put Date for which the Company shall, subject to the limitations and restrictions contained herein, exercise a Put and stating the number of shares of Common Stock (subject to the Individual Put Limit and the Maximum Put Dollar Amount) which the Company intends to sell to the Investor for the Put (the "Intended Put Share Amount"). The Company may, at its option, also designate in any Advance Put Notice (i) a maximum dollar amount of Common Stock, not to exceed $2,000,000, which it shall sell to Investor during the Put (the "Company Designated Maximum Put Dollar Amount") and/or (ii) a minimum purchase price per Put Share at which the Investor may purchase shares of Common Stock pursuant to such Put Notice (a "Company Designated Minimum Put Share Price"). The Company Designated Minimum Put Share Price, if applicable, shall be no greater than the lesser of (i) 80% of the Closing Bid Price of the Company's common stock on the Business Day immediately preceding the Advance Put Notice Date, or (ii) the Closing Bid Price of the Company's common stock on the Business Day immediately preceding the Advance Put Notice Date minus $0.125. The Company may decrease (but not increase) the Company Designated Minimum Put Share Price for a Put at any time by giving the Investor written notice of such decrease not later than 12:00 Noon, New York City time, on the Business Day immediately preceding the Business Day that such decrease is to take effect. A decrease in the Company Designated Minimum Put Share Price shall have no retroactive effect on the determination of Trigger Prices and Excluded Days for days preceding the Business Day that such decrease takes effect, provided that the Put Share Price for all shares in a Put shall be calculated using the lowest Company Designated Minimum Put Share Price, as decreased. Notwithstanding the above, if, at the time of delivery of an Advance Put Notice, more than two (2) Calendar Months have passed since the date of the previous Put Closing, such Advance Put Notice shall provide at least twenty (20) Business Days notice of the intended Put Date, unless waived in writing by the Investor. In order to effect delivery of the Advance Put Notice, the Company shall (i) send the Advance Put Notice by facsimile on such date so that such notice is received by the Investor by 6:00 p.m., New York, NY time, and (ii) surrender such notice on such date to a courier for overnight delivery to the Investor (or two (2) day delivery in the case of an Investor residing outside of the U.S.). Upon receipt by the Investor of a facsimile copy of the Advance Put Notice, the Investor shall, within two (2) Business Days, send, via facsimile, a confirmation of receipt (the "Advance Put Notice Confirmation," the form of which is attached hereto as EXHIBIT F) of the Advance Put Notice to the Company specifying that the Advance Put Notice has been received and affirming the intended Put Date and the Intended Put Share Amount. 11 (b) PUT SHARE AMOUNT. The "Put Share Amount" is the number of shares of Common Stock that the Investor shall be obligated to purchase in a given Put, and shall equal the lesser of (i) the Intended Put Share Amount, and (ii) the Individual Put Limit. The "Individual Put Limit" shall equal the lesser of (A) 1,500,000 shares, (B) 15% of the sum of the aggregate daily reported Trading Volumes in the outstanding Common Stock on the Company's Principal Market, excluding any block trades of 20,000 or more shares of Common Stock, for all Evaluation Days (as defined below) in the Pricing Period, (C) the number of Put Shares which, when multiplied by their respective Put Share Prices, equals the Maximum Put Dollar Amount, and (D) the 9.9% Limitation, but in no event shall the Individual Put Limit exceed 15% of the sum of the aggregate daily reported Trading Volumes in the outstanding Common Stock on the Company's Principal Market, excluding any block trades of 20,000 or more shares of Common Stock, for the twenty (20) Business Days immediately preceding the Advance Put Notice Date (this limitation, together with the limitation in (B) immediately above are collectively referred to herein as the "Volume Limitations"). Company agrees not to trade Common Stock or arrange for Common Stock to be traded for the purpose of artificially increasing the Volume Limitations. For purposes of this Agreement: "Trigger Price" for any Pricing Period shall mean the greater of (i) the Company Designated Minimum Put Share Price, plus $.075, or (ii) the Company Designated Minimum Put Share Price divided by .91. An "Excluded Day" shall mean each Business Day during a Pricing Period where the lowest intra-day trading price of the Common Stock is less than the Trigger Price and each Business Day defined in Section 2.3.4 as an "Excluded Day". An "Evaluation Day" shall mean each Business Day during a Pricing Period that is not an Excluded Day. (c) PUT SHARE PRICE. The purchase price for the Put Shares (the "Put Share Price") shall equal the lesser of (i) the Market Price for such Put, minus $.075, or (ii) 91% of the Market Price for such Put, but shall in no event be less than the Company Designated Minimum Put Share Price for such Put, if applicable. (d) DELIVERY OF PUT NOTICE. After delivery of an Advance Put Notice, on the Put Date specified in the Advance Put Notice the Company shall deliver written notice (the "Put Notice," the form of which is attached hereto as EXHIBIT G) to Investor stating (i) the Put Date, (ii) the Intended Put Share Amount as specified in the Advance Put Notice (such exercise a "Put"), (iii) the Company Designated Maximum Put Dollar Amount (if applicable), and (iv) the Company Designated Minimum Put Share Price (if applicable). In order to effect delivery of the Put Notice, the Company shall (i) send the Put Notice by facsimile on the Put Date so that such notice is received by the Investor by 6:00 p.m., New York, NY time, and (ii) surrender such notice on the Put Date to a courier for overnight delivery to the Investor (or two (2) day delivery in the case of an Investor residing outside of the U.S.). Upon receipt by the Investor of a facsimile copy of the Put Notice, the Investor shall, within two (2) Business Days, send, via facsimile, a confirmation of receipt (the "Put Notice 12 Confirmation," the form of which is attached hereto as EXHIBIT H) of the Put Notice to Company specifying that the Put Notice has been received and affirming the Put Date and the Intended Put Share Amount. (e) DELIVERY OF REQUIRED PUT DOCUMENTS. On or before the Put Date for such Put, the Company shall deliver the Required Put Documents (as defined in Section 2.3.6 below) to the Investor (or to an agent of Investor, if Investor so directs). Unless otherwise specifically requested by the Investor, the Put Shares shall be transmitted electronically pursuant to the Depository Trust Company DWAC system or such other electronic delivery system as the Investor shall request. If the Company has not delivered all of the Required Put Documents to the Investor on or before the Put Date, the Put shall be automatically cancelled (an "Impermissible Put Cancellation") and the Company shall pay the Investor $5,000 for its reasonable due diligence expenses incurred in preparation for the canceled Put and the Company may deliver an Advance Put Notice for the subsequent Put no sooner than ten (10) Business Days after the date that such Put was canceled. Also, in the event of a Put Interruption Notice that occurs prior to the Put Date, the Company shall pay the Investor $5,000 for its reasonable due diligence expenses incurred in preparation for the interrupted Put. (f) Limitation on Investor's Obligation to Purchase Shares. Notwithstanding anything to the contrary in this Agreement, in no event shall the Investor be required to purchase, and an Intended Put Share Amount may not include, an amount of Put Shares, which when added to the number of Put Shares acquired by the Investor pursuant to this Agreement during the 61 days preceding the Put Date with respect to which this determination of the permitted Intended Put Share Amount is being made, would exceed 9.9% of the number of shares of Common Stock outstanding (on a fully diluted basis, to the extent that inclusion of unissued shares is mandated by Section 13(d) of the Exchange Act) on the Put Date for such Pricing Period, as determined in accordance with Section 13(d) of the Exchange Act (the "Section 13(d) Outstanding Share Amount"). Each Put Notice shall include a representation of the Company as to the Section 13(d) Outstanding Share Amount on the related Put Date. In the event that the Section 13(d) Outstanding Share Amount is different on any date during a Pricing Period than on the Put Date associated with such Pricing Period, then the number of shares of Common Stock outstanding on such date during such Pricing Period shall govern for purposes of determining whether the Investor, when aggregating all purchases of Shares made pursuant to this Agreement in the 61 calendar days preceding such date, would have acquired more than 9.9% of the Section 13(d) Outstanding Share Amount. The limitation set forth in this Section 2.3.1(f) is referred to as the "9.9% Limitation." 2.3.2 TERMINATION OF RIGHT TO PUT. The Company's right to initiate subsequent Puts to the Investor shall terminate permanently (each, an "Automatic Termination") upon the occurrence of any of the following: (a) if, at any time, either the Company or any director or executive officer of the Company has engaged in a transaction or conduct related to the Company that has resulted in (i) a Securities and Exchange Commission enforcement action, or (ii) a civil judgment or criminal conviction for fraud or misrepresentation, or for any other offense that, if prosecuted criminally, would constitute a felony under applicable law; 13 (b) on any date after a cumulative time period or series of time periods, consisting only of Ineffective Periods and Delisting Events, that lasts for an aggregate of four (4) months; (c) if at any time the Company has filed for and/or is subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company or any subsidiary of the Company; (d) after the sooner of (i) the date that is three (3) years after the Effective Date, or (ii) the Put Closing Date on which the aggregate of the Put Dollar Amounts for all Puts equal the Maximum Offering Amount (the "Commitment Period"); (e) the Company has breached any covenant in Section 6- or Section 9 hereof; or (f) if no Registration Statement has been declared effective by the date that is one (1) year after the date of this Agreement, the Automatic Termination shall occur on the date that is one (1) year after the date of this Agreement. 2.3.3 MAXIMUM OFFERING AMOUNT. The Investor shall not be obligated to purchase any additional Put Shares once the aggregate Put Dollar Amount paid by Investor equals the Maximum Offering Amount. 2.3.4 PUT INTERRUPTION. Once the Company delivers an Advance Put Notice to the Investor, the Company may not cancel the Put. In the event of a "Put Interruption Event" (as defined below), in each case during any Pricing Period, then (A) the Company shall notify the Investor in writing (a "Put Interruption Notice") as soon as possible by facsimile and overnight courier, but no later than the end of the Business Day in which the Company becomes aware of such facts, (B) the Pricing Period shall be extended or shortened, as applicable, such that the Pricing Period End Date is the tenth (10th) Business Day after the date of such Put Interruption Notice from the Company (the "Put Interruption Date"), (C) each Business Day from and including the Put Interruption Date through and including the Pricing Period End Date for the applicable Put (as extended or shortened, if applicable), shall be considered to be an "Excluded Day," as that term is used in this Agreement, and (D) the Company Designated Minimum Put Share Price, if any, shall not apply to the affected Put. In the event that a Put Interruption Event occurs after an Advance Put Notice Date, but before the applicable Put Date, that Put shall be deemed to be terminated, and the Company may deliver an Advance Put Notice for a new Put anytime beginning on the following Business Day, if otherwise allowed under this Agreement. A "Put Interruption Event" shall mean any of the following: (i) an Automatic Termination, (ii) the failure of one of the items specified in Section 2.3.5 below to be true and correct on any day during an Extended Pricing Period, or (iii) the occurrence of one of the following events: (a) the Company has announced a subdivision or combination, including a reverse split, of its Common Stock or has subdivided or combined its Common Stock; 14 (b) the Company has paid a dividend of its Common Stock or has made any other distribution of its Common Stock; (c) the Company has made a distribution of all or any portion of its assets or evidences of indebtedness to the holders of its Common Stock; (d) a Major Transaction has occurred; or (e) the Company discovers the existence of Material Facts or any Ineffective Period or Delisting Event occurs. 2.3.5 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER AN ADVANCE PUT NOTICE OR A PUT NOTICE. The right of the Company to deliver an Advance Put Notice or a Put Notice is subject to the satisfaction, on the date of delivery of such Advance Put Notice or Put Notice, of each of the following conditions: (a) the Company's Common Stock shall be listed for and actively trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the Nasdaq National Market or the New York Stock Exchange and the Put Shares shall be so listed, and to the Company's knowledge there is no notice of any suspension or delisting with respect to the trading of the shares of Common Stock on such market or exchange; (b) the Company shall have satisfied any and all obligations pursuant to the Registration Rights Agreement, including, but not limited to, the filing of the Registration Statement with the SEC with respect to the resale of all Registrable Securities and the requirement that the Registration Statement shall have been declared effective by the SEC for the resale of all Registrable Securities and the Company shall have satisfied and shall be in compliance with any and all obligations pursuant to this Agreement and the Warrants; (c) the representations and warranties of the Company in Sections 5.1, 5.3, 5.4, 5.5, 5.6, 5.10, 5.13, 5.14, 5.15, 5.16, 5.18, 5.19, 5.21, and 5.25 hereof are true and correct in all material respects as if made on such date, the Company has satisfied its obligations under Section 2.6 hereof and the conditions to Investor's obligations set forth in this Section 2.3.5 are satisfied as of such Closing, and the Company shall deliver a certificate, signed by an officer of the Company, to such effect to the Investor; (d) the Company shall have reserved for issuance a sufficient number of Common Shares for the purpose of enabling the Company to satisfy any obligation to issue Common Shares pursuant to any Put and to effect exercise of the Warrants; (e) the Registration Statement is not subject to an Ineffective Period as defined in the Registration Rights Agreement, the prospectus included therein is current and deliverable, and to the Company's knowledge there is no notice of any investigation or inquiry concerning any stop order with respect to the Registration Statement; 15 (f) if the Aggregate Issued Shares after the Closing of the Put would exceed the Cap Amount, the Company shall have obtained the Stockholder 20% Approval as specified in Section 6.11, if the Company's Common Stock is listed on the NASDAQ Small Cap Market or the NASDAQ National Market System (the "NMS"), and such approval is required by the rules of the NASDAQ; (g) the Company shall have no knowledge of any event that, in the Company's opinion, is more likely than not to have the effect of causing any Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the thirty Business Days following the date on which such Advance Put Notice and Put Notice is deemed delivered); (h) there is not then in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained, nor is there any pending or threatened proceeding or investigation which may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement; (i) no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits the transactions contemplated by this Agreement, and no actions, suits or proceedings shall be in progress, pending or threatened by any person (other than the Investor or any affiliate of the Investor), that seek to enjoin or prohibit the transactions contemplated by this Agreement. For purposes of this paragraph (i), no proceeding shall be deemed pending or threatened unless one of the parties has received written or oral notification thereof prior to the applicable Closing Date; (j) the Put Shares delivered to the Investor are DTC eligible and can be immediately converted into electronic form; and (k) the Company shall have obtained all permits and qualifications (if any) required by any state securities laws or Blue Sky laws for the offer and sale of the Common Stock to the Investor and by the Investor or shall have the availability of exemptions therefrom. 2.3.6 DOCUMENTS REQUIRED TO BE DELIVERED ON THE PUT DATE AS CONDITIONS TO CLOSING OF ANY PUT. The Closing of any Put and Investor's obligations hereunder shall additionally be conditioned upon the delivery to the Investor of each of the following (the "Required Put Documents") on or before the applicable Put Date: 16 (a) a number of DWAC Put Shares equal to the Intended Put Share Amount shall have been delivered to the Depository Trust Company DWAC account specified by the Investor for the Put Shares (unless the Investor has requested physical stock certificates, in writing, in which case the Company shall have delivered to the Investor a number of physical Unlegended Share Certificates equal to the Intended Put Share Amount, in denominations of not more than 50,000 shares per certificate); (b) the following documents: Put Opinion of Counsel, Officer's Certificate, Put Notice, Registration Opinion, and any report or disclosure required under Section 2.3.7 or Section 2.5; and (c) all documents, instruments and other writings required to be delivered on or before the Put Date pursuant to any provision of this Agreement in order to implement and effect the transactions contemplated herein. 2.3.7 ACCOUNTANT'S LETTER AND REGISTRATION OPINION. (a) The Company shall have caused to be delivered to the Investor, (i) whenever required by Section 2.3.7(b) or by Section 2.5.3, and (ii) on the date that is three (3) Business Days prior to each Put Date (the "Registration Opinion Deadline"), an opinion of the Company's independent counsel, in substantially the form of EXHIBIT R (the "Registration Opinion"), addressed to the Investor stating, inter alia, that no facts ("Material Facts") have come to such counsel's attention that have caused it to believe that the Registration Statement is subject to an Ineffective Period or to believe that the Registration Statement, any Supplemental Registration Statement (as each may be amended, if applicable), and any related prospectuses, contain an untrue statement of material fact or omits a material fact required to make the statements contained therein, in light of the circumstances under which they were made, not misleading. If a Registration Opinion cannot be delivered by the Company's independent counsel to the Investor on the Registration Opinion Deadline due to the existence of Material Facts or an Ineffective Period, the Company shall promptly notify the Investor and as promptly as possible amend each of the Registration Statement and any Supplemental Registration Statements, as applicable, and any related prospectus or cause such Ineffective Period to terminate, as the case may be, and deliver such Registration Opinion and updated prospectus as soon as possible thereafter. If at any time after a Put Notice shall have been delivered to Investor but before the related Pricing Period End Date, the Company acquires knowledge of such Material Facts or any Ineffective Period occurs, the Company shall promptly notify the Investor and shall deliver a Put Interruption Notice to the Investor pursuant to Section 2.3.4 by facsimile and overnight courier by the end of that Business Day. (b) (i) the Company shall engage its independent auditors to perform the procedures in accordance with the provisions of Statement on Auditing Standards No. 71, as amended, as agreed to by the parties hereto, and reports thereon (the "Bring Down Cold Comfort Letters") as shall have been reasonably requested by the Investor with respect to certain financial information contained in the Registration Statement and shall have delivered to the Investor such a report addressed to the Investor, on the date that is three (3) Business Days prior to each Put Date. 17 (ii) in the event that the Investor shall have requested delivery of an Agreed Upon Procedures Report pursuant to Section 2.5.3, the Company shall engage its independent auditors to perform certain agreed upon procedures and report thereon as shall have been reasonably requested by the Investor with respect to certain financial information of the Company and the Company shall deliver to the Investor a copy of such report addressed to the Investor. In the event that the report required by this Section 2.3.7(b) cannot be delivered by the Company's independent auditors, the Company shall, if necessary, promptly revise the Registration Statement and the Company shall not deliver a Put Notice until such report is delivered. 2.3.8 INVESTOR'S OBLIGATION AND RIGHT TO PURCHASE SHARES. Subject to the conditions set forth in this Agreement, following the Investor's receipt of a validly delivered Put Notice, the Investor shall be required to purchase (each a "Purchase") from the Company a number of Put Shares equal to the Put Share Amount, in the manner described below. 2.3.9 MECHANICS OF PUT CLOSING. Each of the Company and the Investor shall deliver all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement at or prior to each Closing. Subject to such delivery and the satisfaction of the conditions set forth in this Section 2, the closing of the purchase by the Investor of Shares shall occur by 5:00 PM, New York City Time, on the date which is five (5) Business Days following the applicable Pricing Period End Date (the "Payment Due Date") at the offices of Investor. On each or before each Payment Due Date, the Investor shall deliver to the Company, in the manner specified in Section 8 below, the Put Dollar Amount to be paid for such Put Shares, determined as aforesaid. The closing (each a "Put Closing") for each Put shall occur on the date that both (i) the Company has delivered to the Investor all Required Put Documents, and (ii) the Investor has delivered to the Company such Put Dollar Amount and any Late Payment Amount, if applicable (each a "Put Closing Date"). If the Investor does not deliver to the Company the Put Dollar Amount for such Put Closing on or before the Payment Due Date, then the Investor shall pay to the Company, in addition to the Put Dollar Amount, an amount (the "Late Payment Amount") at a rate of X% per month, accruing daily, multiplied by such Put Dollar Amount, where "X" equals one percent (1%) for the first month following the date in question, and increases by an additional one percent (1%) for each month that passes after the date in question, up to a maximum of five percent (5%) per month; provided, however, that in no event shall the amount of interest that shall become due and payable hereunder exceed the maximum amount permissible under applicable law. In addition to any other remedies the Company may have, in the event that the Investor fails to make payment for any shares put to it by the Company under this Agreement within five (5) Business Days of the date that the Company has notified the Investor, in writing, that such payment is past due, and the Company has complied with this Agreement in all material respects, neither the Commitment Warrant nor any Purchase Warrants shall be exerciseable until such payment is made. 2.3.10 LIMITATION ON SHORT SALES. The Investor and its affiliates shall not engage in short sales of the Company's Common Stock; provided, however, that the Investor may enter into any short exempt sale or any short sale or other hedging or similar arrangement it deems appropriate with respect 18 to Put Shares after it receives a Put Notice with respect to such Put Shares so long as such sales or arrangements do not involve more than the number of such Put Shares specified in the Put Notice. 2.3.11 CAP AMOUNT. If the Company becomes listed on the Nasdaq Small Cap Market or the Nasdaq National Market, then, unless the Company has obtained Stockholder 20% Approval as set forth in Section 6.11 or unless otherwise permitted by Nasdaq, in no event shall the Aggregate Issued Shares exceed the maximum number of shares of Common Stock (the "Cap Amount") that the Company can, without stockholder approval, so issue pursuant to Nasdaq Rule 4460(i)(1)(d)(ii) (or any other applicable Nasdaq Rules or any successor rule) (the "Nasdaq 20% Rule"). 2.3.12 INVESTMENT AGREEMENT TERMINATION. The Company may terminate (a "Company Termination") its right to initiate future Puts by providing written notice ("Termination Notice") to the Investor, by facsimile and overnight courier, at any time other than during an Extended Put Period, provided that such termination shall have no effect on the parties' other rights and obligations under this Agreement, the Registration Rights Agreement or the Warrants. Notwithstanding the above, any Put Interruption Notice occurring during an Extended Put Period is governed by Section 2.3.4. 2.3.13 RETURN OF EXCESS COMMON SHARES. In the event that the number of Shares purchased by the Investor pursuant to its obligations hereunder is less than the Intended Put Share Amount, the Investor shall promptly return to the Company any shares of Common Stock in the Investor's possession that are not being purchased by the Investor. 2.4 WARRANTS. 2.4.1 COMMITMENT WARRANTS. In partial consideration hereof, following the execution of the Letter of Agreement dated on or about September 5, 2000 between the Company and the Investor, the Company issued and delivered to Investor warrants (the "Commitment Warrants") in the form attached hereto as EXHIBIT U, or such other form as agreed upon by the parties, to purchase 1,309,000 shares of Common Stock. Each Commitment Warrant shall be immediately exercisable in accordance with its terms, and shall have a term beginning on the date of issuance and ending on date that is seven (7) years thereafter. The Warrant Shares shall be registered for resale pursuant to the Registration Rights Agreement. The Investment Commitment Opinion of Counsel shall cover the issuance of the Commitment Warrant and the issuance of the common stock upon exercise of the Commitment Warrant. Notwithstanding any Termination or Automatic Termination of this Agreement, regardless of whether or not the Registration Statement is or is not filed, and regardless of whether or not the Registration Statement is approved or denied by the SEC, the Investor shall retain full ownership of the Commitment Warrant as partial consideration for its commitment hereunder. 2.4.2 [Intentionally Left Blank]. 2.5 DUE DILIGENCE REVIEW. The Company shall make available for inspection and review by the Investor (the "Due Diligence Review"), advisors to and representatives of the Investor (who may or may not be affiliated with the 19 Investor and who are reasonably acceptable to the Company), any underwriter participating in any disposition of Common Stock on behalf of the Investor pursuant to the Registration Statement, any Supplemental Registration Statement, or amendments or supplements thereto or any blue sky, NASD or other filing, all financial and other records, all filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company's officers, directors and employees to supply all such information reasonably requested by the Investor or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investor and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of the Registration Statement. 2.5.1 TREATMENT OF NONPUBLIC INFORMATION. The Company shall not disclose nonpublic information to the Investor or to its advisors or representatives unless prior to disclosure of such information the Company identifies such information as being nonpublic information and provides the Investor and such advisors and representatives with the opportunity to accept or refuse to accept such nonpublic information for review. The Company may, as a condition to disclosing any nonpublic information hereunder, require the Investor and its advisors and representatives to enter into a confidentiality agreement (including an agreement with such advisors and representatives prohibiting them from trading in Common Stock during such period of time as they are in possession of nonpublic information) in form reasonably satisfactory to the Company and the Investor. Nothing herein shall require the Company to disclose nonpublic information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate nonpublic information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting nonpublic information (whether or not requested of the Company specifically or generally during the course of due diligence by and such persons or entities), which, if not disclosed in the Prospectus included in the Registration Statement, would cause such Prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 2.5 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain nonpublic information in the course of conducting due diligence in accordance with the terms of this Agreement; provided, however, that in no event shall the Investor's advisors or representatives disclose to the Investor the nature of the specific event or circumstances constituting any nonpublic information discovered by such advisors or representatives in the course of their due diligence without the written consent of the Investor prior to disclosure of such information. 20 2.5.2 DISCLOSURE OF MISSTATEMENTS AND OMISSIONS. The Investor's advisors or representatives shall make complete disclosure to the Investor's counsel of all events or circumstances constituting nonpublic information discovered by such advisors or representatives in the course of their due diligence upon which such advisors or representatives form the opinion that the Registration Statement contains an untrue statement of a material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in the light of the circumstances in which they were made, not misleading. Upon receipt of such disclosure, the Investor's counsel shall consult with the Company's independent counsel in order to address the concern raised as to the existence of a material misstatement or omission and to discuss appropriate disclosure with respect thereto; provided, however, that such consultation shall not constitute the advice of the Company's independent counsel to the Investor as to the accuracy of the Registration Statement and related Prospectus. 2.5.3 PROCEDURE IF MATERIAL FACTS ARE REASONABLY BELIEVED TO BE UNTRUE OR ARE Omitted. In the event after such consultation the Investor or the Investor's counsel reasonably believes that the Registration Statement contains an untrue statement of a material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading, (a) the Company shall file with the SEC an amendment to the Registration Statement responsive to such alleged untrue statement or omission and provide the Investor, as promptly as practicable, with copies of the Registration Statement and related Prospectus, as so amended, or (b) if the Company disputes the existence of any such material misstatement or omission, (i) the Company's independent counsel shall provide the Investor's counsel with a Registration Opinion and (ii) in the event the dispute relates to the adequacy of financial disclosure and the Investor shall reasonably request, the Company's independent auditors shall provide to the Company a letter ("Agreed Upon Procedures Report") outlining the performance of such "agreed upon procedures" as shall be reasonably requested by the Investor and the Company shall provide the Investor with a copy of such letter. 2.6 COMMITMENT PAYMENTS. On the last Business Day of the first one year period following the Effective Date (a "Commitment Evaluation Period"), if the Company has not Put at least $500,000 in aggregate Put Dollar Amount during that Commitment Evaluation Period, the Company, in consideration of Investor's commitment costs, including, but not limited to, due diligence expenses, shall pay to the Investor an amount (the "Non-Usage Fee") equal to the difference of (i) $50,000, minus (ii) 10% of the aggregate Put Dollar Amount of the Put Shares purchased by Investor during that Commitment Evaluation Period. On the last Business Day of the second one year period and the third one year period following the Effective Date (each such one year period also a "Commitment Evaluation Period"), if the Company has not Put at least $1,000,000 in aggregate Put Dollar Amount during that Commitment Evaluation Period, the Company, in consideration of Investor's commitment costs, including, but not limited to, due diligence expenses, shall pay to the Investor an amount (the "Non-Usage Fee") equal to the difference of (i) $100,000, minus (ii) 10% of the aggregate Put Dollar Amount of the Put Shares purchased by Investor during that Commitment Evaluation Period. In the 21 event that the Company delivers a Termination Notice to the Investor or an Automatic Termination occurs, the Company shall pay to the Investor (the "Termination Fee") the greater of (i) the Non-Usage Fee for the applicable Commitment Evaluation Period, or (ii) the difference of (x) $200,000, minus (y) 10% of the aggregate Put Dollar Amount of the Put Shares put to Investor during all Puts to date, and the Company shall not be required to pay the Non-Usage Fee thereafter. Each Non-Usage Fee or Termination Fee is payable, in cash, within five (5) business days of the date it accrued. The Company shall not be required to deliver any payments to Investor under this subsection until Investor has paid all Put Dollar Amounts that are then due. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR. Investor hereby represents and warrants to and agrees with the Company as follows: 3.1 ACCREDITED INVESTOR. Investor is an accredited investor ("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked the applicable box set forth in Section 10 of this Agreement. 3.2 INVESTMENT EXPERIENCE; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION. 3.2.1 ACCESS TO INFORMATION. Investor or Investor's professional advisor has been granted the opportunity to ask questions of and receive answers from representatives of the Company, its officers, directors, employees and agents concerning the terms and conditions of this Offering, the Company and its business and prospects, and to obtain any additional information which Investor or Investor's professional advisor deems necessary to verify the accuracy and completeness of the information received. 3.2.2 RELIANCE ON OWN ADVISORS. Investor has relied completely on the advice of, or has consulted with, Investor's own personal tax, investment, legal or other advisors and has not relied on the Company or any of its affiliates, officers, directors, attorneys, accountants or any affiliates of any thereof and each other person, if any, who controls any of the foregoing, within the meaning of Section 15 of the Act for any tax or legal advice (other than reliance on information in the Disclosure Documents as defined in Section 3.2.4 below and on the Opinion of Counsel). The foregoing, however, does not limit or modify Investor's right to rely upon covenants, representations and warranties of the Company in this Agreement. 3.2.3 CAPABILITY TO EVALUATE. Investor has such knowledge and experience in financial and business matters so as to enable such Investor to utilize the information made available to it in connection with the Offering in order to evaluate the merits and risks of the prospective investment, which are substantial, including without limitation those set forth in the Disclosure Documents (as defined in Section 3.2.4 below). 3.2.4 DISCLOSURE DOCUMENTS. Investor, in making Investor's investment decision to subscribe for the Investment Agreement hereunder, represents that (a) Investor has received and had an opportunity to review (i) the Company's Annual Report on Form 10-KSB for the year ended June 30, 2000, (ii) the Company's quarterly report on Form 10-QSB for the quarters ended December 31, 1999, and March 31, 2000, (iii) the Risk Factors, attached as EXHIBIT J, (the "Risk Factors") (iv) the Capitalization Schedule, attached as EXHIBIT K, (the "Capitalization Schedule") and (v) the Use of Proceeds Schedule, attached as EXHIBIT L, (the "Use of Proceeds Schedule"); (b) Investor has read, 22 reviewed, and relied solely on the documents described in (a) above, the Company's representations and warranties and other information in this Agreement, including the exhibits, documents prepared by the Company which have been specifically provided to Investor in connection with this Offering (the documents described in this Section 3.2.4 (a) and (b) are collectively referred to as the "Disclosure Documents"), and an independent investigation made by Investor and Investor's representatives, if any; (c) Investor has, prior to the date of this Agreement, been given an opportunity to review material contracts and documents of the Company which have been filed as exhibits to the Company's filings under the Act and the Exchange Act and has had an opportunity to ask questions of and receive answers from the Company's officers and directors; and (d) is not relying on any oral representation of the Company or any other person, nor any written representation or assurance from the Company other than those contained in the Disclosure Documents or incorporated herein or therein. The foregoing, however, does not limit or modify Investor's right to rely upon covenants, representations and warranties of the Company in Sections 5 and 6 of this Agreement. Investor acknowledges and agrees that the Company has no responsibility for, does not ratify, and is under no responsibility whatsoever to comment upon or correct any reports, analyses or other comments made about the Company by any third parties, including, but not limited to, analysts' research reports or comments (collectively, "Third Party Reports"), and Investor has not relied upon any Third Party Reports in making the decision to invest. 3.2.5 INVESTMENT EXPERIENCE; FEND FOR SELF. Investor has substantial experience in investing in securities and it has made investments in securities other than those of the Company. Investor acknowledges that Investor is able to fend for Investor's self in the transaction contemplated by this Agreement, that Investor has the ability to bear the economic risk of Investor's investment pursuant to this Agreement and that Investor is an "Accredited Investor" by virtue of the fact that Investor meets the investor qualification standards set forth in Section 3.1 above. Investor has not been organized for the purpose of investing in securities of the Company, although such investment is consistent with Investor's purposes. 23 3.3 EXEMPT OFFERING UNDER REGULATION D. 3.3.1 NO GENERAL SOLICITATION. The Investment Agreement was not offered to Investor through, and Investor is not aware of, any form of general solicitation or general advertising, including, without limitation, (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 3.3.2 RESTRICTED SECURITIES. Investor understands that the Investment Agreement is, the Common Stock issued at each Put Closing will be, and the Warrant Shares will be, characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction exempt from the registration requirements of the federal securities laws and that under such laws and applicable regulations such securities may not be transferred or resold without registration under the Act or pursuant to an exemption therefrom. In this connection, Investor represents that Investor is familiar with Rule 144 under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 3.3.3 DISPOSITION. Without in any way limiting the representations set forth above, Investor agrees that until the Securities are sold pursuant to an effective Registration Statement or an exemption from registration, they will remain in the name of Investor and will not be transferred to or assigned to any broker, dealer or depositary. Investor further agrees not to sell, transfer, assign, or pledge the Securities (except for any bona fide pledge arrangement to the extent that such pledge does not require registration under the Act or unless an exemption from such registration is available and provided further that if such pledge is realized upon, any transfer to the pledgee shall comply with the requirements set forth herein), or to otherwise dispose of all or any portion of the Securities unless and until: (a) There is then in effect a registration statement under the Act and any applicable state securities laws covering such proposed disposition and such disposition is made in accordance with such registration statement and in compliance with applicable prospectus delivery requirements; or (b) (i) 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 to the extent relevant for determination of the availability of an exemption from registration, and (ii) if reasonably requested by the Company, Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of the Securities under the Act or state securities laws. It is agreed that the Company will not require the Investor to provide opinions of counsel for transactions made pursuant to Rule 144 provided that Investor and Investor's broker, if necessary, provide the Company with the necessary representations for counsel to the Company to issue an opinion with respect to such transaction. The Investor is entering into this Agreement for its own account and the Investor has no present arrangement (whether or not legally binding) at any time to sell the Common Stock to or through any person or entity; provided, 24 however, that by making the representations herein, the Investor does not agree to hold the Common Stock for any minimum or other specific term and reserves the right to dispose of the Common Stock at any time in accordance with federal and state securities laws applicable to such disposition. 3.4 DUE AUTHORIZATION. 3.4.1 AUTHORITY. The person executing this Investment Agreement, if executing this Agreement in a representative or fiduciary capacity, has full power and authority to execute and deliver this Agreement and each other document included herein for which a signature is required in such capacity and on behalf of the subscribing individual, partnership, trust, estate, corporation or other entity for whom or which Investor is executing this Agreement. Investor has reached the age of majority (if an individual) according to the laws of the state in which he or she resides. 3.4.2 DUE AUTHORIZATION. Investor is duly and validly organized, validly existing and in good standing as a limited liability company under the laws of Georgia with full power and authority to purchase the Securities to be purchased by Investor and to execute and deliver this Agreement. 3.4.3 PARTNERSHIPS. If Investor is a partnership, the representations, warranties, agreements and understandings set forth above are true with respect to all partners of Investor (and if any such partner is itself a partnership, all persons holding an interest in such partnership, directly or indirectly, including through one or more partnerships), and the person executing this Agreement has made due inquiry to determine the truthfulness of the representations and warranties made hereby. 3.4.4 REPRESENTATIVES. If Investor is purchasing in a representative or fiduciary capacity, the representations and warranties shall be deemed to have been made on behalf of the person or persons for whom Investor is so purchasing. 4. ACKNOWLEDGMENTS. Investor is aware that: 4.1 RISKS OF INVESTMENT. Investor recognizes that an investment in the Company involves substantial risks, including the potential loss of Investor's entire investment herein. Investor recognizes that the Disclosure Documents, this Agreement and the exhibits hereto do not purport to contain all the information, which would be contained in a registration statement under the Act; 4.2 NO GOVERNMENT APPROVAL. No federal or state agency has passed upon the Securities, recommended or endorsed the Offering, or made any finding or determination as to the fairness of this transaction; 4.3 NO REGISTRATION, RESTRICTIONS ON TRANSFER. As of the date of this Agreement, the Securities and any component thereof have not been registered under the Act or any applicable state securities laws by reason of exemptions from the registration requirements of the Act and such laws, and may not be sold, pledged (except for any limited pledge in connection with a margin account of Investor to the extent that such pledge does not require registration under the Act or unless an exemption from such registration is available and provided 25 further that if such pledge is realized upon, any transfer to the pledgee shall comply with the requirements set forth herein), assigned or otherwise disposed of in the absence of an effective registration of the Securities and any component thereof under the Act or unless an exemption from such registration is available; 4.4 RESTRICTIONS ON TRANSFER. Investor may not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Securities or any component thereof in the absence of either an effective registration statement or an exemption from the registration requirements of the Act and applicable state securities laws; 4.5 NO ASSURANCES OF REGISTRATION. There can be no assurance that any registration statement will become effective at the scheduled time, or ever, or remain effective when required, and Investor acknowledges that it may be required to bear the economic risk of Investor's investment for an indefinite period of time; 4.6 EXEMPT TRANSACTION. Investor understands that the Securities are being offered and sold in reliance on specific exemptions from the registration requirements of federal and state law and that the representations, warranties, agreements, acknowledgments and understandings set forth herein are being relied upon by the Company in determining the applicability of such exemptions and the suitability of Investor to acquire such Securities. 4.7 LEGENDS. The certificates representing the Put Shares shall not bear a legend restricting the sale or transfer thereof ("Restrictive Legend"). The certificates representing the Warrant Shares shall not bear a Restrictive Legend unless they are issued at a time when the Registration Statement is not effective for resale. It is understood that the certificates evidencing any Warrant Shares issued at a time when the Registration Statement is not effective for resale, subject to legend removal under the terms of Section 6.8 below, shall bear the following legend (the "Legend"): "The securities represented hereby have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws, nor the securities laws of any other jurisdiction. They may not be sold or transferred in the absence of an effective registration statement under those securities laws or pursuant to an exemption therefrom." 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the following representations and warranties to Investor (which shall be true at the signing of this Agreement, and as of any such later date as specified hereunder) and agrees with Investor that, except as set forth in the "Schedule of Exceptions" attached hereto as EXHIBIT C: 5.1 ORGANIZATION, GOOD STANDING, AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, USA and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would, in the Company's opinion, have a material adverse effect on the business or properties of the Company and its subsidiaries taken as a whole. The Company is not the subject of any pending, threatened or, to its knowledge, contemplated investigation or administrative or legal proceeding (a "Proceeding") by the 26 Internal Revenue Service, the taxing authorities of any state or local jurisdiction, or the Securities and Exchange Commission, the National Association of Securities Dealers, Inc., the Nasdaq Stock Market, Inc. or any state securities commission, or any other governmental entity, which have not been disclosed in the Disclosure Documents. None of the disclosed Proceedings, if any, will, in the Company's opinion, have a material adverse effect upon the Company. The Company has the following subsidiaries: InfoPak, Inc. 5.2 CORPORATE CONDITION. The Company's condition is, in all material respects, as described in the Disclosure Documents (as further set forth in any subsequently filed Disclosure Documents, if applicable), except for changes in the ordinary course of business and normal year-end adjustments that are not, in the aggregate, materially adverse to the Company. Except for continuing losses, there have been no material adverse changes to the Company's business, financial condition, or prospects from the dates of such Disclosure Documents through the date of the Investment Commitment Closing. The financial statements as contained in the 10-KSB and 10-QSB have been prepared in accordance with generally accepted accounting principles, consistently applied (except as otherwise permitted by Regulation S-X of the Exchange Act, or Generally Accepted Accounting Principles, as applicable), subject, in the case of unaudited interim financial statements, to customary year end adjustments and the absence of certain footnotes, and fairly present the financial condition of the Company as of the dates of the balance sheets included therein and the consolidated results of its operations and cash flows for the periods then ended. Without limiting the foregoing, there are no material liabilities, contingent or actual, that are not disclosed in the Disclosure Documents (other than liabilities incurred by the Company in the ordinary course of its business, consistent with its past practice, after the period covered by the Disclosure Documents). The Company has paid all material taxes that are due, except for taxes that it reasonably disputes. There is no material claim, litigation, or administrative proceeding pending or, to the best of the Company's knowledge, threatened against the Company, except as disclosed in the Disclosure Documents. This Agreement and the Disclosure Documents do not contain any untrue statement of a material fact and do not omit to state any material fact required to be stated therein or herein necessary to make the statements contained therein or herein not misleading in the light of the circumstances under which they were made. No event or circumstance exists relating to the Company which, under applicable law, requires public disclosure but which has not been so publicly announced or disclosed. 5.3 AUTHORIZATION. All corporate action on the part of the Company by its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and the authorization, issuance and delivery of the Common Stock being sold hereunder and the issuance (and/or the reservation for issuance) of the Warrants and the Warrant Shares have been taken, and this Agreement and the Registration Rights Agreement constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except insofar as the enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or other similar laws affecting creditors' rights generally or by principles governing the availability of equitable remedies. The Company has obtained all consents and approvals required for it to execute, deliver and perform each agreement referenced in the previous sentence. 5.4 VALID ISSUANCE OF COMMON STOCK. The Common Stock and the Warrants, when issued, sold and delivered in accordance with the terms hereof, for the consideration expressed herein, will be validly issued, fully paid and nonassessable and, based in part upon the representations of Investor in this Agreement, will be issued in compliance with all applicable U.S. federal and 27 state securities laws. The Warrant Shares, when issued in accordance with the terms of the Warrants, shall be duly and validly issued and outstanding, fully paid and nonassessable, and based in part on the representations and warranties of Investor, will be issued in compliance with all applicable U.S. federal and state securities laws. The Put Shares, the Warrants and the Warrant Shares will be issued free of any preemptive rights. 5.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or default of any provisions of its Certificate of Incorporation or Bylaws, each as amended and in effect on and as of the date of the Agreement, or of any material provision of any material instrument or material contract to which it is a party or by which it is bound or of any provision of any federal or state judgment, writ, decree, order, statute, rule or governmental regulation applicable to the Company, which would, in the Company's opinion, have a material adverse effect on the Company's business or prospects, or on the performance of its obligations under this Agreement or the Registration Rights Agreement. The execution, delivery and performance of this Agreement and the other agreements entered into in conjunction with the Offering and the consummation of the transactions contemplated hereby and thereby will not (a) result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company, which would, in the Company's opinion, have a material adverse effect on the Company's business or prospects, or on the performance of its obligations under this Agreement, the Registration Rights Agreement, or (b) violate the Company's Certificate of Incorporation or By-Laws or (c) violate any statute, rule or governmental regulation applicable to the Company which violation would, in the Company's opinion, have a material adverse effect on the Company's business or prospects. 5.6 REPORTING COMPANY. The Company is subject to the reporting requirements of the Exchange Act, has a class of securities registered under Section 12 of the Exchange Act, and has filed all reports required by the Exchange Act since the date the Company first became subject to such reporting obligations. The Company undertakes to furnish Investor with copies of such reports as may be reasonably requested by Investor prior to consummation of this Offering and thereafter, to make such reports available, for the full term of this Agreement, including any extensions thereof, and for as long as Investor holds the Securities. The Common Stock is duly listed or approved for quotation on the O.T.C. Bulletin Board. The Company is not in violation of the listing requirements of the O.T.C. Bulletin Board and does not reasonably anticipate that the Common Stock will be delisted by the O.T.C. Bulletin Board for the foreseeable future. The Company has filed all reports required under the Exchange Act. The Company has not furnished to the Investor any material nonpublic information concerning the Company. 5.7 CAPITALIZATION. The capitalization of the Company as of the date hereof, subject to exercise of any outstanding warrants and/or exercise of any outstanding stock options, and after taking into account the offering of the Securities contemplated by this Agreement and all other share issuances occurring prior to this Offering, is as set forth in the Capitalization Schedule as set forth in EXHIBIT K. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities. Except as disclosed in the Capitalization Schedule, as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, calls or commitments of any character whatsoever 28 relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, and (ii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of its or their securities under the Act (except the Registration Rights Agreement). 5.8 INTELLECTUAL PROPERTY. The Company has valid, unrestricted and exclusive ownership of or rights to use the patents, trademarks, trademark registrations, trade names, copyrights, know-how, technology and other intellectual property necessary to the conduct of its business. EXHIBIT M lists all patents, trademarks, trademark registrations, trade names and copyrights of the Company. The Company has granted such licenses or has assigned or otherwise transferred a portion of (or all of) such valid, unrestricted and exclusive patents, trademarks, trademark registrations, trade names, copyrights, know-how, technology and other intellectual property necessary to the conduct of its business as set forth in EXHIBIT M. The Company has been granted licenses, know-how, technology and/or other intellectual property necessary to the conduct of its business as set forth in EXHIBIT M. To the best of the Company's knowledge after due inquiry, the Company is not infringing on the intellectual property rights of any third party, nor is any third party infringing on the Company's intellectual property rights. There are no restrictions in any agreements, licenses, franchises, or other instruments that preclude the Company from engaging in its business as presently conducted. 5.9 USE OF PROCEEDS. As of the date hereof, the Company expects to use the proceeds from this Offering (less fees and expenses) for the purposes and in the approximate amounts set forth on the Use of Proceeds Schedule set forth as EXHIBIT L hereto. These purposes and amounts are estimates and are subject to change without notice to any Investor. 5.10 NO RIGHTS OF PARTICIPATION. No person or entity, including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the financing contemplated by this Agreement which has not been waived. 5.11 COMPANY ACKNOWLEDGMENT. The Company hereby acknowledges that Investor may elect to hold the Securities for various periods of time, as permitted by the terms of this Agreement, the Warrants, and other agreements contemplated hereby, and the Company further acknowledges that Investor has made no representations or warranties, either written or oral, as to how long the Securities will be held by Investor or regarding Investor's trading history or investment strategies. 5.12 NO ADVANCE REGULATORY APPROVAL. The Company acknowledges that this Investment Agreement, the transaction contemplated hereby and the Registration Statement contemplated hereby have not been approved by the SEC, or any other regulatory body and there is no guarantee that this Investment Agreement, the transaction contemplated hereby and the Registration Statement contemplated hereby will ever be approved by the SEC or any other regulatory body. The Company is relying on its own analysis and is not relying on any representation by Investor that either this Investment Agreement, the transaction contemplated hereby or the Registration Statement contemplated hereby has been or will be approved by the SEC or other appropriate regulatory body. 29 5.13 UNDERWRITER'S FEES AND RIGHTS OF FIRST REFUSAL. The Company is not obligated to pay any compensation or other fees, costs or related expenditures in cash or securities to any underwriter, broker, agent or other representative in connection with this Offering. 5.14 AVAILABILITY OF SUITABLE FORM FOR REGISTRATION. The Company is currently eligible and agrees to maintain its eligibility to register the resale of its Common Stock on a registration statement on a suitable form under the Act. 5.15 NO INTEGRATED OFFERING. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any of the Company's securities or solicited any offers to buy any security under circumstances that would prevent the parties hereto from consummating the transactions contemplated hereby pursuant to an exemption from registration under Regulation D of the Act or would require the issuance of any other securities to be integrated with this Offering under the Rules of the SEC. The Company has not engaged in any form of general solicitation or advertising in connection with the offering of the Common Stock or the Warrants. 5.16 FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary has, in the course of its actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 5.17 KEY EMPLOYEES. As of the date of this Agreement, each "Key Employee" (as defined in EXHIBIT N) is currently serving the Company in the capacity disclosed in EXHIBIT N. No Key Employee, to the best knowledge of the Company and its subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each Key Employee does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. No Key Employee has, to the best knowledge of the Company and its subsidiaries, any intention to terminate his employment with, or services to, the Company or any of its subsidiaries. 5.18 REPRESENTATIONS CORRECT. The foregoing representations, warranties and agreements are true, correct and complete in all material respects, and shall survive any Put Closing and the issuance of the shares of Common Stock thereby. 5.19 TAX STATUS. The Company has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those 30 being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. 5.20 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Disclosure Documents, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 5.21 APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination or other similar anti-takeover provision under Delaware law which is or could become applicable to the Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the issuance of the Common Stock, any exercise of the Warrants and ownership of the Common Shares and Warrant Shares. The Company has not adopted and will not adopt any "poison pill" provision that will be applicable to Investor as a result of transactions contemplated by this Agreement. 5.22 OTHER AGREEMENTS. The Company has not, directly or indirectly, made any agreements with the Investor under a subscription in the form of this Agreement for the purchase of Common Stock, relating to the terms or conditions of the transactions contemplated hereby or thereby except as expressly set forth herein, respectively, or in exhibits hereto or thereto. 5.23 MAJOR TRANSACTIONS. There are no other Major Transactions currently pending or contemplated by the Company. 5.24 FINANCINGS. There are no other financings currently pending or contemplated by the Company. 5.25 SHAREHOLDER AUTHORIZATION. The Company shall, at its next annual shareholder meeting following its listing on either the Nasdaq Small Cap Market or the Nasdaq National Market, or at a special meeting to be held as soon as practicable thereafter, use its best efforts to obtain approval of its shareholders to (i) authorize the issuance of the full number of shares of Common Stock which would be issuable under this Agreement and eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or any of its securities with respect to the Company's ability to issue shares of Common Stock in excess of the Cap Amount (such approvals being the "20% Approval") and (ii) increase the number of authorized shares of Common Stock of the Company (the "Share Authorization Increase Approval") such that at least 25,000,000 shares can be reserved for this Offering. In connection with such shareholder vote, the Company shall use its best efforts to cause all officers and directors of the Company to promptly 31 enter into irrevocable agreements to vote all of their shares in favor of eliminating such prohibitions. As soon as practicable after the 20% Approval and the Share Authorization Increase Approval, the Company agrees to use its best efforts to reserve 25,000,000 shares of Common Stock for issuance under this Agreement. 5.26 ACKNOWLEDGMENT OF LIMITATIONS ON PUT AMOUNTS. The Company understands and acknowledges that the amounts available under this Investment Agreement are limited, among other things, based upon the liquidity of the Company's Common Stock traded on its Principal Market. 5.27 DILUTION. The number of shares of Common Stock issuable as Put Shares may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Commitment Period. The Company's executive officers and directors fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, whenever the Company elects to initiate a Put, its obligation to issue the Put Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company. 6. COVENANTS OF THE COMPANY. 6.1 INDEPENDENT AUDITORS. The Company shall, until at least the Termination Date, maintain as its independent auditors an accounting firm authorized to practice before the SEC. 6.2 CORPORATE EXISTENCE AND TAXES; CHANGE IN CORPORATE ENTITY. The Company shall, until at least the Termination Date, maintain its corporate existence in good standing and, once it becomes a "Reporting Issuer" (defined as a Company which files periodic reports under the Exchange Act), remain a Reporting Issuer and shall pay all its taxes when due except for taxes which the Company disputes. The Company shall not, at any time after the date hereof, enter into any merger, consolidation or corporate reorganization of the Company with or into, or transfer all or substantially all of the assets of the Company to, another entity unless the resulting successor or acquiring entity in such transaction, if not the Company (the "Surviving Entity"), (i) has Common Stock listed for trading on the OTC Bulletin Board, Nasdaq or on another national stock exchange and is a Reporting Issuer, (ii) assumes by written instrument the Company's obligations with respect to this Investment Agreement, the Registration Rights Agreement, the Transfer Agent Instructions, the Warrant Antidilution Agreement, the Warrants and the other agreements referred to herein, including but not limited to the obligations to deliver to the Investor shares of Common Stock and/or securities that Investor is entitled to receive pursuant to this Investment Agreement and upon exercise of the Warrants and agrees by written instrument to reissue, in the name of the Surviving Entity, any Warrants (each in the same terms, including but not limited to the same reset provisions, as the applicable Warrant originally issued or required to be issued by the Company) that are outstanding immediately prior to such transaction, making appropriate proportional adjustments to the number of shares represented by such Warrants and the exercise prices of such Warrants to accurately reflect the exchange represented by the transaction. 32 6.3 REGISTRATION RIGHTS. The Company will enter into a registration rights agreement covering the resale of the Common Shares and the Warrant Shares substantially in the form of the Registration Rights Agreement attached as EXHIBIT A. 6.4 ASSET TRANSFERS. The Company shall not (i) transfer, sell, convey or otherwise dispose of any of its material assets to any subsidiary except for a cash or cash equivalent consideration and for a proper business purpose or (ii) transfer, sell, convey or otherwise dispose of any of its material assets to any Affiliate, as defined below, during the Term of this Agreement. For purposes hereof, "Affiliate" shall mean any officer of the Company, director of the Company or owner of twenty percent (20%) or more of the Common Stock or other securities of the Company. 6.5 CAPITAL RAISING LIMITATIONS AND RIGHTS OF FIRST REFUSAL. 6.5.1 CAPITAL RAISING LIMITATIONS. During the period from the date of this Agreement until the date that is sixty (60) days after the Termination Date, the Company shall not issue or sell, or agree to issue or sell Equity Securities (as defined below), for cash in private capital raising transactions without obtaining the prior written approval of the Investor of the Offering (the limitations referred to in this subsection 6.5.1 are collectively referred to as the "Capital Raising Limitations"). For purposes hereof, the following shall be collectively referred to herein as, the "Equity Securities": (i) Common Stock or any other equity securities, (ii) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock or other equity securities, or (iii) any securities of the Company pursuant to an equity line structure or format similar in nature to this Offering. 6.5.2 INVESTOR'S RIGHT OF FIRST REFUSAL. For any private capital raising transactions of Equity Securities which close after the date hereof and on or prior to the date that is sixty (60) days after the Termination Date of this Agreement, not including any warrants issued in conjunction with this Investment Agreement, the Company agrees to deliver to Investor, at least ten (10) days prior to the closing of such transaction, written notice describing the proposed transaction, including the terms and conditions thereof, and providing the Investor and its affiliates an option (the "Right of First Refusal") during the ten (10) day period following delivery of such notice to purchase the securities being offered in such transaction on the same terms as contemplated by such transaction. 6.5.3 EXCEPTIONS TO CAPITAL RAISING LIMITATIONS AND RIGHTS OF FIRST REFUSAL. Notwithstanding the above, neither the Capital Raising Limitations nor the Rights of First Refusal shall apply to any transaction involving issuances of securities by the Company to a company being acquired by the Company, as payment to such company for such acquisition, or in connection with the exercise of options by employees or directors of the Company, or a primary underwritten offering of the Company's Common Stock. The Capital Raising Limitations and Rights of First Refusal also shall not apply to (a) the issuance 33 of securities upon exercise or conversion of the Company's options, warrants or other convertible securities outstanding as of the date hereof, (b) the grant of additional options or warrants, or the issuance of additional securities, under any Company stock option or restricted stock plan for the benefit of the Company's employees or directors, or (c) the issuance of debt securities, with no equity feature, incurred solely for working capital purposes. 6.6 FINANCIAL 10-KSB STATEMENTS, ETC. AND CURRENT REPORTS ON FORM 8-K. The Company shall deliver to the Investor copies of its annual reports on Form 10-KSB, and quarterly reports on Form 10-QSB and shall deliver to the Investor current reports on Form 8-K within two (2) days of filing for the Term of this Agreement. 6.7 OPINION OF COUNSEL. Investor shall, concurrent with the Investment Commitment Closing, receive an opinion letter from the Company's legal counsel, in the form attached as EXHIBIT B, or in such form as agreed upon by the parties, and shall, concurrent with each Put Date, receive an opinion letter from the Company's legal counsel, in the form attached as EXHIBIT I or in such form as agreed upon by the parties. 6.8 REMOVAL OF LEGEND. If the certificates representing any Securities are issued with a restrictive Legend in accordance with the terms of this Agreement, the Legend shall be removed and the Company shall issue a certificate without such Legend to the holder of any Security upon which it is stamped, and a certificate for a security shall be originally issued without the Legend, if (a) the sale of such Security is registered under the Act, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions (the reasonable cost of which shall be borne by the Investor), to the effect that a public sale or transfer of such Security may be made without registration under the Act, or (c) such holder provides the Company with reasonable assurances that such Security can be sold pursuant to Rule 144. Each Investor agrees to sell all Securities, including those represented by a certificate(s) from which the Legend has been removed, or which were originally issued without the Legend, pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or in compliance with an exemption from the registration requirements of the Act. 6.9 LISTING. Subject to the remainder of this Section 6.9, the Company shall ensure that its shares of Common Stock (including all Warrant Shares and Put Shares) are listed and available for trading on the O.T.C. Bulletin Board. Thereafter, the Company shall (i) use its best efforts to continue the listing and trading of its Common Stock on the O.T.C. Bulletin Board or to become eligible for and listed and available for trading on the Nasdaq Small Cap Market, the NMS, or the New York Stock Exchange ("NYSE"); and (ii) comply in all material respects with the Company's reporting, filing and other obligations under the By-Laws or rules of the National Association of Securities Dealers ("NASD") and such exchanges, as applicable. 6.10 THE COMPANY'S INSTRUCTIONS TO TRANSFER AGENT. The Company will instruct the Transfer Agent of the Common Stock (the "Transfer Agent"), by delivering instructions in the form of EXHIBIT T hereto, to issue certificates, registered in the name of each Investor or its nominee, for the Put Shares and Warrant Shares in such amounts as specified from time to time by the Company upon any exercise by the Company of a Put and/or exercise of the Warrants by the holder thereof. Such certificates shall not bear a Legend unless issuance with a Legend is permitted by the terms of this Agreement and Legend removal is not permitted by Section 6.8 hereof and the Company shall cause the Transfer Agent to issue such certificates without a Legend. Nothing in this Section shall affect in any way Investor's obligations and agreement set forth in Sections 3.3.2 or 3.3.3 hereof to resell the Securities pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or in compliance with an exemption from the registration requirements of applicable securities laws. If (a) an Investor provides the Company with an opinion of counsel, which opinion of counsel shall be in form, substance and scope customary for opinions of counsel in comparable transactions, to the 34 effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from registration or (b) an Investor transfers Securities, pursuant to Rule 144, to a transferee which is an accredited investor, the Company shall permit the transfer, and, in the case of Put Shares and Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denomination as specified by such Investor. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to an Investor by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 6.10 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 6.10, that an Investor shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 6.11 STOCKHOLDER 20% APPROVAL. Prior to the closing of any Put that would cause the Aggregate Issued Shares to exceed the Cap Amount, if required by the rules of NASDAQ because the Company's Common Stock is listed on NASDAQ, the Company shall obtain approval of its stockholders to authorize (i) the issuance of the full number of shares of Common Stock which would be issuable pursuant to this Agreement but for the Cap Amount and eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or any of its securities with respect to the Company's ability to issue shares of Common Stock in excess of the Cap Amount (such approvals being the "Stockholder 20% Approval"). 6.12 PRESS RELEASE. Any public announcement relating to this financing (a "Press Release") shall be submitted to the Investor for review at least two (2) business days prior to the planned release. The Company shall not disclose the Investor's name in any press release or other public announcement without the Investor's prior written approval. The Company shall obtain the Investor's written approval of the Press Release prior to issuance by the Company. 6.13 CHANGE IN LAW OR POLICY. In the event of a change in law, or policy of the SEC, as evidenced by a No-Action letter or other written statements of the SEC or the NASD which causes the Investor to be unable to perform its obligations hereunder, this Agreement shall be automatically terminated and no Termination Fee shall be due, provided that notwithstanding any termination under this section 6.13, the Investor shall retain full ownership of the Commitment Warrant as partial consideration for its commitment hereunder. 6.14. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall immediately notify the Investor, but in no event later than two (2) business days by facsimile and by overnight courier, upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to 35 the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) the declaration by the SEC of the effectiveness of a Registration Statement; and (vi) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to the Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to the Investor any Put Notice during the continuation of any of the foregoing events. 6.15 ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF THE SECURITIES. The Company acknowledges and agrees that the Investor is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor's purchase of the Securities. The Company further represents to the Investor that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives and advisors. 6.16. LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that the sums payable as Non-Usage Fees, Termination Fees and Ineffective Registration Payments shall each give rise to liquidated damages and not penalties. The parties further acknowledge that (a) the amount of loss or damages likely to be incurred by the Investor is incapable or is difficult to precisely estimate, (b) the amounts specified bear a reasonable proportion and are not plainly or grossly disproportionate to the probable loss likely to be incurred by the Investor, and (c) the parties are sophisticated business parties and have been represented by sophisticated and able legal and financial counsel and negotiated this Agreement at arm's length. 6.17. COPIES OF FINANCIAL STATEMENTS, REPORTS AND PROXY STATEMENTS. Promptly upon the mailing thereof to the shareholders of the Company generally, the Company shall deliver to the Investor copies of all financial statements, reports and proxy statements so mailed and any other document generally distributed to shareholders. 36 6.18. NOTICE OF CERTAIN LITIGATION. Promptly following the commencement thereof, the Company shall provide the Investor written notice and a description in reasonable detail of any litigation or proceeding to which the Company or any subsidiary of the Company is a party, in which the amount involved is $250,000 or more and which is not covered by insurance or in which injunctive or similar relief is sought. 7. MISCELLANEOUS. 7.1 REPRESENTATIONS AND WARRANTIES SURVIVE THE CLOSING; SEVERABILITY. Investor's and the Company's representations and warranties shall survive the Investment Date and any Put Closing contemplated by this Agreement notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, or is altered by a term required by the Securities Exchange Commission to be included in the Registration Statement, this Agreement shall continue in full force and effect without said provision; provided that if the removal of such provision materially changes the economic benefit of this Agreement to the Investor, this Agreement shall terminate. 7.2 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable by either party. 7.3 EXECUTION IN COUNTERPARTS PERMITTED. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one (1) instrument. 7.4 TITLES AND SUBTITLES; GENDER. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. The use in this Agreement of a masculine, feminine or neuter pronoun shall be deemed to include a reference to the others. 7.5 WRITTEN NOTICES, ETC. Any notice, demand or request required or permitted to be given by the Company or Investor pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally, or by facsimile or upon receipt if by overnight or two (2) day courier, addressed to the parties at the addresses and/or facsimile telephone number of the parties set forth at the end of this Agreement or such other address as a party may request by notifying the other in writing; provided, however, that in order for any notice to be effective as to the Investor such notice shall be delivered and sent, as specified herein, to all the addresses and facsimile telephone numbers of the Investor set forth at the end of this Agreement or such other address and/or facsimile telephone number as Investor may request in writing. 7.6 EXPENSES. Except as set forth in the Registration Rights Agreement, each of the Company and Investor shall pay all costs and expenses that it respectively incurs, with respect to the negotiation, execution, delivery and performance of this Agreement. 7.7 ENTIRE AGREEMENT; WRITTEN AMENDMENTS REQUIRED. This Agreement, including the Exhibits attached hereto, the Common Stock certificates, the Warrants, the Registration Rights Agreement, and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, 37 representations or covenants, whether oral, written, or otherwise except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 7.8 ACTIONS AT LAW OR EQUITY; JURISDICTION AND VENUE. The parties acknowledge that any and all actions, whether at law or at equity, and whether or not said actions are based upon this Agreement between the parties hereto, shall be filed in any state or federal court sitting in Atlanta, Georgia. Georgia law shall govern both the proceeding as well as the interpretation and construction of the Transaction Documents and the transaction as a whole. In any litigation between the parties hereto, the prevailing party, as found by the court, shall be entitled to an award of all attorney's fees and costs of court. Should the court refuse to find a prevailing party, each party shall bear its own legal fees and costs. 7.9 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on the Principal Market on any given Trading Day for the purposes of this Agreement shall be the Bloomberg L.P. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity. 8. SUBSCRIPTION AND WIRING INSTRUCTIONS; IRREVOCABILITY. (a) WIRE TRANSFER OF SUBSCRIPTION FUNDS. Investor shall deliver Put Dollar Amounts (as payment towards any Put Share Price) by wire transfer, to the Company pursuant to a wire instruction letter to be provided by the Company, and signed by the Company. (b) IRREVOCABLE SUBSCRIPTION. Investor hereby acknowledges and agrees, subject to the provisions of any applicable laws providing for the refund of subscription amounts submitted by Investor, that this Agreement is irrevocable and that Investor is not entitled to cancel, terminate or revoke this Agreement or any other agreements executed by such Investor and delivered pursuant hereto, and that this Agreement and such other agreements shall survive the death or disability of such Investor and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and assigns. If the Securities subscribed for are to be owned by more than one person, the obligations of all such owners under this Agreement shall be joint and several, and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors, administrators, successors, legal representatives and assigns. 38 9. INDEMNIFICATION AND REIMBURSEMENT. (a) INDEMNIFICATION. In consideration of the Investor's execution and delivery of the Investment Agreement, the Registration Rights Agreement and the Warrants (the "Transaction Documents") and acquiring the Securities thereunder and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless Investor and all of its stockholders, officers, directors, employees and direct or indirect investors and any of the foregoing person's agents, members, partners or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorney's fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or documents contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (c) any cause of action, suit or claim, derivative or otherwise, by any stockholder of the Company based on a breach or alleged breach by the Company or any of its officers or directors of their fiduciary or other obligations to the stockholders of the Company, or (d) claims made by third parties against any of the Indemnitees based on a violation of Section 5 of the Securities Act caused by the integration of the private sale of common stock to the Investor and the public offering pursuant to the Registration Statement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which it would be required to make if such foregoing undertaking was enforceable which is permissible under applicable law. Promptly after receipt by an Indemnified Party of notice of the commencement of any action pursuant to which indemnification may be sought, such Indemnified Party will, if a claim in respect thereof is to be made against the other party (hereinafter "Indemnitor") under this Section 9, deliver to the Indemnitor a written notice of the commencement thereof and the Indemnitor shall have the right to participate in and to assume the defense thereof with counsel reasonably selected by the Indemnitor, provided, however, that an Indemnified Party shall have the right to retain its own counsel, with the reasonably incurred fees and expenses of such counsel to be paid by the Indemnitor, if representation of such Indemnified Party by the counsel retained by the Indemnitor would be inappropriate due to actual or potential conflicts of interest between such Indemnified Party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the Indemnitor within a reasonable time of the commencement of any such action, if prejudicial to the Indemnitor's ability to defend such action, shall relieve the Indemnitor of any liability to the Indemnified Party under this Section 9, but the omission to so deliver written notice to the Indemnitor will not relieve it of any liability that it may have to any Indemnified Party other than under this Section 9 to the extent it is prejudicial. (b) REIMBURSEMENT. If (i) the Investor, other than by reason of its gross negligence or willful misconduct, becomes involved in any capacity in any action, proceeding or investigation brought by any stockholder of the Company, in connection with or as a result of the consummation of the 39 transactions contemplated by the Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person or entity, or (ii) the Investor, other than by reason of its gross negligence or willful misconduct, becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person or entity, then in any such case, the Company will reimburse the Investor for its reasonable legal and other expenses (including the cost of any investigation and preparation ) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearing, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Investor who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Investor and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Investor and any such Affiliate and any such person or entity. The Company also agrees that neither the Investor nor any such Affiliate, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of the Investor or any inaccuracy in any representation or warranty of the Investor contained herein or any breach by the Investor of any of the provisions hereof. 40 10. ACCREDITED INVESTOR. Investor is an "accredited investor" because (check all applicable boxes): (a) [ ] it is an organization described in Section 501(c)(3) of the Internal Revenue Code, or a corporation, limited duration company, limited liability company, business trust, or partnership not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000. (b) [ ] any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment. (c) [ ] a natural person, who [ ] is a director, executive officer or general partner of the issuer of the securities being offered or sold or a director, executive officer or general partner of a general partner of that issuer. [ ] has an individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeding $1,000,000. [ ] had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. (d) [ ] an entity each equity owner of which is an entity described in a - b above or is an individual who could check one (1) of the last three (3) boxes under subparagraph (c) above. (e) [ ] other [specify] ___________________________________________. 41 The undersigned hereby subscribes the Maximum Offering Amount and acknowledges that this Agreement and the subscription represented hereby shall not be effective unless accepted by the Company as indicated below. IN WITNESS WHEREOF, the undersigned Investor does represent and certify under penalty of perjury that the foregoing statements are true and correct and that Investor by the following signature(s) executed this Agreement. Dated this 2nd day of MARCH, 2001. SWARTZ PRIVATE EQUITY, LLC By: /s/ Eric S. Swartz -------------------------------- Eric S. Swartz, Manager SECURITY DELIVERY INSTRUCTIONS: Swartz Private Equity, LLC c/o Eric S. Swartz 300 Colonial Center Parkway Suite 300 Roswell, GA 30076 Telephone: (770) 640-8130 THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM OFFERING AMOUNT ON THE 2ND DAY OF MARCH, 2001. DIMENSIONAL VISIONS INCORPORATED By: /s/ John D. McPhilimy ------------------------------------- John D. McPhilimy, President Address: Attn: John D. McPhilimy, President 2301 W. Dunlap Ave., Ste. 207 Phoenix, AZ 85021 Telephone (602) 997-1990 Facsimile (602) 997-5658 42 ADVANCE PUT NOTICE DIMENSIONAL VISIONS INCORPORATED (the "Company") hereby intends, subject to the Individual Put Limit (as defined in the Investment Agreement), to elect to exercise a Put to sell the number of shares of Common Stock of the Company specified below, to _____________________________, the Investor, as of the Intended Put Date written below, all pursuant to that certain Investment Agreement (the "Investment Agreement") by and between the Company and Swartz Private Equity, LLC dated on or about March 2, 2001. Date of Advance Put Notice: ___________________ Intended Put Date: ____________________________ Intended Put Share Amount: ____________________ Company Designation Maximum Put Dollar Amount (Optional): --------------------------------------------------------. Company Designation Minimum Put Share Price (Optional): --------------------------------------------------------. DIMENSIONAL VISIONS INCORPORATED By: ------------------------------------- John D. McPhilimy, President Address: Attn: John D. McPhilimy, President 2301 W. Dunlap Ave., Ste. 207 Phoenix, AZ 85021 Telephone (602) 997-1990 Facsimile (602) 997-5658 43 EXHIBIT E CONFIRMATION of ADVANCE PUT NOTICE _________________________________, the Investor, hereby confirms receipt of DIMENSIONAL VISIONS INCORPORATED's (the "Company") Advance Put Notice on the Advance Put Date written below, and its intention to elect to exercise a Put to sell shares of common stock ("Intended Put Share Amount") of the Company to the Investor, as of the intended Put Date written below, all pursuant to that certain Investment Agreement (the "Investment Agreement") by and between the Company and Swartz Private Equity, LLC dated on or about March 2, 2001. Date of Confirmation: _____________________ Date of Advance Put Notice: _______________ Intended Put Date: ________________________ Intended Put Share Amount: ________________ Company Designation Maximum Put Dollar Amount (Optional): ------------------------------------------------------------. Company Designation Minimum Put Share Price (Optional): ------------------------------------------------------------. INVESTOR(S) ---------------------------------------- Investor's Name By: ------------------------------------- (Signature) Address: -------------------------------- -------------------------------- -------------------------------- Telephone No.: -------------------------- Facsimile No.: -------------------------- 44 EXHIBIT F PUT NOTICE DIMENSIONAL VISIONS INCORPORATED (the "Company") hereby elects to exercise a Put to sell shares of common stock ("Common Stock") of the Company to _____________________________, the Investor, as of the Put Date, at the Put Share Price and for the number of Put Shares written below, all pursuant to that certain Investment Agreement (the "Investment Agreement") by and between the Company and Swartz Private Equity, LLC dated on or about March 2, 2001. Put Date: _________________ Intended Put Share Amount (from Advance Put Notice): _________________ Common Shares Company Designation Maximum Put Dollar Amount (Optional): ------------------------------------------------------------. Company Designation Minimum Put Share Price (Optional): ------------------------------------------------------------. Note: Capitalized terms shall have the meanings ascribed to them in this Investment Agreement. DIMENSIONAL VISIONS INCORPORATED By: ------------------------------------- John D. McPhilimy, President Address: Attn: John D. McPhilimy, President 2301 W. Dunlap Ave., Ste. 207 Phoenix, AZ 85021 Telephone (602) 997-1990 Facsimile (602) 997-5658 45 CONFIRMATION of PUT NOTICE _________________________________, the Investor, hereby confirms receipt of Dimensional Visions Incorporated (the "Company") Put Notice and election to exercise a Put to sell ___________________________ shares of common stock ("Common Stock") of the Company to Investor, as of the Put Date, all pursuant to that certain Investment Agreement (the "Investment Agreement") by and between the Company and Swartz Private Equity, LLC dated on or about March 2, 2001. Date of Confirmation: _____________________ Date of Advance Put Notice: _______________ Put Date: _________________________________ Intended Put Share Amount: ________________ Company Designation Maximum Put Dollar Amount (Optional): ------------------------------------------------------------. Company Designation Minimum Put Share Price (Optional): ------------------------------------------------------------. INVESTOR(S) ---------------------------------------- Investor's Name By: ------------------------------------- (Signature) Address: -------------------------------- -------------------------------- -------------------------------- Telephone No.: -------------------------- Facsimile No.: -------------------------- EXHIBIT G EX-5 4 ex-5.txt OPINION AND CONSENT OF SENN PALUMBO MEULEMANS, LLP Exhibit 5 [LETTERHEAD OF SENN PALUMBO MEULEMANS, LLP] March 6, 2001 DIMENSIONAL VISIONS INCORPORATED Ladies and Gentlemen: This office represents Dimensional Visions Incorporated, a Delaware corporation (the "Registrant") in connection with the Registrant's Registration Statement on Form SB-2 under the Securities Act of 1933 (the "Registration Statement"), which relates to the sale of 33,681,207 shares of the Registrant's Common Stock (the "Shares" or the "Registered Securities") by certain beneficial owners of the Company's shares. In connection with our representation, we have examined such documents and undertaken such further inquiry as we consider necessary for rendering the opinion hereinafter set forth. Based upon the foregoing, it is our opinion that the Registered Securities, when sold as set forth in the Registration Statement, will be legally issued, fully paid and nonassessable. We acknowledge that we are referred to under the heading "Legal Matters" in the prospectus which is a part of the Registration Statement, and we hereby consent to such use of our name in such Registration Statement and to the filing of this opinion as Exhibit 5 to the Registration Statement and with such state regulatory agencies in such states as may require such filing in connection with the registration of the Registered Securities for offer and sale in such states. SENN PALUMBO MEULEMANS, LLP /s/ Senn Palumbo Meulemans, LLP EX-10.4 5 ex10-4.txt LEASE AGREEMENT DATED 10/27/97 Exhibit 10.4 OFFICE LEASE by and between PRESSION ADVISORY L.L.C An Arizona Limited Liability Company "Landlord" and DIMENSIONAL VISIONS GROUP, LTD. A Delaware Corporation "Tenant" October 27, 1997 for premises known as "DUNLAP EXECUTIVE OFFICE" 2301 West Dunlap Avenue, Suite 207 Phoenix, Arizona TABLE OF CONTENTS PAGE - ----------------- ---- 1. BASIC PROVISIONS 1 2. LEASED PREMISES; NO ADJUSTMENT 2 3. LEASE TERM; COMMENCEMENT DATE 2 4. SECURITY DEPOSIT 2 5. RENT; RENT TAX; ADDITIONAL RENT 3 6. OPERATING COSTS 3 7. CONDITION, REPAIRS AND ALTERATIONS 4 8. SERVICES 5 9. LIABILITY AND CASUALTY INSURANCE 6 10. CASUALTY DAMAGE 6 11. WAIVER OF SUBROGATION 7 12. LANDLORD'S RIGHT TO PERFORM TENANT OBLIGATIONS 7 13. DEFAULT AND REMEDIES 7 14. LATE PAYMENTS 8 15. SURRENDER 8 16. INDEMNIFICATION AND EXCULPATION 9 17. ENTRY BY LANDLORD 9 18. SUBSTITUTE PREMISES 9 19. ASSIGNMENT AND SUBLETTING 10 20. USE OF LEASED PREMISES 11 21. SUBORDINATION AND ATTORNMENT 11 22. ESTOPPEL CERTIFICATE 12 23. SIGNS 12 24. PARKING 12 25. LIENS 12 26. HOLDING OVER 12 27. ATTORNEYS' FEES 13 28. RESERVED RIGHTS OF LANDLORD 13 29. EMINENT DOMAIN 13 30. NOTICES 13 31. RULES AND REGULATIONS 14 32. ACCORD AND SATISFACTION 14 33. EARLY MOVE-IN 14 34. MISCELLANEOUS 14 OFFICE LEASE I. BASIC PROVISIONS
1.1 Date October 27. 1997 1.2 Landlord: Presson Advisory. L.LC. an Arizona Limited Liability Company 1.3 Landlord's Address: 501 Fast Thomas. Suite 200 Phoenix. Arizona 85012 1.4 Tenant: Dimensional Visions Group, Ltd. A Delaware Corporation 1.5 Tenant's Address 2301 West Dunlap, Suite 207 Phoenix, Arizona 85021 1.6 Property The parcel of real estate located in Maricopa County, Arizona, described on Exhibit "A" attached hereto and incorporated herein by this reference. 1.7 Building That certain office building located at 2301 West Dunlap. Phoenix, AZ and situated on the Property, and the landscaping, parking facilities, and all other improvements and appurtenances to the Property. 1.8 Leased Premises Approximately 3100 rentable square feet of office space located on the 2nd floor of the Building and commonly known as Suite 207 1.9 Permitted use General office and no other purpose. 1.10 Lease Term. Three (3) years and One-Half (1/2 ) months. 1.11 Scheduled Commencement Date: December 15, 1997 1.12 Annual Basic Rent: December 15, 1997 through December 31, 1997-Rent at no charge. 1. $44,950.00 ($3,745.83/month) based upon a rental rate of $14.50 PSF 1/1/98 through 12/31/98. 2. $46,500.00 ($3,875.00/month) based upon a rental rate of $15.00 PSF 1/1/99 through 12/31/99 3. $48,050.00 ($4,004.17/month) based upon a rental rate of $15.50 PSF 1/1/2000 through 12/31/2000. 1.13 Security Deposit. $4,100.00 1.14 Base Year Costs 1998 actual Operating Costs per rentable square foot from the Commencement Date until December 31, 1998 extrapolated over a twelve (12) month period. 1.15 Building Hours 7 a.m., to 7 p.m., Monday through Friday, and 8 a.m. to 2 p.m. on Saturday, excluding recognized federal, state or local holidays. 1.16 Parking Spaces Three (3) covered/reserved. 1.17 Parking Charge. Two (2) covered/reserved no charge. One (1) covered/reserved at $25.00 per month. 1.18 Guarantors None 1.19 Broker DAUM Commercial Real Estate Services and CB Commercial. 1.20 Metropolitan Area: Phoenix 1.21 Late Charge Percentage Ten Percent (10%) 1.22 Riders 1= Hazardous Materials - exception would be for copy machine and common office supplies. 1.23 Exhibits A = Description of the Property B = Floor Plan E = Building Rules and Regulations G = Work Letter
2. LEASED PREMISES: NO ADJUSTMENTS 2.1 Leased Premises. Landlord leases to Tenant, and Tenant leases and accepts from Landlord, the Leased Premises, upon the terms and conditions set forth in this Lease and any modifications, supplements or addenda to this Lease (the "Lease"), including the Basic Provisions of Article I which are incorporated into this Lease by this reference, together with the nonexclusive right to use, in common with Landlord and others, the Building Common Areas (as defined below). For the purposes of this Lease, the term "Building Common Areas" means common hallways, corridors, walkways and footpaths, foyers and lobbies, bathrooms and janitorial closets, electrical and telephone closets, landscaped areas, and such other areas within or adjacent to the Building which are subject to or are designed or intended solely for the common enjoyment, use and/or benefits of the tenants of the Building. 2.2 No Adjustment The Annual Basic Rent at the Commencement Date (as defined below) is based on the Leased Premises containing approximately the rentable square footage set forth in Article 1.8 above. The Annual Basic Rent shall not be increased or decreased if the actual rentable square footage of the Leased Premises is more or less than the rentable square footage set forth in Article 1.8. 3. LEASE TERM: COMMENCEMENT DATE 3.1 Lease Term. The Lease Term shall begin on the Commencement Date and shall be for the period set forth in Article 1.10 above, plus any period of less than one (1) month between the Commencement Date and the first day of the next succeeding calendar month, unless sooner terminated in accordance with the further provisions of this Lease. 3.2 Commencement Date. The Commencement Date shall mean the earliest of (a) the date on which Landlord tenders possession of the Leased Premises to Tenant; (b) the date on which Landlord would have tendered possession of the Leased Premises to Tenant but for any act or omission of Tenant, its agents, contractors or employees, or (c) the date on which Tenant takes possession of the Leased Premises. 3.3 Memorandum of Commencement Date. Landlord and Tenant shall, within ten (10) days after the Commencement Date, execute a declaration in the form of Exhibit "C" attached hereto specifying the Commencement Date should the Commencement Date be a date other than the Scheduled Commencement Date. 3.4 Delay in Commencement Date. In the event Landlord shall be unable, for any reason, to deliver possession of the Leased Premises to Tenant on the Scheduled Commencement Date, Landlord shall not be liable for any loss or damage occasioned due to such failure, nor shall such inability affect the validity of this Lease or the obligations of Tenant. In such event, Tenant shall not be obligated to pay Annual Basic Rent or Additional Rent until the Commencement Date. In the event Landlord shall not have delivered possession of the Leased Premises to Tenant within thirty (30) days after the Scheduled Commencement Date, and if such failure to deliver possession was (a) caused solely by the fault or neglect of Landlord, and (b) not caused by any fault or neglect of Tenant or due to additional time required to plan for and install other work for Tenant beyond the amount of time which would have been required if only building standard improvements had been installed, then, as its sole and exclusive remedy for Landlord's failure to deliver possession of the Leased Premises in a timely manner, Tenant shall have the right to terminate this Lease by delivering written notice of termination to Landlord at any time within thirty (30) days after the expiration of such thirty (30) day period. Such termination shall be effective thirty (30) days after receipt by Landlord of Tenant's notice of termination unless Landlord shall, prior to the expiration of such thirty (30) day period, deliver possession of the Leased Premises to Tenant. Upon a termination of this Lease pursuant to the provisions of this Article 3.4, the parties shall have no further obligations or liabilities to the other and Landlord shall promptly return any monies previously deposited or paid by Tenant. 3.5 Lease Year. Each "Lease Year" shall be a period of twelve (12) consecutive calendar months, the first Lease Year beginning on the Commencement Date or on the first day of the calendar month next succeeding the Commencement Date if the Commencement Date is not on the first day of a calendar month. 4. SECURITY DEPOSIT Tenant shall pay to Landlord, upon the execution of this Lease, the Security Deposit set forth in Article 1.13 above as security for the performance by Tenant of its obligations under this Lease, which amount shall be returned to Tenant after the expiration or earlier termination of this Lease, provided that Tenant shall have fully performed all of its obligations contained in this Lease. The Security Deposit, at the election of Landlord, may be retained by Landlord as and for its full damages or may be applied in reduction of any loss and/or damage sustained by Landlord by reason of the occurrence of any breach, nonperformance or default by Tenant under this Lease without the waiver of any other right or remedy available to Landlord at law, in equity or under the terms of this Lease. If any portion of the Security Deposit is so used or applied, Tenant shall, within five(5) days after written notice from Landlord, deposit with Landlord immediately available funds in an amount sufficient to restore the Security Deposit to its original amount, and Tenant's failure to do so shall be a breach of this Lease. Tenant acknowledges and agrees that in the event Tenant shall file a voluntary petition pursuant to the Bankruptcy Code, or if an involuntary petition is filed against Tenant pursuant to the Bankruptcy Code, then Landlord may apply the Security Deposit towards those obligations of Tenant to Landlord which accrued prior to the filing of such petition. Tenant acknowledges further that the Security Deposit may be commingled with Landlord's other funds and that Landlord shall be entitled to retain any interest earnings on the Security Deposit. In the event of termination of Landlord's Interest in this Lease, Landlord shall transfer the Security Deposit to Landlord's successor in interest, and Landlord shall be released from liability by Tenant for the return of such deposit or for an accounting of the Security Deposit. 5. RENT: RENT TAX: ADDITIONAL RENT 5.1 Payment of Rent. Tenant shall pay to Landlord the Annual Basic Rent set forth in Article 1.12 above, subject to adjustment as provided for in Article 1.12. The Annual Basic Rent shall be paid in equal monthly installments, on or before the first day of each and every calendar month during the Lease Term, in advance, without notice or demand and without abatement, deduction or set-off, except for the first month's rent which is due and payable on execution, and pro-rata, in advance for any partial month.. The Annual Basic Rent for the first full month of the Lease Term shall be paid upon the execution of this Lease. All payments requiring proration shall be prorated on the basis of a thirty (30) day month. In addition, all payments to be made under this Lease shall be paid in lawful money of the United States of America to Landlord or its agent at the address set forth in Article 1.3 above, or to such other person or at such other place as Landlord may from time to time designate in writing. 5.2 Rent Tax. In addition to the Annual Basic Rent and Additional Rent (as defined below), Tenant shall pay to Landlord, together with the monthly installments of Annual Basic Rent and payments of Additional Rent, an amount equal to any state or local sales, rental, occupancy, excise, use or transactional privilege taxes assessed or levied upon Landlord with respect to the amounts paid by Tenant to Landlord under this Lease, as well as all taxes assessed or imposed upon Landlord's gross receipts or gross income from leasing the Leased Premises to Tenant, including, without limitation, transaction privilege taxes, education excise taxes, any tax now or subsequently imposed by the City of Phoenix, the State of Arizona, any other governmental body, and any taxes assessed or imposed in lieu of or in substitution of any of the foregoing taxes. Such taxes shall not, however, include any franchise, gift, estate, inheritance, conveyance, transfer or net income tax assessed against Landlord. 5.3 Additional Rent In addition to Annual Basic Rent, all other amounts to be paid by Tenant to Landlord pursuant to this Lease (including amounts to be paid by Tenant pursuant to Article 6 below), if any, shall be deemed to be Additional Rent, irrespective of whether designated as such, and shall be due and payable within thirty (30) days after receipt by Tenant of Landlord's statement or together with the next succeeding installment of Annual Basic Rent, whichever shall first occur. Landlord shall have the same remedies for the failure to pay Additional Rent as for the nonpayment of Annual Basic Rent. 6. OPERATING COSTS 6.1 Tenant's Obligation. The Annual Basic Rent does riot include amounts attributable to any increase in the amount of Taxes (as hereinafter defined) or amounts attributable to any increase in the cost of the use, management, repair, service, insurance, condition, operation and maintenance of the Building. Therefore, in order that the Annual Basic Rent payable throughout the Lease Term shall reflect any such increases, Tenant shall pay to Landlord, in accordance with the further provisions of this Article 6, an amount per rentable square foot of the Leased Premises equal to the difference between the Operating Costs (as hereinafter defined) per rentable square foot and the Base Year Costs. Tenant acknowledges that the Base Year Costs does not constitute a representation by Landlord as to the Operating Costs per rentable square foot that may be incurred during any calendar year. 6.2 Landlord's Estimate. Landlord shall furnish Tenant an estimate of the Operating Costs per rentable square foot for each Fiscal Year (as hereinafter defined) commencing with the Fiscal Year in which the Commencement Date occurs. In addition, Landlord may, from time to time, furnish Tenant a revised estimate of Operating Costs should Landlord anticipate any increase in Operating Costs from that set forth in a prior estimate. Commencing with the first month to which an estimate applies, Tenant shall pay, in addition to the monthly installments of Annual Basic Rent, an amount equal to one-twelfth (1/12th) of the product of the rentable square footage of the Leased Premises multiplied by the difference (but not less than zero (0)), if any, between such estimate and the Base Year Costs; provided, however, if less than ninety-five percent (95%) of the rentable area of the Building shall be occupied by tenants during the period covered by such estimate, the estimated Operating Costs for such period shall be, for the purposes of this Article 6, increased to an amount reasonably determined by Landlord to be equivalent to the Operating Costs that would be incurred if occupancy would be at least ninety-five percent (95%) during the entire period. Within one hundred twenty (120) days after the expiration of each Fiscal Year or such longer period of time as may be necessary to compile such statement, Landlord shall deliver to Tenant a statement of the actual Operating Costs for such Fiscal Year, If the actual Operating Costs for such Fiscal Year are more or less than the estimated Operating Costs, a proper adjustment shall be made; provided, however, if less than ninety-five percent (95%) of the rentable area of the Building shall have been occupied by tenants at any time during such period, the actual Operating Costs for such period shall be, for the purposes of this Article 6, increased to an amount reasonably determined by Landlord to be equivalent to the Operating Costs that would have been incurred had such occupancy been at least ninety-five (95%) during the entire period. Any excess amounts paid by Tenant shall be, at Landlord's option, applied to any amounts then payable by Tenant to Landlord or to the next maturing monthly installments of Annual Basic Rent or Additional Rent. Any deficiency between the estimated and actual Operating Costs shall be paid by Tenant to Landlord concurrently with the monthly installment of Annual Basic Rent next due. Any amount owing for a fractional Fiscal Year in the first or final Lease Years of the Lease Term shall be prorated. For the purposes of this Lease, the term means the fiscal year (or portion of the fiscal year) of Landlord. The Fiscal Year currently commences on January land ends on December 31; provided, however, Landlord reserves the right to change the Fiscal Year at any time or times, but no such change shall result in an increase in the amounts otherwise payable by Tenant pursuant to the provisions of this Article 6. 6.3 Operating Costs - Defined. For the purposes of this Lease, "Operating Costs" shall mean all costs and expenses accrued, paid or incurred by Landlord, or on Landlord's behalf, in respect of the use, management, repair. service, insurance, condition, operation and maintenance of the Building including, but not limited to the following: (a) salaries, wages and benefits of all persons who perform duties in connection with landscaping, parking, janitorial and general cleaning services, security services and any and all other employees engaged by or on behalf of Landlord; (b) payroll taxes, workmen's compensation, uniforms and related expenses for such employees; (c)the cost of all charges for oil, gas, steam, electricity, any alternate source of energy, heat, ventilation, air-conditioning, refrigeration, water, sewer service, trash collection, pest control and all other utilities, together with any taxes on such utilities; (d) the cost of painting non-tenant space; (e) the cost of all charges for rent, casualty, liability, fidelity and other insurance maintained by Landlord, including any deductible amounts incurred with respect to an insured loss; (f) the cost of all supplies (including cleaning supplies), tools, materials, equipment and personal property, the rental of the personal property and sales, transaction privilege, excise and oilier taxes on the personal property; (g) depreciation of hand tools and other moveable equipment; (h) the cost of all charges for window and other cleaning, janitorial, and security services; (i) the cost of charges for independent contractors; (j) the cost of repairs and replacements made by Landlord at its expense and the fees and other charges for maintenance and service agreements; (k) the cost of exterior and interior landscaping; (l) costs relating to the operation and maintenance of all real property and improvements appurtenant to the Building including, without limitation, all parking areas, service areas, walkways and landscaping; (m) the cost of alterations and improvements made by reason of the laws and requirements of any public authorities or the requirements of insurance bodies; (n) all management fees and other charges for management services and overhead costs (including travel and related expenses), whether provided by an independent management company, Landlord or an affiliate of Landlord, not to exceed, however, the then prevailing range of rates charged in comparable office buildings in tile metropolitan area set forth in Article 1.20; (o) the cost of any capital improvements or additions which improve the comfort or amenities available to tenants of the Building, provided, however, that any such costs shall be amortized with interest over the useful life of the improvement or addition; (p) the cost of any capital improvements or additions which are intended to enhance the safety of the Building or reduce (or avoid increases in) Operating Costs, provided, however, that any such costs shall be amortized with interest over the useful life of the improvement or addition; (q) the cost of licenses and permits, inspection fees and reasonable legal, accounting and other professional fees and expenses; (r) taxes (as defined below); and (s) all other charges properly allocable to the use, management, repair, service, insurance, condition, operation and maintenance of the Building in accordance with generally accepted accounting principles. 6.4 Operating Costs - Exclusions. Excluded from Operating Costs shall be the following: (a) depreciation, except to the extent expressly included pursuant to Article 6.3 above; (b) interest on and amortization of debts, except to the extent expressly included pursuant to Article 6.3 above;(c)leasehold improvements, including redecorating made for tenants of the Building; (d) brokerage commissions and advertising expenses for procuring tenants for the Building or the Property; (e) refinancing costs; (f) the cost of any repair, replacement or addition which would be required to be capitalized under general accepted accounting principles, except to the extent expressly included pursuant to Article 6.3 above; and (g) the cost of any item included in Operating Costs under Article 6.3 above to the extent that such cost is reimbursed or paid directly by an insurance company, condemnor, a tenant of the Building or any other party. 6.5 Taxes - Defined. For the purposes of this Lease, "Taxes" shall mean and include all real property taxes and personal property taxes, general and special assessments, foreseen as well as unforeseen, which are levied or assessed upon or with respect to the Property any improvements, fixtures, equipment and other property of Landlord, real or personal, located on the Property and used in connection with the operation of all or any portion of the Property, as well as any tax, surcharge or assessment which shall be levied or assessed in addition to or in lieu of such real or personal property taxes and assessments. Taxes shall also include any expenses incurred by Landlord in contesting the amount or validity of any real or personal property taxes and assessments. Taxes shall not, however, include any franchise, gift, estate, inheritance, conveyance, transfer or income tax assessed against Landlord. No Waiver. The failure by Landlord to furnish Tenant with a statement of Operating Costs shall not constitute a waiver by Landlord or its right to require Tenant to pay excess Operating Costs per rentable square foot. 7. CONDITION. REPAIRS AND ALTERATIONS 7.1 As-Is Condition. Landlord shall provide the Leased Premises to Tenant, and Tenant accepts the Leased Premises in an "AS-IS" condition, and Landlord makes no representations or warranties concerning the condition of the Leased Premises and has no obligation to construct, remodel, improve, repair, decorate or paint the Leased Premises or any improvement on or part of the Leased Premises, except as set forth in Articles 7.4. 10 or as outlined in the "Work Letter" marked as Exhibit's" below. Tenant represents and warrants that it has inspected the Leased Premises prior to execution of this Lease, and that it is relying on its own inspection in executing this Lease and not on any statement, representation or warranty of Landlord, its agents or employees. 7.2 Alterations and Improvements. Tenant shall not make any improvements or other alterations to the interior or exterior of the Leased Premises (the "Tenant Improvements") without first obtaining the written consent of Landlord to the proposed work, including the plans, specifications and the proposed architect and/or contractor(s) for such alterations and/or improvements. All such Tenant Improvements shall be at the sole cost and expense of Tenant. Tenant acknowledges and agrees that any review by Landlord of Tenant's plans and specifications and/or right of approval exercised by Landlord with respect to any Tenant Improvements is for Landlord's benefit only and Landlord shall not, by virtue of such review or right of approval, be deemed to make any representation. warranty or acknowledgment to Tenant or to any other person or entity as to the adequacy of Tenant's plans and specifications or any Tenant Improvements. 7.3 Tenant's Obligations. Tenant shall, at Tenants sole cost and expense, maintain the Leased Premises in a clean, neat and sanitary condition and shall keep the Leased Premises and every part of the Leased Premises in good condition and repair except where the same is required to be done by Landlord. Tenant waives all rights to make repairs at the expense of Landlord as provided by any law, statute or ordinance now or subsequently in effect. All of Tenant's Improvements are the property of the Landlord, and Tenant shall, upon the expiration or earlier termination of the Lease Term, surrender the Leased Premises, including Tenants Improvements, to Landlord, broom clean and in the same condition as when received, ordinary wear and tear excepted. Except as set forth in Articles 7.4.10 and the "Work Letter" marked as Exhibit "G" below, Landlord has no obligation to construct, remodel, improve, repair, decorate or paint the Leased Premises or any improvement on or part of the Leased Premises. Tenant shall pay for the cost of all repairs to the Leased Premises not required to be made by Landlord and shall be responsible for any redecorating, remodeling, alteration, painting and carpet cleaning other than routine vacuuming during the Lease Term. Tenant shall pay for any repairs to the Leased Premises and/or the Building made necessary by any negligence or carelessness of Tenant, its employees or invitees. 7.4 Landlord's Obligations. Landlord shall (a) make all necessary repairs to the exterior walls, exterior doors, windows and corridors of the Building, (b) keep the Building and the Building Common Areas in good condition, and(c)keep the Building equipment such as elevators, plumbing, heating, air conditioning and similar Building equipment in good repair, but Landlord shall not be liable or responsible for breakdowns or interruptions in service when reasonable efforts are made to restore such service. 7.5 Removal of Alterations. Upon the expiration or earlier termination of this Lease, Tenant shall remove from the Leased Premises all movable trade fixtures and other movable personal property, and shall promptly repair any damage to the Leased Premises and/or the Building caused by such removal. All such removal and repair shall be entirely at Tenants sole cost and expense. At any time within fifteen (15) days prior to the scheduled expiration of the Lease Term or immediately upon any termination of this Lease, Landlord may require that Tenant remove from the Leased Premises any alterations, additions, improvements, trade fixtures, equipment, shelving, cabinet units or movable furniture (and other personal property) designated by Landlord to be removed. In such event, Tenant shall, in accordance with the provisions of Article 7.2 above and Article 10 below, complete such removal (including the repair of any damage caused thereby) entirely at its own expense and within fifteen (15) days after notice from Landlord. All repairs required of tenant pursuant to the provisions of this Article 7.5 and Article 10 below shall be performed in a manner satisfactory to Landlord, and shall include, but not be limited to, repairing plumbing, electrical wiring and holes in walls, restoring damaged floor and/or ceiling tiles, repairing any other cosmetic damage, and cleaning the Leased Premises. Except for normal wear. 7.6 No Abatement. Except as provided herein, Landlord shall have no liability to Tenant, nor shall Tenants covenants and obligations under this Lease, including without limitation, Tenant's obligation to pay Annual Basic Rent and Additional Rent, be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required or permitted to make pursuant to the terms of this Lease or by any other tenants lease or are required by law to be made in and to any portion of the Leased Premises or the Building. Landlord shall, nevertheless, use reasonable efforts to minimize any interference with Tenant's business in the Leased Premises. If Landlord is unable to abate damages within sixty (60) days then Tenant has the right to terminate. 8. SERVICES 8.1 Climate Control. Landlord shall provide reasonable climate control to the Leased Premises during the Building Hours as is suitable, in Landlord's judgment, for the comfortable use and occupation of the Leased Premises, excluding, however, air conditioning, evaporative cooling or heating for electronic data processing or other equipment requiring extraordinary climate control. 8.2 Janitorial Services. Landlord shall make janitorial and cleaning services available to the Leased Premises at least five (5) evenings per week, except recognized federal, state or local holidays. Tenant shall pay to Landlord, within five (5) days after receipt of Landlord's bill, the reasonable costs incurred by Landlord for extra cleaning in the Leased Premises required because of (a) misuse or neglect on the part of Tenant, its employees or invitees, (b) use of portions of the Leased Premises for special purposes requiring greater or more difficult cleaning work than office areas,(c)interior glass partitions or unusual quantities of glass surfaces, (d) non-building standard materials or finishes installed by Tenant or at its request, (e) removal from the Leased Premises of refuse and rubbish of Tenant in excess of that ordinarily accumulated in general office occupancy or at times other than Landlord's standard cleaning times, and (f) shampooing or other forms of carpet cleaning other than routine vacuuming. 8.3 Electricity. Landlord shall, during Building Hours, furnish reasonable amounts of electric current as required for normal and usual lighting purposes and for office machines and equipment such as personal computers, telecopy or facsimile machines, typewriters, adding machines, copying machines, calculators and similar machines and equipment normally utilized in general office use. Tenants use of electric energy in the Leased Premises shall not at any time exceed the capacity of any of the risers, piping, electrical conductors and other equipment in or serving the Leased Premises. The Tenant will have electricity uninterrupted except for any emergency throughout lease period without regauged to building hours. 8.4 Water. Landlord shall furnish cold and heated water for drinking and lavatory purposes to the Building Common Areas. 8.5 Light Bulbs. Landlord shall perform such replacement of lamps, fluorescent tubes and lamp ballasts in the Leased Premises and in the Building as may be required from time to time. If the lighting fixtures in the Leased Premises are other than those furnished at the beginning of the Lease Term, Tenant shall pay Landlord's charge for replacing the lamps, lamp ballasts and fluorescent tubes in such lighting fixtures so installed by Tenant within thirty (30) days after receipt of Landlord's bill. 8.6 Additional Services. Tenant shall pay to Landlord, monthly as billed, as Additional Rent, Landlord's charge for services furnished by Landlord to Tenant in excess of that agreed to be furnished by Landlord pursuant to this Article 8, including, but not limited to (a) any utility services utilized by Tenant during other than Building Hours, and (b) climate control in excess of that agreed to be furnished by Landlord pursuant to Article 8.1 above or provided at times other than Building Hours. 8.7 Interruptions in Service. Landlord does not warrant that any of the foregoing services or any other services which Landlord may supply will be free from interruption. Tenant acknowledges that anyone or more of such services may be suspended by reason of accident, repairs, inspections, alterations or improvements necessary to be made, or by strikes or lockouts, or by reason of operation of law, or by causes beyond the reasonable control of Landlord. Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of Annual Basic Rent or Additional Rent by reason of any disruption of the services to be provided by Landlord pursuant to this Lease. 9. LIABILITY AND CASUALTY INSURANCE 9.1 Liability Insurance. Tenant shall, during the Lease Term, keep in full force and effect, a policy or policies of commercial general liability insurance for bodily injury, personal injury (including wrongful death) and damage to property resulting from (i) any occurrence in the Leased Premises, (ii) any act or omission by Tenant, by any subtenant of Tenant, or by any of their respective invitees, agents, servants, contractors or employees anywhere in the Leased Premises or the Building, (iii) the business operated by Tenant or by any subtenant of Tenant in the Leased Premises, and (iv) the contractual liability of Tenant to Landlord pursuant to the indemnification provisions of Article 16.1 below, which coverage shall not be less than One Million and No/100 Dollars ($l,000,000.00), combined single limit, per occurrence. The liability policy or policies shall contain an endorsement naming Landlord as an additional insured. 9.2 Casualty Insurance. Tenant shall, during the Lease Term, keep in full force and effect, a policy or policies of so called "All Risk" or "All Peril" insurance, including coverage for vandalism or malicious mischief, insuring the Tenant Improvements and Tenant's stock in trade, furniture, personal property, fixtures, equipment and other items in the Leased Premises, with coverage in an amount equal to the replacement cost. 9.3 Worker's Compensation Insurance. Tenant shall, during the Lease Term, keep in full force and effect, a policy or policies of worker's compensation insurance with an insurance carrier and in amounts approved by the Industrial Commission of the State of Arizona. 9.4 Business Interruption Insurance. If Landlord shall so require, Tenant shall, during the Lease Term, keep in full force and effect, a policy or policies of business interruption insurance in an amount equal to twelve (12) monthly installments of Annual Basic Rent and Additional Rent payable to Landlord, together with the taxes on such rent, insuring Tenant against losses sustained by Tenant as a result of any cessation or interruption of Tenant's business in the Leased Premises for any reason. 9.5 Insurance Requirements. Each insurance policy and certificate of such insurance policy obtained by Tenant pursuant to this Lease shall contain a clause that the insurer will provide Landlord with at least thirty (30) days prior written notice of any material change, non-renewal or cancellation of the policy. Each such insurance policy shall be with an insurance company authorized to do business in the State of Arizona and reasonably acceptable to Landlord. A certificate (e.g. Acord Form 27) evidencing the coverage under each such policy, as well as a certified copy of the required additional insured endorsement(s) shall be delivered to Landlord prior to commencement of the Lease Term. All insurance policies required pursuant to this Article 9 shall be written as primary policies, not contributing with or in excess of any coverage which Landlord may carry. Tenant shall procure and maintain all policies entirely at its own expense and shall, at least twenty (20) days prior to the expiration of such policies, furnish Landlord with renewal certificates of such policies. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies maintained by Landlord or the insurance policies required pursuant to this Article 9 or the coverage under such policies. 9.6 Co-Insurance. If on account of the failure of Tenant to comply with the provisions of this Article 9 Landlord is deemed a co-insurer by its insurance carrier, then any loss or damage which Landlord shall sustain by reason of such failure shall be borne by Tenant, and shall be paid by Tenant within ten (10) days after receipt of a bill for such loss or damage. 9.7 Adequacy of Insurance. Landlord makes no representation or warranty to Tenant that the amount of insurance to be carried by Tenant under the terms of this Lease is adequate to fully protect Tenant's interests. If Tenant believes that the amount of any such insurance is insufficient, Tenant is encouraged to obtain, at its sole cost and expense, such additional insurance as Tenant may deem desirable or adequate. Tenant acknowledges that Landlord shall not, by the fact of approving, disapproving, waiving, accepting, or obtaining any insurance, incur any liability for or with respect to the amount of insurance carried, the form or legal sufficiency of such insurance, the solvency of any insurance companies or the payment or defense of any lawsuit in connection with such insurance coverage, and Tenant hereby expressly assumes full responsibility for and all liability, if any, with respect to, Tenant's insurance coverage. 10. CASUALTY DAMAGE 10.1 Obligation to Repair. In the event of any damage to the Leased Premises, Tenant shall promptly notify Landlord in writing. If the Leased Premises or any part of the Building are damaged by fire or other casualty not due to the fault or negligence of Tenant, its employees, invitees, agents, contractors or servants, the damage to the Building and/or the Leased Premises shall be repaired by and at the expense of Landlord, excluding any alterations or improvements made by Tenant, unless this Lease is terminated in accordance with the provisions of Article 10.2 below. Until such repairs by Landlord are completed, Annual Basic Rent and Additional Rent shall be abated in proportion to the part of the Leased Premises which is unusable by Tenant in the conduct of its business. If, however, such damage is due in whole or in part to the fault or neglect of Tenant or any subtenant of Tenant, or any of their respective agents, employees, servants, contractors or invitees, there shall be no abatement of Annual Basic Rent or Additional Rent and Tenant shall be required to repair all such damage at its sole cost and expense. There shall be no abatement of Annual Basic Rent or Additional Rent on account of damage to the Building or the Property unless there is also damage to the Leased Premises. Tenant hereby waives any statute now or subsequently in effect which grants to Tenant the right to terminate this Lease or which provides for an abatement of rent on account of damage or destruction, including, without limitation, ARS. ss. 33-343. 10.2 Landlord's Option. If the damage is not fully covered by Landlord's insurance, or if Landlord determines in good faith that the cost of repairing the damage is more than one-third of the then replacement cost of the Building, or if Landlord has determined in good faith that the required repairs to the Building cannot be made within a one hundred twenty (120) day period without the payment of overtime or other premiums, or in the event a holder of a mortgage or a deed of trust against the Building or the Property requires that all or any portion of the insurance proceeds be applied in reduction of the mortgage debt, or if such damage occurs during the final year of the Lease Term, then Landlord may, by written notice to Tenant within sixty (60) days after the occurrence of such damage, terminate this Lease as of the date set forth in Landlord's notice to Tenant. This right will be reciprocal. If Landlord does not elect to terminate this Lease, Landlord shall, at its sole cost and expense, repair the Building and the Leased Premises, excluding any alterations or improvements made by Tenant, and while such repair work is being performed, the Annual Basic Rent and Additional Rent shall be abated as provided above. Nothing in this Article 10 shall be construed as a limitation of Tenant's liability for any such damage, should such liability otherwise exist. 11. WAIVER OF SUBROGATION Landlord and Tenant each hereby waives its rights and the subrogation rights of its insurer against the other patty and any other tenants of space in the Building or the Property as well as their respective officers, employees, agents, authorized representatives and invitees, with respect to any claims including, but not limited to, claims for injury to any persons, and/or damage to the Property, the Building or the Leased Premises and/or any fixtures, equipment, personal property, furniture, improvements and/or alterations in or to the Leased Premises, which are caused by or result from (a) risks or damages required to be insured against under this Lease, or (b) risks and damages which are insured against by insurance policies maintained by Landlord and Tenant from time to time. Landlord and Tenant shall obtain for the other party from its insurers under each policy required by this Lease or otherwise maintained a waiver of all rights of subrogation which such insurers of Landlord or Tenant might otherwise have against the other party. 12. LANDLORD'S RIGHT TO PERFORM TENANT OBLIGATIONS All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any abatement of Annual Basic Rent or Additional Rent. If Tenant shall fail to pay any sum of money, other than Annual Basic Rent, required to be paid by it under this Lease, or shall fail to perform any other act on its part to be performed under this Lease, and such failure shall continue for ten (10) days after notice of such failure by Landlord (or such shorter period of time as may be reasonable in the event of an emergency), Landlord may (but shall not be obligated to do so) without waiving or releasing Tenant from any of Tenant's obligations, make any such payment or perform any such other act on behalf of Tenant. All sums so paid by Landlord and all necessary incidental costs, together with interest at the greater of (a) eighteen percent (18%) per annum or (b) the rate of interest per annum publicly announced, quoted or published, from time to time, by Bank of America, at its Phoenix, Arizona office as its "reference rate" plus four (4) percentage points, from the date of such payment by Landlord until reimbursement in full by Tenant (the "Default Rate"), shall be payable to Landlord as Additional Rent with the next monthly installment of Annual Basic Rent; provided, however, in no event shall the Default Rate exceed the maximum rate (if any) permitted by applicable law. 13. DEFAULT AND REMEDIES 13.1 Event of Default. If Tenant shall fail to pay any installment of Annual Basic Rent, any Additional Rent or any other sum required to be paid by Tenant under this Lease, and such failure shall continue for ten (10) days, or if Tenant shall fail to perform any of the other covenants or conditions which Tenant is required to observe and perform and such failure shall continue for fifteen (15) days (or such shorter period of time as may be specified by Landlord in the event of an emergency) after written notice of such failure by Landlord to Tenant, or if Tenant makes or has made any warranty, representation or statement to Landlord in connection with this Lease which is or was materially false or misleading when made or furnished, or if Tenant shall commit an Event of Default under any other agreement between Landlord and Tenant, or if the interest of Tenant in this Lease or any of Tenant's equipment, fixtures, or personal property located on the Leased Premises shall be levied upon under execution or other legal process. or if any petition shall be filed by or against Tenant or any Guarantor to declare Tenant or any Guarantor a bankrupt or to delay, reduce or modify Tenant's or any Guarantor's debts or obligations, or if any petition shall be filed or other action taken to reorganize or modify Tenant's or any Guarantor's capital structure, or if Tenant or any Guarantor shall be declared insolvent according to law, or if any assignment of Tenant's or any Guarantor's property shall be made for the benefit of creditors, or if a receiver or trustee is appointed for Tenant or any Guarantor or all or any of their respective property, or if Tenant or any Guarantor shall file a voluntary petition pursuant to the Bankruptcy Code or any successor the Bankruptcy Code or if an involuntary petition be filed against Tenant or any Guarantor pursuant to the Bankruptcy Code or any successor the Bankruptcy Code, then Tenant shall have committed a material breach and default under this Lease (an "Event of Default"). 13.2 Remedies. Upon the occurrence of an Event of Default under this Lease by Tenant, Landlord may, without prejudice to any other rights and remedies available to a landlord at law, in equity or by statute, Landlord may exercise one or more of the following remedies, all of which shall be construed and held to be cumulative and non-exclusive: (a) Terminate this Lease and re-enter and take possession of the Leased Premises, in which event, Landlord is authorized to make such repairs, redecorating, refurbishments or improvements to the Leased Premises as may be necessary in the reasonable opinion of Landlord acting in good faith for the purposes of reletting the Leased Premises and the costs and expenses incurred in respect of such repairs, redecorating and refurbishments and the expenses of such reletting (including brokerage commissions) shall be paid by Tenant to Landlord within ten (10) days after receipt of Landlord's statement; or (b) Without terminating this Lease, re-enter and take possession of the Leased Premises; or (c)Without such re-entry, recover possession of the Leased Premises in the manner prescribed by any statute relating to summary process, and any demand for Annual Basic Rent, re-entry for condition broken, and any and all notices to quit, or other formalities of any nature to which Tenant may be entitled, are hereby specifically waived to the extent permitted by law; or (d) Without terminating this Lease, Landlord may relet the Leased Premises as Landlord may see fit without thereby avoiding or terminating this Lease, and for the purposes of such reletting, Landlord is authorized to make such repairs, redecorating, refurbishments or improvements to the Leased Premises as may be necessary Ill the reasonable opinion of Landlord acting in good faith for the purpose of such reletting, and if a sufficient sum is not realized from such reletting (after payment of all costs and expenses of such repairs, redecorating and refurbishments and expenses of such reletting (including brokerage commissions) and the collection of rent accruing therefrom) each month to equal the Annual Basic Rent and Additional Rent payable under this Lease, then Tenant shall pay such deficiency each month within ten (10) days after receipt of Landlord's statement; or (e) Landlord may declare immediately due and payable all the remaining installments of Annual Basic Rent and Additional Rent, and such amount, less the fair rental value of the Leased Premises for the remainder of the Lease Term shall be paid by Tenant within ten (10) days after receipt of Landlord's statement. Landlord shall not by re-entry or any other act, be deemed to have terminated this Lease, or the liability of Tenant for the total Annual Basic Rent and Additional Rent reserved under this Lease or for any installment of Annual Basic Rent and Additional Rent then due or subsequently accruing, or for damages. unless Landlord notifies Tenant in writing that Landlord has so elected to terminate this Lease. After the occurrence of an Event of Default, the acceptance of Annual Basic Rent or Additional Rent, or the failure to re-enter by Landlord shall not be deemed to be a waiver of Landlord's right to subsequently terminate this Lease and exercise any other rights and remedies available to it, and Landlord may re-enter and take possession of the Leased Premises as if no Annual Basic Rent or Additional Rent had been accepted after the occurrence of an Event of Default. Upon an Event of Default, Tenant shall also pay to Landlord all costs and expenses incurred by Landlord, including court costs and attorneys' fees, in retaking or otherwise obtaining possession of the Leased Premises, removing and storing all equipment, fixtures and personal property on the Leased Premises and otherwise enforcing any of Landlord's rights, remedies or recourses arising as a result of an Event of Default 13.3 Interest on Past Due Amounts. In addition to the late charge described in Article 14 below, if any installment of Annual Basic Rent or Additional Rent is not paid promptly when due, it shall bear interest at the Default Rate; provided, however, this provision shall not relieve Tenant from any default in the making of any payment at the time and in the manner required by this Lease; and provided, further, in no event shall the Default Rate exceed the maximum rate (if any) permitted by applicable law. 13.4 Landlord Default. In the event Landlord should neglect or fail to perform or observe any of the covenants, provisions or conditions contained in this Lease on its part to be performed or observed, and such failure continues for thirty (30) days after written notice of default (or if more than thirty (30) days shall be required because of the nature of the default, if Landlord shall fail to commence the curing of such default within such thirty (30) day period and proceed diligently to completion), then Landlord shall be responsible to Tenant for any actual damages sustained by Tenant as a result of Landlord's breach, but not special or consequential damages. Notwithstanding any other provisions in this Lease, any claim which Tenant may have against Landlord for failure to perform or observe any of the covenants, provisions or conditions contained in this Lease shall be deemed waived unless such claim is asserted by written notice of such claim to Landlord within ten (10) days of commencement of the alleged default or of occurrence of the cause of action and unless suit be brought upon such claim within six (6) months subsequent to the occurrence of such cause of action. Tenant shall have no right to terminate this Lease, except as expressly provided elsewhere in this Lease. 14. LATE PAYMENTS Tenant hereby acknowledges that the late payment by Tenant to Landlord of any monthly installment of Annual Basic Rent any Additional Rent or any other sums due under this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Such costs include but are not limited to processing, administrative and accounting costs. Accordingly, if any monthly installment of Annual Basic Rent, any Additional Rent or any other sum due from Tenant shall not be received by Landlord within ten (10) days after the date when due, Tenant shall pay to Landlord a late charge equal to the greater of the Late Charge Percentage set forth in Article 1.21 multiplied by such overdue amount or One Hundred and No/l00 Dollars ($100.00). Tenant acknowledges that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payments by Tenant. Nothing contained in this Article 14 shall be deemed to condone, authorize, sanction or grant to Tenant an option for the late payment of Annual Basic Rent, Additional Rent or any other sum due under this Lease. If any check of Tenant is returned for insufficient funds, Tenant shall pay to Landlord a Fifty and No/l00 Dollars ($50.00) processing charge, in addition to payment of the amount due plus applicable interest and late charges. 15. SURRENDER Tenant shall, upon the expiration or earlier termination of this Lease, peaceably surrender the Leased Premises, including any Tenant Improvements, in a broom clean condition and otherwise in as good condition as when Tenant took possession, except for (i) reasonable wear and tear subsequent to the last repair, replacement, restoration, alteration or renewal; (ii) loss by fire or other casualty, and (iii) loss by condemnation. If Tenant shall abandon, vacate or surrender the Leased Premises, or be dispossessed by process of law or otherwise, any personal property and fixtures belonging to Tenant and left in the Leased Premises shall be deemed abandoned and, at Landlord's option, title shall pass to Landlord under this Lease as by a bill of sale. Landlord may, however, if it so elects, remove all or any part of such personal property from the Leased Premises and the costs incurred by Landlord in connection with such removal, including storage costs and the cost of repairing any damage to the Leased Premises and/or the Building caused by such removal shall be paid by Tenant within ten (10) days after receipt of Landlord's statement. Upon the expiration or earlier termination of this Lease, Tenant shall surrender to Landlord all keys to the Leased Premises and shall inform Landlord of the combination of any vaults, locks and safes left on the Leased Premises. The obligations of Tenant under this Article 15 shall survive the expiration or earlier termination of this Lease. Tenant shall indemnify Landlord against any loss or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, any claims made by any succeeding Tenant founded on such delay. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating the Leased Premises for the express purpose of arranging a meeting with Landlord for a joint inspection of the Leased Premises. In the event of Tenants failure to give such notice or to participate in such joint inspection, Landlord's inspection at or after Tenant's vacation of the Leased Premises shall be conclusively deemed correct for purposes of determining Tenant's liability for repairs and restoration under this Lease. 16. INDEMNIFICATION AND EXCULPATION 16.1 Indemnification. Tenant shall indemnify, protect, defend and hold Landlord harmless for, from and against all claims, damages, losses, costs, liens, encumbrances, liabilities and expenses, including reasonable attorneys', accountants' and investigators' fees and court costs (collectively, the "Claims"), however caused, arising in whole or in part from Tenant's use of all or any part of the Leased Premises and/or the Building or the conduct of Tenants business or from any activity, work or thing done, permitted or suffered by Tenant or by any invitee, servant, agent, contractor, employee or subtenant of Tenant in the Leased Premises and/or the Building, and shall further indemnify, protect, defend and hold Landlord harmless for, from and against all Claims arising in whole or in part from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease or arising in whole or in part from any act, neglect, fault or omission by Tenant or by any invitee, servant, agent, employee or subtenant of Tenant anywhere in the Leased Premises and/or the Building. In case any action or proceeding is brought against Landlord to which this indemnification shall be applicable, Tenant shall pay all Claims resulting therefrom and shall defend such action or proceeding, if Landlord shall so request, at Tenant's sole cost and expense, by counsel reasonably satisfactory to Landlord. The obligations of Tenant under this Article 16.1 shall survive the expiration or earlier termination of this Lease. 16.2 Exculpation. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property, injury and death to persons and all claims of any other nature resulting from Tenants use of all or any part of the Leased Premises and/or the Building, and Tenant hereby waives all claims against Landlord arising out of Tenants use of all or any part of the Leased Premises and/or the Building. Neither Landlord nor its agents or employees shall be liable for any damaged property of Tenant entrusted to any employee or agent of Landlord or for loss of or damage to any property of Tenant by theft or otherwise. Landlord shall not be liable for any injury or damage to persons or property resulting from any cause, including, but not limited to, fire, explosion, falling plaster, steam, gas, electricity, sewage, odor, noise, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works in tile Building, or from the roof of any structure on the Property, or from any streets or subsurface on or adjacent to the Building or the Property, or from any other place or resulting from dampness or any other causes whatsoever, unless caused solely by the gross negligence or willful misconduct of Landlord. Neither Landlord nor its employees or agents shall be liable for any defects in the Leased Premises and/or the Building, nor shall Landlord be liable for the negligence or misconduct, including, but not limited to, criminal acts, by maintenance or other personnel or contractors serving the Leased Premises and/or the Building, other tenants or third parties, unless Landlord is grossly negligent or guilty of willful misconduct. All property of Tenant kept or stored on the Property shall be so kept or stored at the risk of Tenant only, and Tenant shall indemnify, defend and hold Landlord harmless for, from and against any Claims arising out of damage to the same, including subrogation claims by Tenant's insurance carriers, unless such damage shall be caused by the willful act or gross neglect of Landlord and through no fault of Tenant. None of the events or conditions set forth in this Article 16 shall be deemed a constructive or actual eviction or result in a termination of this Lease, nor shall Tenant be entitled to any abatement or reduction of Annual Basic Rent or Additional Rent by reason of such events or condition. Tenant shall give prompt notice to Landlord with respect to any defects, fires or accidents which Tenant observes in the Leased Premises and/or the Building. 17. ENTRY BY LANDLORD Landlord reserves and shall at any and all times have, upon twenty four (24) hours prior written notice (except in the event of an emergency), the right to enter the Leased Premises, to inspect tile same, to submit the Leased Premises to prospective purchasers or tenants, to post notices of non-responsibility, and to alter, improve or repair the Leased Premises and any portion of the Building of which the Leased Premises area part, without abatement of Annual Basic Rent or Additional Rent, and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, always providing that access into the Leased Premises shall not be blocked thereby, and further providing that the business of Tenant shall not be interfered with unreasonably. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Leased Premises or any loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all the doors in, upon or about the Leased Premises, excluding Tenant's vaults and safes, and Landlord shall have the right to use any and all means which Landlord may deem proper to open such doors in an emergency in order to obtain entry to the Leased Premises, and any entry to the Leased Premises obtained by Landlord by any such means or otherwise shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Leased Premises or an eviction of Tenant from all or any portion of the Leased Premises. Nothing in this Article 17 shall be construed as obligating Landlord to perform any repairs, alterations or maintenance except as otherwise expressly required elsewhere in this Lease. 18. SUBSTITUTE PREMISES 18.1 Relocation of Leased Premises. Landlord may, before or after the Commencement Date, elect by notice to Tenant, to substitute for the Leased Premises other office space in the Building (the "Substitute Premises") designated by Landlord, provided that the Substitute Premises shall contain at least the same useable area as the Leased Premises and have a configuration substantially similar to the Leased Premises. Landlord's notice shall be accompanied by a plan of the Substitute Premises. Tenant shall vacate and surrender the Leased Premises and shall occupy the Substitute Premises promptly (and, in any event, not later than fifteen (15) days) after Landlord has substantially completed the work to be performed by Landlord in the Substitute Premises pursuant to Article 18.2 below. Tenant shall pay the same rental rate per square foot with respect to tile Substitute Premises as was payable with respect to the Leased Premises. This Lease shall remain in full force and effect and the Substitute Premises shall subsequently be deemed to be the Leased Premise 18.2 Compensation to Tenant. In the event Landlord shall elect to relocate Tenant to Substitute Premises, Tenant shall not be entitled to any compensation for any inconvenience or interference with Tenant's business, nor any abatement or reduction of Annual Basic Rent or Additional Rent, but Landlord shall, at Landlord's expense perform the following: (a) furnish and install in the Substitute Premises fixtures, equipment, improvements, appurtenances and leasehold improvements at least equal in kind and quality to those contained or to be contained in the Leased Premises at the time such notices of substitution is given by Landlord; (b) provide personnel to perform, under Tenant's direction, the moving of Tenant's personal property and trade fixtures from the Leased Premises to the Substitute Premises;(c)promptly reimburse Tenant for Tenant's actual and reasonable out-of-pocket costs incurred in connection with the relocation of any telephone or other communications equipment from the Leased Premises to the Substitute Premises; and (d) promptly reimburse Tenant for any other actual and reasonable out-of-pocket costs incurred by Tenant in connection with Tenants move from Leased Premises to the Substitute Premises, provided such costs are approved by Landlord in advance which approval shall not be unreasonably withheld. Tenant shall cooperate with Landlord so as to facilitate the performance by Landlord of its obligations under this Article 13.2 and the prompt surrender by Tenant of the Leased Premises. Without limiting the generality of the preceding sentence, Tenant shall provide Landlord promptly any approvals or instructions and any plans or specifications or any other information reasonably requested by Landlord, and Tenant shall perform promptly in the Substitute Premises any work to be performed in the Substitute Premises by Tenant to prepare the same for Tenant's occupancy. 19. ASSIGNMENT AND SUBLET'TING 19.1 Assignment and Subletting Prohibited. Tenant shall not transfer or assign this Lease or any right or interest under this Lease, or sublet the Leased Premises or any part of the Leased Premises, without first obtaining Landlord's prior written consent, which consent Landlord shall not unreasonably withhold. No transfer or assignment (whether voluntary or involuntary, by operation of law or otherwise) or subletting shall be valid or effective without such prior written consent. Should Tenant attempt to make or allow to be made any such transfer, assignment or subletting, except as stated above, or should any of Tenant's rights under this Lease be sold or otherwise transferred by or under court order or legal process or otherwise, then, and in any of the foregoing events Landlord may, at its option, treat such act as an Event of Default by Tenant. Should Landlord consent to a transfer, assignment or subletting, such consent shall not constitute a waiver of any of the restrictions or prohibitions of this Article 19, and such restrictions or prohibitions shall apply to each successive transfer, assignment or subletting under this Article 19, if any. 19.2 Deemed Transfers. If Tenant is a corporation, an unincorporated association, a limited liability company or a partnership, the transfer, assignment or hypothecation of twenty-five percent (25%) or more of any stock or interest in such corporation, association, limited liability company or partnership shall be deemed a transfer within the meaning of and subject to the provisions of this Article 19. 19.3 Landlord's Consent Required. If Tenant desires at any time to assign this Lease or sublet the Leased Premises or any portion of the Leased Premises, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord: (a) the name, address, telephone number and social security number or taxpayer identification number, if applicable, of the proposed sub-tenant or assignee; (b) the nature of the proposed subtenant's or assignee's business to be carried on in the Leased Premises;(c)the terms and the provisions of the proposed sublease or assignment; and (d) such financial information as Landlord may reasonably request concerning the proposed subtenant or assignee. Tenant's failure to comply with the provisions of this Article 19.3 shall entitle Landlord to withhold its consent to the proposed assignment or subletting. 19.4 Recapture. If Tenant proposes to assign its interest in this Lease or sublet all or any part of the Leased Premises, Landlord may, at its option, upon written notice to Tenant within thirty (30) days after Landlord's receipt of the information specified in Article 19.3 above, elect to recapture all or any portion of the Leased Premises, and within sixty (60) days after notice of such election has been given to Tenant, this Lease shall terminate as to the portion of the Leased Premises recaptured. If all or a portion of the Leased Premises is recaptured by Landlord pursuant to this Article 19.4, Tenant shall promptly execute and deliver to Landlord a termination agreement setting forth the termination date with respect to the Leased Premises or the recaptured portion of the Leased Premises, and prorating the Annual Basic Rent, Additional Rent and other charges payable under this Lease to such date. If Landlord doe not elect to recapture as set forth above, Tenant may then after enter into a valid assignment or sublease with respect to the Leased Premises, provided that Landlord consents to such assignment or sublease pursuant to this Article 19, and provided further, that (a) such assignment or sublease is executed within ninety (90) days after Landlord has given its consent, (b) Tenant pays all amounts then owed to Landlord under this Lease,(c)there is not in existence an Event of Default as of the effective date of the assignment or sublease, (d) there have been no material changes with respect to the financial condition of the proposed subtenant or assignee or the business such party intends to conduct in the Leased Premises, aid (e) a fully executed original of such assignment or sublease providing for an express assumption by the assignee or subtenant of all of the terms, covenants and conditions of this Lease is promptly delivered to Landlord. 19.5 Adjustment to Rental. In the event Tenant assigns its interest in this Lease or sublets the Leased Premises, the Annual Basic Rent set forth in Article 1.12 above, as adjusted, shall be increased effective as of the date of such assignment or subletting to the rent and other consideration payable by any such assignee or sublessee pursuant to such assignment or sublease. Notwithstanding the foregoing, in no event shall the Annual Basic Rent after any such assignment or subletting be less than the Annual Basic Rent specified in Article 1.12 above, as adjusted. 19.6 No Release from Liability. Landlord may collect Annual Basic Rent and Additional Rent from the assignee, subtenant, occupant or other transferee, and apply the amount so collected, first to the monthly installments of Annual Basic Rent, then to any Additional Rent and other sums due and payable to Landlord, and the balance, if any, to Landlord, but no such assignment, subletting, occupancy, transfer or collection shall be deemed a waiver of Landlord's rights under this Article 19, or the acceptance of the proposed assignee, subtenant, occupant or transferee. Notwithstanding any assignment, sublease or other transfer (with or without the consent of Landlord), Tenant shall remain primarily liable under this Lease and neither Tenant nor any Guarantor shall be released from performance of any of the terms, covenants and conditions of this Lease. 19.7 Landlord's Expenses. If Landlord consents to an assignment, sublease or other transfer by Tenant of all or any portion of Tenants interest under this Lease, Tenant shall reimburse Landlord for its actual administrative expenses and for legal, accounting and other out of pocket expenses incurred by Landlord, all not to exceed an aggregate of Two Hundred Fifty and No/100 Dollars ($250.00). 19.8 Assumption Agreement. If Landlord consents to an assignment, sublease or other transfer by Tenant of all or any portion of Tenants interest under this Lease, Tenant shall execute and deliver to Landlord, and cause the transferee to execute and deliver to Landlord, an instrument in the form and substance acceptable to Landlord it) which (a) the transferee adopts this Lease and assumes and agrees to perform, jointly and severally with Tenant, all of the obligations of Tenant under this Lease, (b) Tenant acknowledges that it remains primarily liable for the payment of Annual Basic Rent, Additional Rent and other obligations under this Lease,(c)Tenant subordinates to Landlord's statutory lien, contract lien and security interest, any liens, security interests or other rights which Tenant may claim with respect to any property of transferee and (d) the transferee agrees to use and occupy the Leased Premises solely for the purpose specified in Article 20 and otherwise in strict accordance with this Lease. 20. USE OF LEASED PREMISES The Leased Premises are leased to Tenant solely for the Permitted Use set forth in Article 1.9 above and for no other purpose whatsoever. If Tenant wishes to change the Permitted Use set forth in Article 1.9 above, Tenant shall first seek Landlord's prior written consent. Within thirty (30) days after receipt by Landlord of Tenant's request for consent, Landlord shall provide Tenant written notice that Landlord has (i) consented to the proposed change in the Permitted Use, or (ii) decline to consent to the change, or (iii) elected to terminate this Lease, in which event this Lease shall terminate ten (10) days following receipt by Tenant of Landlord's Notice of Termination. Tenant shall not do or permit anything to be done in or about tile Leased Premises nor bring or keep anything in the Leased Premises which will in any way increase the existing rate of or affect any casualty or other insurance on the Building, the Property, or any of their respective contents, or cause a cancellation of any insurance policy covering the Building, the Property, or any part of the Building or the Property, or any of their respective contents. Tenant shall not do or permit anything to be done in or about the Leased Premises and/or the Building which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them. Tenant shall not use or allow the Leased Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Leased Premises and/or the Building. In addition, Tenant shall not commit or suffer to be committed any waste in or upon the Leased Premises and/or the Building. Tenant shall not use the Leased Premises and/or the Building or permit anything to be done in or about the Leased Premises and/or the Building which will in any way conflict with any matters of record, or any law, statute, ordinance or governmental rule or regulation now in force or which may subsequently be enacted or promulgated, and shall, at its sole cost and expense, promptly comply with all matters of record and all laws, statutes, ordinances and governmental rules, regulations and requirements now in force or which may subsequently be in force and with the requirements of any Board of Fire Underwriters or other similar body now or subsequently constituted, foreseen or unforeseen, ordinary as well as extraordinary, relating to or affecting the condition, use or occupancy of the Property, excluding structural changes not relating to or affected by Tenant's improvements or acts. The judgment of any court of competent jurisdiction or the admission by Tenant in any action against Tenant, irrespective of whether Landlord is a party, that Tenant has violated any matters of record, or any law, statute, ordinance or governmental rule, regulation or requirement, shall be conclusive of that fact between Landlord and Tenant. In addition, Tenant shall not place a load upon any floor of the Leased Premises which exceeds the load per square foot which the floor was designed to carry, nor shall Tenant install business machines or other mechanical equipment in the Leased Premises which cause noise or vibration that may be transmitted to the structure of the Building. 21. SUBORDINATION AND AT'TORNMENT 21.1 Subordination. This Lease and all rights of Tenant under this Lease shall be, at the option of Landlord, subordinate to (a) all matters of record, (b) all ground leases, overriding leases and underlying leases (collectively referred to as the "leases") of the Building or the Property now or subsequently existing,(c)all mortgages and deeds of trust (collectively referred to as the "mortgages") which may now or subsequently encumber or affect the Building or the Property, and (d) all renewals, modifications, amendments, replacements and extensions of leases and mortgages and to spreaders and consolidations of the mortgages, irrespective or whether leases or mortgages shall also cover other lands, buildings or leases. The provisions of this Article 21.1 shall be self-operative and no further instruments of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute, acknowledge and deliver any instrument that Landlord, the lessor under any lease or the holder of any mortgage or any of their respective assigns or successors in interest may reasonably request to evidence such subordination. Any lease to which this Lease is subject and subordinate is called a "Superior Lease" and the lessor under a Superior Lease or its assigns or successors in interest is called a "Superior Lessor". Any mortgage to which this Lease is subject and subordinate is called a "Superior Mortgage" and tile holder of a Superior Mortgage is called a "Superior Mortgagee". If Landlord, a Superior Lessor or a Superior Mortgagee requires that such instruments be executed by Tenant, Tenant's failure to do so within ten (10) days after request for such instrument shall be deemed an Event of Default under this Lease. Tenant waives any right to terminate this Lease because of any foreclosure proceedings. Tenant hereby irrevocably constitutes and appoints Landlord (and any successor Landlord) as Tenants attorney-in-fact to execute and deliver to any Superior Lessor or Superior Mortgagee any documents required to be executed by Tenant for and on behalf of Tenant if Tenant shall have failed to do so within ten (10) days after the request for execution and delivery. 21.2 Attornment If any Superior Lessor or Superior Mortgagee (or any purchaser at a foreclosure sale) succeeds to the rights of Landlord under this Lease, whether through possession or foreclosure action, or the delivery of anew lease or deed (a "Successor Landlord"), Tenant shall attorn to and recognize such Successor Landlord as Tenant's landlord under this Lease and shall promptly execute and deliver any instrument that such Successor Landlord may reasonably request to evidence such attornment. Notwithstanding such subordination, Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Rental Agreement, unless this Rental Agreement is otherwise terminated pursuant to its terms. 22. ESTOPPEL CERTIFICATE Tenant shall, from time to time, within ten (10) days after written request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying: (a) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect); (b) the dates to which Annual Basic Rent, Additional Rent and other charges are paid in advance, if any;(c)that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord under this Lease or specifying such defaults if any are claimed; (d) that Tenant has paid Landlord the Security Deposit; (e) the Commencement Date and the scheduled expiration date of the Lease Term; (f) the rights (if any) of Tenant to extend or renew this Lease or to expand the Leased Premises; and (g) the amount of Annual Basic Rent, Additional Rent and other charges currently payable under this Lease. In addition, such statement shall provide such other information and facts Landlord may reasonably require. Any such statement may be relied upon by any prospective or existing purchaser, ground lessee or mortgagee of all or any portion of the Property, as well as by any other assignee of Landlord's interest in this Lease. Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant (I) that this Lease is in full force and effect, without modification except as may be represented by Landlord; (ii) that there are no uncured defaults in Landlord's performance under this Lease; (iii) that Tenant has paid to Landlord the Security Deposit; (iv) that not more than one month's installment of Annual Basic Rent or Additional Rent has been paid in advance; (v) that the Commencement Date and the scheduled expiration date of the Lease Term are as stated in the statement, (vi) that Tenant has no rights to extend or renew this Lease or to expand the Leased Premises; (vii) that the Annual Basic Rent, Additional Rent and other charges are as set forth in the certificate; and (viii) that the other information and facts set forth in the certificate are true and correct. 23. SIGNS Landlord shall retain absolute control over the exterior appearance of the Building and the exterior appearance of the Leased Premises as viewed from the public halls. Tenant shall not install, or permit to be installed, any drapes. shutters, signs, lettering, advertising, or any items that will in any way alter the exterior appearance of tile Building or the exterior appearance of the Leased Premises as viewed from the public halls or the exterior of the Building. Notwithstanding the foregoing, Landlord shall install, at Tenant's sole cost and expense, letters or numerals at or near the entryway to the Leased Premises provided Tenant obtains Landlord's prior written consent as to size, color, design and location. All such letters or numerals shall be in accordance with the criteria established by Landlord for the Building. In addition, Tenant's name and suite number shall be identified on the Building directory. 24. PARKING Tenant is allocated the number of parking spaces designated in Article 1.16 above entitling Tenant to park in parking spaces located in the Parking Facility as designated by Landlord from time to time for use by Tenant, its employees and licensees, and for which Tenant shall pay the monthly charges set forth in Article 1.17 above. The parking spaces shall be available to Tenant, its employees and licensees on a "first come, first serve" basis. Landlord reserves the right to increase the parking charges set forth in Article 1.17 in such reasonable amounts as Landlord deems necessary based upon increased costs of operating and maintaining the Parking Facility. Holders of parking passes shall not be entitled to park in visitor parking spaces so designated by Landlord, or in any other parking spaces other than those designated by Landlord for use by holders of parking passes. 25. LIENS Tenant shall keep the Leased Premises free and clear of all mechanic's and materialmen's liens. If, because of any act or omission (or alleged act or omission) of Tenant, any mechanics', materialmen's or other lien, charge or order for the payment of money shall be filed or recorded against the Leased Premises, the Property, or the Building, or against any other property of Landlord (irrespective of whether such lien, charge or order is valid or enforceable as such), Tenant shall, at its own expense, cause the same to be canceled or discharged of record within thirty (30) days after Tenant shall have received written notice of the filing of such lien, or Tenant may. within such thirty (30) day period, furnish to Landlord, a bond pursuant to A.R.S. ss.33-1004 (or any successor statute) and satisfactory to Landlord and all Superior Lessors and Superior Mortgagees against the lien, charge or order, in which case Tenant shall have the right to contest, in good faith, the validity or amount of such lien. 26. HOLDING OVER It is agreed that the date of termination of this Lease and the right of Landlord to recover immediate possession of the Leased Premises thereupon is an important and material matter affecting the parties hereto and the rights of third parties, all of which have been specifically considered by Landlord and Tenant. In the event of any continued occupancy or holding over of the Leased Premises without the express written consent of Landlord beyond the expiration or earlier termination of this Lease or of Tenants right to occupy the Leased Premises, whether in whole or in part, or by leaving property on the Leased Premises or otherwise, this Lease shall be deemed a monthly tenancy and Tenant shall pay 150% times the Annual Basic Rent then in effect, in advance at the beginning of the hold-over month(s), plus any Additional Rent or other charges or payments contemplated in this Lease. 27. ATTORNEYS' FEES Tenant shall pay to Landlord all amounts for costs (including reasonable attorneys' fees) incurred by Landlord in connection with any breach or default by Tenant under this Lease or incurred in order to enforce or interpret the terms or provisions of this Lease. Such amounts shall be payable within ten (10) days after receipt by Tenant of Landlord's statement. In addition, if any action shall be instituted by either of the parties hereto for the enforcement or interpretation of any of their respective rights or remedies in or under this Lease, the prevailing party shall be entitled to recover from the losing party all costs incurred by the prevailing party in such action and any appeal therefrom, including reasonable attorneys' fees to be fixed by the court. 28. RESERVED RIGHTS OF LANDLORD Landlord reserves the following rights, exercisable without liability to Tenant for damage or injury to property, persons or business and without effecting an eviction, constructive or actual, or disturbance of Tenant's use or possession or giving rise to any claim: (a) to name the Building and the Property and to change the name or street address of the Building and the Property; (b) to install and maintain all signs on the exterior and interior of the Building and the Property;(c)to designate all sources furnishing sign painting and lettering; (d) during the last ninety (90) days of the Lease Term, if Tenant has vacated the Leased Premises, to decorate, remodel, repair, alter or otherwise prepare the Leased Premises for re-occupancy, without affecting Tenants obligation to pay Annual Basic Rent; (e) on reasonable prior notice to Tenant, to exhibit the Leased Premises to any prospective purchaser, mortgagee, or assignee of any mortgage on the Building or the Property and to others having interest in the Leased Premises, Building and/or the Property, at any time during the Lease Term, and to prospective tenants during the last six (6) months of the Lease Term; (f) to take any and all measures, including entering the Leased Premises for the purposes of making inspections, repairs, alterations, additions and improvements to the Leased Premises or to the Building (including, for the purposes of checking, calibrating, adjusting and balancing controls and other parts of the Building systems) as maybe necessary or desirable for the operation, improvement, safety, protection or preservation of the Leased Premises or the Building, or in order to comply with all laws, orders and requirements of governmental or other authorities, or as may otherwise be permitted or required by this Lease; provided, however, that Landlord shall endeavor (except in an emergency) to minimize interference with Tenants business in the Leased Premises; (g) to relocate various facilities within the Building and on the Property if Landlord shall determine such relocation to be in the best interest of the development of the Building and/or the Property, provided, that such relocation shall not materially restrict access to the Leased Premises; (h) to change the nature, extent, arrangement, use and location of the Building Common Areas; (i) to make alterations or additions to and to build additional stories on the Building and to build additional buildings or improvements on the Property; and (j) to install vending machines of all kinds in the Leased Premises and the Building, and to receive all of the revenue derived therefrom, provided, however, that no vending machines shall be installed by Landlord in the Leased Premises unless Tenant so requests. Landlord further reserves the exclusive right to the roof of the Building. No easement for light, air, or view is included in the leasing of the Leased Premises to Tenant. Accordingly, any diminution or shutting off of light, air or view by any structure which may be erected on the Property or other properties in the vicinity of the Building shall in no way affect this Lease or impose any liability upon Landlord. 29. EMINENT DOMAIN 29.1 Taking. If the whole of the Building is lawfully and permanently taken by condemnation or any other manner for any public or quasi-public purpose, or by deed in lieu of condemnation, this Lease shall terminate as of the date of vesting of title in such condemning authority and the Annual Basic Rent and Additional Rent shall be pro rated to such date. If any part of the Building or Property is so taken, or if the whole of the Building is taken, but not permanently, then this Lease shall be unaffected thereby, except that (a) Landlord may terminate this Lease by notice to Tenant within sixty (60) days after the date of vesting of title in the condemning authority, and (b) if twenty percent (20%) or more of the Leased Premises shall be permanently taken and the remaining portion of the Leased Premises shall not be reasonably sufficient for Tenant to continue operation of its business, Tenant may terminate this Lease by notice to Landlord within sixty (60) days after the date of vesting of title in such condemning authority. This Lease shall terminate on the thirtieth (30th) day after receipt by Landlord of such notice, by which date Tenant shall vacate and surrender the Leased Premises to Landlord. The Annual Basic Rent and Additional Rent shall be pro rated to the earlier of the termination of this Lease or such date as Tenant is required to vacate the Leased Premises by reason of the taking. If this Lease is not terminated as a result of a partial taking of the Leased Premises, the Annual Basic Rent and Additional Rent shall be equitably adjusted according to the rentable area of the Leased Premises and Building remaining. 29.2 Award. In the event of a taking of all or any part of the Building or the Property, all of the proceeds or the award, judgment, settlement or damages payable by the condemning authority shall be and remain the sole and exclusive property of Landlord, and Tenant hereby assigns all of its right, title and interest in and to any such award, judgment, settlement or damages to Landlord. Tenant shall, however, have the right, to the extent that the same shall not reduce or prejudice amounts available to Landlord, to claim from the condemning authority, but not from Landlord, such compensation as may be recoverable by Tenant in its own right for relocation benefits, moving expenses, and damage to Tenants personal property and trade fixtures. 30. NOTICES Any notice or communication given under the terms of this Lease shall be in writing and shall be delivered in person, sent by any public or private express delivery service or deposited with the United States Postal Service or a successor agency, certified or registered mail, return receipt requested, postage pre-paid, addressed as set forth in the Basic Provisions, or at such other address as a party may from time to time designate by notice under this Article 30. Notice given by personal delivery or by public or private express delivery service shall be effective upon delivery, notice sent by mail shall be deemed to have occurred upon deposit of the notice in the United States mail. The inability to deliver a notice because of a changed address of which no notice was given or a rejection or other refusal to accept any notice shall be deemed to be the receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any notice to be given by Landlord may be given by the legal counsel and/or the authorized agent of Landlord. 31. RULES AND REGULATIONS Tenant shall abide by all rules and regulations (the "Rules and Regulations") of the Building imposed by Landlord, as attached hereto as Exhibit "E" or as may subsequently be issued by Landlord. The Rules and Regulations may be changed from time to time upon ten (10) days notice to Tenant. Breach of the Rules and Regulations, by Tenant shall constitute an Event of Default if such breach is not fully cured within ten (10) days alter written notice to Tenant by Landlord; provided, however, no notice or opportunity to cure shall be required in connection with a breach of rule number 39. Landlord shall not be responsible to Tenant for nonperformance by any other tenant, occupant or invitee of the Building of any Rules or Regulations. 32. ACCORD AND SATISFACTION No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Annual Base Rent and Additional Rent (jointly called "Rent" in this Article 32), shall be deemed to be other than on account of the earliest stipulated Rent due and not yet paid, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction. Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or to pursue any other remedy in this Lease. No receipt of money by Landlord from Tenant after the termination of this Lease, after the service of any notice relating to the termination of this Lease, after the commencement of any suit, or after final judgment for possession of the Leased Premises, shall reinstate, continue or extend the Lease Term or affect any such notice, demand, suit or judgment. 33. EARLY MOVE IN Landlord shall give occupancy to Tenant on December 8, 1997 to start moving furniture, equipment, etc. into the premises. All terms and conditions of this lease shall apply during the early move-in period. 34. MISCELLANEOUS 34.1 Entire Agreement, Amendments. This Lease and any Exhibits attached to and forming a part of this Lease set forth all of the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Leased Premises and there are no covenants, promises, agreements, representations, warranties, conditions or understandings either oral or written between them other than as contained in this Lease. Except as otherwise provided in this Lease, no subsequent alteration, amendment, change or addition to this Lease shall be binding unless it is in writing and signed by both Landlord and Tenant.. 34.2 Time of the Essence. Time is of the essence of each and every term, covenant and condition of this Lease. 34.3 Binding Effect. The covenants and conditions of this Lease shall, subject to the restrictions on assignment and subletting, apply to and bind the heirs, executors, administrators, personal representatives, successors and assigns of the parties to this Lease. 34.4 Recordation Neither this Lease nor any memorandum of this Lease shall be recorded by Tenant. 34.5 Governing law. This Lease and all the terms and conditions of this Lease shall be governed by and construed in accordance with the laws of the State of Arizona. 34.6 No Partnership. Nothing contained in this Lease shall be deemed or construed as creating an agency, partnership or joint venture relationship between Landlord and Tenant or between Landlord and any other party, or cause Landlord to be responsible in any way for the debts or obligations of Tenant or any other party. 34.7 Authority. If Tenant executes this Lease as a partnership, each individual executing this Lease on behalf of the partnership represents and warrants that he or she is a general partner of the partnership and that this Lease is binding upon file partnership in accordance with its terms. If Tenant executes this Lease as a corporation, each of the persons executing this Lease on behalf of Tenant covenants and warrants that Tenant is a duly authorized and existing corporation, that Tenant has and is qualified to transact business in Arizona, that the corporation has full right, authority and power to enter into this Lease and to perform its obligations under this Lease, that each person signing this Lease on behalf of the corporation is authorized to do so and that this Lease is binding upon the corporation in accordance with its terms. 34.8 No Waiver. The failure of either party to insist in any one or more instances upon the strict performance of any one or more of the obligations of this Lease, or to exercise any election contained in this Lease, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this Lease or the right to exercise such election, but the same shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. 34.9 Severability. If any clause or provision of this Lease is or becomes illegal or unenforceable because of any present or future law or regulation of any governmental body or entity effective during the Lease Term, the intention of the parties is that the remaining provisions of this Lease shall not be affected by such determination. 34.10 Exhibits. If any provision contained in an Exhibit or Addenda to this Lease is inconsistent with any other provision of this Lease, the provision contained in this Lease shall supersede the provisions contained in such Exhibit or Addenda, unless otherwise provided. 34.11 Fair Meaning. The language of this Lease shall be construed to its normal and usual meaning and not strictly for or against either Landlord or Tenant. Landlord and Tenant acknowledge and agree that each party has reviewed and revised this Lease and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Lease, or any Exhibits, Riders or amendments to this Lease. 34.12 No Merger. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation of this Lease shall not work as a merger and shall, at Landlord's option, either terminate any or all existing subleases or subtenancies, or operate as an assignment to Landlord of any or all of such subleases or subtenancies. 34.13 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes for labor or materials, governmental restrictions, regulations or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualty and other causes beyond the reasonable control of Landlord shall excuse the Landlord's performance under this Lease for the period of any such prevention, delay, or stoppage. 34.14 Transfer of Landlord's Interest. The term "Landlord" as used in this Lease, insofar as the covenants or agreements on the part of the Landlord are concerned, shall be limited to mean and include only the owner or owners of Landlord's interest in this Lease at the time in question. Upon any transfer or transfers of such interest, the Landlord herein named in this Lease (and in the case of any subsequent transfer, the (lien transferor) shall be relieved of all liability for the performance of any covenants or agreements on the part of the Landlord contained in this Lease. 34.15 Limitation on Landlord's Liability. If Landlord becomes obligated to pay Tenant any judgment arising out of any failure by the Landlord to perform or observe any of the terms, covenants, conditions or provisions to be performed or observed by Landlord under this Lease, Tenant shall be limited in the satisfaction of such judgment solely to Landlord's interest in the Building and the Property or any proceeds arising from the sale of the Building or the Property, and no other property or assets of Landlord or the individual partners, directors, officers or shareholders of Landlord or its constituent partners shall be subject to levy, execution or other enforcement procedure whatsoever for the satisfaction of any such money judgment. 34.16 Brokerage Fees. Tenant warrants and represents that it has not dealt with any realtor, broker or agent in connection with this Lease except the Broker identified in Article 1.19 above. Tenant shall indemnify, defend and hold Landlord harmless for, from and against any cost, expense or liability (including the cost of suit and reasonable attorneys' fees) for any compensation, commission or charges claimed by any other realtor, broker or agent in connection with this Lease or by reason of any act of Tenant. 34.17 Guaranty. Concurrently with the execution of this Lease, Tenant shall cause the Guarantors to execute, have acknowledged and deliver to Landlord, the Guaranty of Lease attached hereto as Exhibit "F", whereby Guarantors unconditionally guaranty to Landlord each and every obligation of Tenant under this Lease. 34.18 Continuing Obligations. All obligations of Tenant under this Lease not fully performed as of the expiration or earlier termination of this Lease shall survive the expiration or earlier termination of this Lease, including, without limitation, all payment obligations with respect to Annual Basic Rent, Additional Rent and all obligations concerning the condition of the Leased Premises. 34.19 Confidentiality. Tenant shall keep the term, rental rate and all other provisions of this lease confidential and shall prevent the publication or other disclosure thereof by Tenant, its shareholders, officers, directors, employees, agents or representatives unless Tenant receives the prior written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. A breach by Tenant of the provisions of this paragraph shall constitute an Event of Default under this Lease. IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date and year first above written. LANDLORD TENANT PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd. an Arizona Limited Liability Company A Delaware Corporation By Presson Corporation, An Arizona Corporation Its: General Manager By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle ----------------------- ------------------------------- Its President Its: CFO RIDER "1" Rider I to Office Lease dated October 27,1997, between PRESSON ADVISORY L.L.C., an Arizona Limited Liability Company ("Landlord") and Dimensional Visions Group, Ltd. a Delaware Corporation ("Tenant"). 1. Hazardous Materials Laws. "Hazardous Materials Laws" means any and all federal, state or local laws, ordinances, rules, decrees, orders, regulations or court decisions (including the so-called "common-law") relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under or about the Property, or soil and ground water conditions, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, 42 U.S.C.ss.9601, et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.ss.6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C.ss.1801, et seq., any amendments to the foregoing, and any similar federal, state or local laws, ordinances, rules, decrees, orders or regulations. 2. Hazardous Materials. "Hazardous Materials" means any chemical, compound, material, substance or other matter that: (I) is a flammable explosive, asbestos, radioactive material, nuclear medicine material, drug, vaccine, bacteria, virus, hazardous waste, toxic substance, petroleum product, or related injurious or potentially injurious material, whether injurious or potentially injurious by itself or in combination with other materials; (ii) is controlled, designated in or governed by any Hazardous Materials Law; (iii) gives rise to any reporting, notice or publication requirements under any Hazardous Materials Law; or (iv) gives rise to any liability, responsibility or duty on the part of Tenant or Landlord with respect to any third person under any Hazardous Materials Law. 3. Use. Tenant shall not allow any Hazardous Material to be used, generated, released, stored or disposed of on, under or about, or transported from, the Leased Premises, the Building or the Property, unless: (I) such use is specifically disclosed to and approved by Landlord in writing prior to such use; and (ii) such use is conducted in compliance with the provisions of this Rider 1. Landlord may approve such use subject to reasonable conditions to protect the Leased Premises, the Building or the Property, and Landlord's interests. Landlord may withhold approval if Landlord determines that such proposed use involves a material risk of a release or discharge of Hazardous Materials or a violation of any Hazardous Materials Laws or that Tenant has not provided reasonable assurances of its ability to remedy such a violation and fulfill its obligations under this Rider 1. 4. Compliance With Laws. Tenant shall strictly comply with, and shall maintain the Leased Premises in compliance with, all Hazardous Materials Laws. Tenant shall obtain and maintain in full force and effect all permits. licenses and other governmental approvals required for Tenant's operations on the Leased Premises under any Hazardous Materials Laws and shall comply with all terms and conditions of any Hazardous Materials laws. At Landlord's request, Tenant shall deliver copies of; or allow Landlord to inspect, all such permits, licenses and approvals. Tenant shall perform any monitoring, investigation, clean-up, removal and other remedial work (collectively, "Remedial Work") required as a result of any release or discharge of Hazardous Materials affecting the Leased Premises or the Building, or any violation of hazardous Materials Laws by Tenant or any assignee or sublessee of Tenant or their respective agents, contractors, employees, licensees, or invitees. Landlord shall have the right to intervene in any governmental action or proceeding involving any Remedial Work, and to approve performance of the work, in order to protect Landlord's interests. 5. Compliance With Insurance Requirements. Tenant shall comply with the requirements of Landlord's and Tenant's respective insurers regarding Hazardous Materials and with such insurers' recommendations based upon prudent industry practices regarding management of Hazardous Materials. 6. Notice: Reporting. Tenant shall notify Landlord, in writing, within two (2) days after any of the following: (a) a release or discharge of any Hazardous Material, whether or not the release or discharge is in quantities that would otherwise be reportable to a public agency; (b) Tenant's receipt of any order of a governmental agency requiring any Remedial Work pursuant to any Hazardous Materials Laws; (c) Tenant's receipt of any warning, notice of inspection, notice of violation or alleged violation, or Tenant's receipt of notice or knowledge of any proceeding, investigation of enforcement action, pursuant to any Hazardous Materials Laws; or (d) Tenant's receipt of notice or knowledge of any claims made or threatened by any third party against Tenant or the Leased Premises, the Building or the Property, relating to any loss or injury resulting from Hazardous Materials. Tenant shall deliver to Landlord copies of all test results, reports and business or management plans required to be filed with any governmental agency pursuant to any Hazardous Materials Laws. 7 Termination: Expiration. Upon the termination or expiration of this Lease, Tenant shall remove any equipment, improvements or storage facilities utilized in connection with any Hazardous Materials and shall, clean up, detoxify, repair and otherwise restore the Leased Premises to a condition free of Hazardous Materials. 8. Indemnity. Tenant shall protect, indemnify, defend and hold Landlord harmless for, from and against any and all claims, costs, expenses, suits, judgments, actions, investigations, proceedings and liabilities arising out of or in connection with any breach of any provisions of this Rider I or directly or indirectly arising out of the use, generation, storage, release, disposal or transportation of Hazardous Materials by Tenant or any sublessee or assignee of Tenant, or their respective agents, contractors, employees, licensees, or invitees, on, under or about the Leased Premises, the Building or the Property during the Lease Term or Tenant's occupancy of the Leased Premises, including, but not limited to, all foreseeable and unforeseeable consequential damages and the cost of any Remedial Work. Neither the consent by Landlord to the use, generation, storage, release, disposal or transportation of Hazardous Materials nor the strict compliance with all Hazardous Material Laws shall excuse Tenant from Tenant's indemnification obligations pursuant to this Rider 1. The foregoing indemnity shall be in addition to and not a limitation of the indemnification provisions of Rider 1 of the Lease. Tenant's obligations pursuant to this Rider 1 shall survive the termination or expiration of this Lease. 9 Assignment: Subletting. If Landlord's consent is required for an assignment of this Lease or a subletting of the Leased Premises, Landlord shall have the right to refuse such consent if the possibility of a release of Hazardous Materials is materially increased as a result of the assignment or sublease or if Landlord does not receive reasonable assurances that the new tenant has the experience and the financial ability to remedy a violation of the Hazardous Materials Laws and fulfill its obligations under this Rider 1. 10. Entry and Inspection: Cure. Landlord and its agents, employees and contractors, shall have the right, but not the obligation, to enter the Leased Premises at all reasonable times to inspect the Leased Premises and Tenant's compliance with the terms and conditions of this Rider 1, or to conduct investigations and tests. No prior notice to Tenant shall be required in the event of an emergency, or if Landlord has reasonable cause to believe that violations of this Rider 1 have occurred, or if Tenant consents at the time of entry. In all other cases, Landlord shall give at least twenty-four (24) hours prior notice to Tenant. Landlord shall have the right, but not the obligation, to remedy any violation by Tenant of the provisions of this Rider I or to perform any Remedial Work which is necessary or appropriate as a result of any governmental order, investigation or proceeding. Tenant shall pay, upon demand, as Additional Rent, all costs incurred by Landlord in remedying such violations or performing all Remedial Work, plus interest on such costs incurred at the Default Rate from the date of demand until the date received by Landlord. 11. Event of Default. The release or discharge of any Hazardous Material or the violation of any Hazardous Materials Law shall constitute an Event of Default by Tenant under this Lease. In addition to and not in lieu of the remedies available under this Lease as a result of such Event of Default, Landlord shall have the right, without terminating this Lease, to require Tenant to suspend its operations and activities on the Leased Premises until Landlord is satisfied that appropriate Remedial Work has been or is being adequately performed and Landlord's election of this remedy shall not constitute a waive of Landlord's right to subsequently pursue the other remedies set forth in this Lease. LANDLORD TENANT PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd. an Arizona Limited Liability Company A Delaware Corporation By Presson Corporation, An Arizona Corporation Its: General Manager By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle ----------------------- ------------------------------- Its President Its: CFO EXHIBIT "E" RULES AND REGULATIONS 1. Unless otherwise specifically defined in this Exhibit, all capitalized terms in these Rules and Regulations shall have the meaning set forth in the Lease to which these Rules and Regulations are attached. 2. The sidewalks, driveways, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls of the Building shall not be obstructed or encumbered or used for any purpose other than ingress and egress to and from the premises leased to any tenant or occupant. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public, and the Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the Building and its tenants. 3. No awnings or other projection shall be attached to the outside walls or windows of the Building. No curtains, blinds, shades, or screens shall be attached to or hung in, or used in connection with, any window or door of the premises leased to any tenant or occupant, without the prior written consent of Landlord. All electrical fixtures hung in any premises leased to any tenant or occupant must be of a type, quality, design, color, size and general appearance approved by Landlord. 4 No tenant shall place objects against glass partitions, doors or windows which would be in sight from the Building corridors or from the exterior of the Building and such tenant will promptly remove any such objects when requested to do so by Landlord. 5. The windows and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed, nor shall any bottles, parcels, or other articles be placed on any window sills. 6. No show cases or other articles shall be put in front of or affixed to any part of the exterior of the Building nor placed in the halls, corridors, walkways, landscaped areas, vestibules or other public parts of the Building. 7. The restrooms, water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown in the restrooms, water and wash closets. The reasonable costs incurred by Landlord (a) for extra cleaning in any restroom, water or wash closet required because of any misuse of such restroom, water or wash closet, and/or (b) to repair any damage resulting from any misuse of the fixtures will be borne by the tenant who, or whose employees, agents, visitors or licensees, caused the same. No tenant shall bring or keep, or permit to be brought or kept, any inflammable, combustible, explosive or hazardous fluid, material, chemical or substance in or about the premises leased to such tenant or the Property. 8. No tenant or occupant shall mark, paint, drill into, or ii any way deface any part of the Building or the premises leased to such tenant or occupant. No boring, cutting or strings of wires shall be permitted, except with the prior consent of Landlord, and as Landlord may direct. No tenant or occupant shall install any resilient tile or similar floor covering in the premises leased to such tenant or occupant except in a manner approved by Landlord. 9. Any carpeting cemented down by a tenant shall be installed with a releasable adhesive. In the event of a violation of this paragraph by a tenant, Landlord may charge the expense incurred to remove the carpeting to such tenant. 10. No bicycles, vehicles or animals of any kind (except seeing eye dogs) shall be brought into or kept in or about the premises leased to any tenant. No cooking shall be done or permitted in the Building by any tenant without the written approval of Landlord. No tenant shall cause or permit any unusual or objectionable odors to emanate from the premises leased to such tenant. 11. No space in the Building shall be used for manufacturing, for the storage of merchandise, or for the sale of merchandise, goods or property of any kind at auction. 12. No tenant and no employee, visitor, agent, or licensee of any Tenant shall make, or permit to be made, any unseemly or disturbing noises or vibrations or disturb or interfere with other tenants or occupants of the Building, or neighboring buildings or premises whether by the use of any musical instrument, radio, television set broadcasting equipment or other audio device, unmusical noise, whistling, singing, yelling or screaming. or in any other way. Nothing shall be thrown out of any doors. No tenant and no employee, visitor, agent, or licensee of any Tenant shall conduct itself in any manner that is inconsistent with the character of the Building as a first quality building or that will impair the comfort, convenience or safety of other tenants in the Building. 13. No additional locks or bolts of any kind shall be placed upon any of the doors, nor shall any changes be made in belts or the mechanism of such locks. Each tenant must, upon the termination of its tenancy, restore to Landlord all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such tenant. 14. All removals from the Building, or the carrying in or out of the Building or from the premised leased to any tenant, of any safes, freight, furniture or bulky matter of any description must take place at such time and in such manner as Landlord or its agents may determine, from time to time. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of the Rules and Regulations or the provisions of such tenant's lease. 15. Landlord shall have the right to prohibit any advertising by any tenant or occupant which, in Landlord's opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon notice from Landlord, such tenant or occupant shall refrain from or discontinue such advertising. 16. Each tenant, before closing and leaving the premises leased to such tenant at any time, shall see that all entrance doors are locked and all electrical equipment and lighting fixtures are turned off. Corridor doors, when not in use, shall be kept closed. 17. Each tenant shall, at its expense, provide artificial light in the premises leased to such tenant for Landlord's agents, contractors and employees while performing janitorial or other cleaning services and making repairs or alterations in said premises. 18. No premises shall be used, or permitted to be used for lodging or sleeping, or for any immoral or illegal purposes or in any manner that, in Landlord's reasonable judgment, threatens the safety of the Building or the tenants of the Building and their employees and invitees. 19. The requirements of tenants will be attended to only upon application at the office of Landlord. Building employees shall not be required to perform, and shall not be requested by any tenant or occupant to perform, and work outside of their regular duties, unless under specific instructions from the office of Landlord. 20. Canvassing, soliciting and peddling in the Building are prohibited and each tenant and occupant shall cooperate in seeking their prevention. 21. There shall not be used in the Building, either by any tenant or occupant or by their agents or contractors, in the delivery or receipt of merchandise, freight or other matter, any hand trucks or other means of conveyance except those equipped with rubber tires, rubber side guards and such other safeguards as Landlord may require. 22. If the premises leased to any tenant become infested with vermin, such tenant, at its sole cost and expense, shall cause its premises to be exterminated, from time to time, to the satisfaction of Landlord, and shall employ such exterminators for the extermination of the vermin as shall be approved in writing by Landlord. 23. No premises shall be used, or permitted to be used, at any time, without the prior written approval of Landlord, as a store for the sale or display of goods, wares or merchandise of any kind, or as a restaurant, shop, booth, bootblack or other stand, or for the conduct of any business or occupation which predominantly involves direct patronage of the general public in the premises leased to such tenant, or for manufacturing or for other similar purposes. 24. No tenant shall clean any window of the Building from the outside 25. No tenant shall move, or permit to be moved, into or out of the Building or the premises leased to such tenant, any heavy or bulky matter, without the specific approval of Landlord. If any such matter requires special handling, only a qualified person shall be employed to perform such special handling. No tenant shall place or permit to be placed, on any pad of the floor or floors of the premises leased to such tenant, a load exceeding the floor load per square foot which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight and position of safes and other heavy objects, which must be placed so as to distribute the weight. 26. With respect to work being performed by a tenant in its premises with the approval of Landlord, the tenant shall refer all contractors, contractors' representatives and installation technicians to Landlord for its supervision, approval and control prior to the performance of any work or services. This provision shall apply to all work performed in the Building including installation of telephones, telegraph equipment, electrical devices and attachments, and installations of every nature affecting floors, walls, woodwork, trim, ceilings, equipment and ally other physical portion of the Building. 27. Landlord shall not be responsible for lost or stolen personal property, equipment, money, or jewelry from the premises of tenants or public rooms whether or not such loss occurs when the Building or the premises are locked against entry. 28. Landlord may permit entrance to the premises of tenants by use of pass keys controlled by Landlord employees, contractors, or service personnel directly supervised by Landlord and employees of the United States Postal Service. 29. Each tenant and all of tenant's representatives, shall observe and comply with the directional and parking signs on the property surrounding the Building, and Landlord shall not be responsible for any damage to any vehicle towed because of noncompliance with parking regulations. 30. No tenant shall install any radio, telephone, television, microwave or satellite antenna, loudspeaker music system or other device on the roof or exterior walls of the Building or on common walls with adjacent tenants. 31. Each tenant shall store all trash and garbage within its premises. No material shall be placed in the trash boxes or receptacles in the Building unless such material may be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage and will not result in a violation of any law or ordinance governing such disposal. All garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate. 32. No tenant shall employ any persons other than the janitor of Landlord for the purpose of cleaning its premises without the prior written consent of Landlord. 33. Each tenant shall give prompt notice to Landlord of any accidents to or defects in plumbing, electrical or heating apparatus so that same may be attended to properly. 34. No tenant shall bring into the Building any pollutants, contaminants, inflammable, gasoline, kerosene or hazardous substances (as now or later defined under State or Federal law). 35. Landlord reserves the right to restrict access to and from the Building between the hours of 6:00P.M. and 8:00 A.M. on business days and at all hours on Saturdays, Sundays and holidays. 36. All tenant and tenant's servants, employees, agents, visitors, invitees and licensees shall observe faithfully and comply strictly with these Rules and Regulations and such other and further appropriate Rules and Regulations as Landlord or Landlord's agent from time to time adopt. Each tenant shall at all times keep the premises leased to such tenant, its employees, agents mid invitees under its control so as to prevent the performance of any act that would damage the Building or its reputation or the premises leased to such tenant or could injure, annoy, or threaten the security of the other tenants in the Building or their respective employees, agents or invitees or the public. 37. Landlord may deny entrance to the Building and may remove from the Building any person or persons who appear to be or are intoxicated, or who appear to be or are under the influence of liquor or drugs, or who are in any manner violating any of the Building Rules and Regulations, or who present a hazard or nuisance to any other person. The reasonable costs incurred by Landlord for security services or other costs reasonably incurred by Landlord to remove any such persons shall be borne by the tenant whose employees, agents and/or invitees are so removed. 38. Landlord shall furnish each tenant, at Landlord's expense, with two (2) keys to unlock the entry level doors and two (2) keys to unlock each corridor door entry to each tenant's premises and, at such tenant's expense, with such additional keys as such tenant may request. No tenant shall install or permit to be installed any additional lock on any door into or inside of the premises leased to that tenant or make or permit to be made any duplicate of keys to tile entry level doors or the doors to such premises. Landlord shall be entitled at all times to possession of a duplicate of all keys to all doors into or inside of the premises leased to tenants of the Building. All keys shall remain the property of Landlord. Upon the expiration of the Lease Term, each tenant shall surrender all such keys to Landlord and shall deliver to Landlord the combination to all locks on all safes, cabinets and vaults which will remain in the premises leased to that tenant. Landlord shall be entitled to install, operate and maintain security systems in or about the Property which monitor, by computer, close circuit television or otherwise, persons entering or leaving the Property, tile Building and/or the premises leased to any tenant. For the purposes of this rule the term "keys" shall mean traditional metallic keys, plastic or other key cards and other lock opening devices. 39. Each person using the Parking Facility or other areas designated by Landlord where parking will be permitted shall comply with all Rules and Regulations adopted by Landlord with respect to the Parking Facility or other areas, including any employee or visitor parking restrictions, and any sticker or other identification system established by Landlord. Landlord may refuse to permit any person who violates any parking rule or regulation to park in the Parking Facility or other areas, aid may remove any vehicle which is parked in the Parking Facility or other areas in violation of the parking Rules and Regulations. The Rules and Regulations applicable to the Parking Facility and the outside parking areas are as follows: a. The maximum speed limit within the Parking Facility shall be 5 miles per hour, the maximum speed limit in other parking areas shall be 15 miles per hour. b. All directional signs and arrows must be strictly observed c. All vehicles must be parked entirely within painted stall lines. d. No intermediate or full-size car may be parked in any parking space reserved for a compact car; no bicycle, motorcycle or other two or three wheeled vehicle, and no truck, van or other oversized vehicle, may be parked in any area not specifically designated for use by such vehicle. e. No vehicle may be parked (i) in an area not striped for parking, (ii) in a space which has been reserved for visitors or for another person or firm, (iii) in an aisle or on a ramp, (iv) where a "no parking" sign is posted or which has otherwise designated as a 110 parking area, (v) in a cross hatched area, (vi) ii an area bearing a "handicapped parking only" or similar designation unless the vehicle bears an appropriate handicapped designation, (vii) in an area bearing a "loading zone" or similar designation unless the vehicle is then engaged in a loading or unloading function and (viii) in an area with a posted height limitation if the vehicle exceeds the limitation. f. Parking passes, stickers or other identification devices supplied by Landlord shall remain the property of Landlord and shall not be transferable. A replacement charge determined by Landlord will be payable by each tenant for loss of any magnetic parking card or parking pass or sticker. g. Garage managers or attendants shall not be authorized to make or allow any exceptions to these Rules and Regulations. h. Each operator shall be required to park and lock his or her own vehicle, shall use the Parking Facilities at his or her own risk and shall bear full responsibility for all damage to or loss of his or her vehicle, and for all injury to persons and damage to property caused by his or her operation of the vehicle. i. Landlord reserves the right to tow away, at the expense of the owner, any vehicle which is inappropriately parked or parked in violation of these Rules and Regulations. 40. Landlord has designated the Building a "non-smoking" building in accordance with The Smoking Pollution Control Ordinance adopted by the City of Phoenix, Arizona as set forth in Sections 23-101, etc. of the City of Phoenix Municipal Code. Accordingly, smoking of tobacco or any other weed plant is prohibited in the Building Common Areas located within the Building, including the Building lobby, public corridors, lavatories, elevators and other public areas. Further, smoking of tobacco or any other weed plant is prohibited within the Leased Premises. 41. Landlord reserves the right at any tine and from time to time to rescind, alter or waive, in whole or in part, any of the Building Rules and Regulations when it is deemed necessary, desirable or proper, in Landlord's judgment for its best interest or of the best of the tenants of the Building. TENANT: Dimensional Visions Group, Ltd. A Delaware Corporation By: /s/ Roy D. Pringle --------------------------- Its: CFO EXHIBIT G WORKLETTER Landlord at its sole cost and expense shall provide the following tenant improvements: 1. Demise suite in accordance with plan in Exhibit B. 2. Touch-up paint throughout. 3. Install new carpet throughout. 4. Remove and replace the glass wall adjacent to the exterior door for the purpose of moving large office equipment through the door. RIDER 2 THIS RIDER 2 to Office Lease dated October 27, 1997 between PRESSON ADVISORY L.L.C. an Arizona Limited Liability Company ("Landlord") and DIMENSIONAL VISIONS GROUP, LTD. a Delaware Corporation ("Tenant"). 1. Quite Enjoyment: Landlord covenants that, provided Tenant complies with the terms and conditions set forth herein, Tenant shall quietly and peacefully have and hold the Leased Premises for the Term of the Lease. 2. In Addition to 7.1: Notwithstanding the foregoing, Landlord knows of no defect or repair or other condition of the Leased Premises that would interfere with Tenant's Quiet Enjoyment and possession of the Leased Premises. 3. In Addition to 18.1: In the event Landlord needs to relocate Tenant into a substitute premise in the building and substitute promise is not acceptable to Tenant, Tenant may cancel the Lease. LANDLORD TENANT PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd. an Arizona Limited Liability Company A Delaware Corporation By Presson Corporation, An Arizona Corporation Its: General Manager By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle ----------------------- ------------------------------- Its President Its: CFO AMENDMENT #1 TO LEASE THIS AMENDMENT #1 TO LEASE, made and entered into this 10th day of August, 1998 by and between PRESSON ADVISORY L.L.C., an Arizona Limited Liability Company, hereinafter referred to as ("Landlord") and DIMENSIONAL VISIONS GROUP, LTD, a Delaware Corporation hereinafter referred to as ("Tenant"). WITNESETH WHEREAS, Landlord leased certain premises to Tenant in the Dunlap Executive Office Building, located at 2301 W. Dunlap Avenue, Suite 207, in the City of Phoenix, State of Arizona, pursuant to that certain Lease dated the 27th day of October 1997, the premises being more particularly described; therein; and WHEREAS, Landlord wishes to expand Tenant's premises and Tenant wishes to expand its premises from Landlord; and WHEREAS, Landlord and Tenant therefore wish to amend said Lease; NOW, THEREFORE, in consideration of these present and the agreement of each other, Landlord and Tenant agree that the said Lease shall be and the same is hereby amended as of the 15th day of September 1998. 1. Lease Premises: Paragraph 1.8 of the Lease is deleted and the following new Paragraph replaces it: "Approximately 4,364 rentable square feet of office space located on the 2nd floor of the Building and commonly known as Suite 207 and 201. Furthermore, Suite 207 consists of approximately 3,100 rentable square feet and Suite 201 consists of approximately 1,264 rentable square feet. 2. Rental: The Annual Basic Rent set forth by Paragraph 1.12 shall be amended to reflect the following New Base Rent Schedule: September 15, 1998 through September 30, 1998 - $63,278.00 ($2,812.32 per month), based upon a rental rate of $14.50 per rentable square foot. October 1, 1998 through December 31, 1998 - $63,278.00 ($5,273.17 per month), based upon a rental rate of $14.50 per rentable square foot. January 1, 1999 through December 31, 1999 - $65,460.00 ($5,455.00 per month), based upon a rental rate of $15.00 per rentable square foot. January 1, 2000 through December 31, 2000 - $67,642.00 ($5,636.83 per month), based upon a rental rate of $15.50 per rentable square foot. 3. All other terms and conditions of this Lease, as amended, remain in full force and effect as heretofore. IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument by proper persons thereunto duly authorized so to do on the day and year first hereinabove. LANDLORD TENANT PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd. an Arizona Limited Liability Company A Delaware Corporation By Presson Corporation, An Arizona Corporation Its: General Manager By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle ----------------------- ------------------------------- Its President Its: CFO SECOND AMENDMENT TO LEASE THIS SECOND AMENDMENT TO LEASE, made and entered into this 13th day of November, 2000 by and between PRESSION ADVISORY L.L.C., an Arizona Limited Liability Company, hereinafter referred to as ("Landlord") and DIMENSIONAL VISIONS GROUP, LTD, a Delaware Corporation, hereinafter referred to as ("Tenant"). WITNESSETH WHEREAS, Landlord leased certain premises to Tenant in the Dunlap Executive Office Building, located at 2301 W. Dunlap Avenue, Suite 207, in the City of Phoenix, State of Arizona, pursuant to that certain Lease dated the 27th day of October, 1997, and as amended by Amendment #1 To Lease, dated the 10th day of August, 1998, the Premises being more particularly described therein; and WHEREAS, Landlord and Tenant therefore wish to amend said Lease; NOW, THEREFORE, in consideration of these present and the agreement of each other, Landlord and Tenant agree that the said Lease shall be and the same is hereby amended as of the 1st day of January, 2001. 1. Article 1.10 of the Basic Provisions of the Lease is hereby deleted in its entirety and replaced with the following New Article 1.10: "This Lease is hereby extended for an additional term of Three (3) years commencing on January 1, 2001 and terminating at midnight on December 31, 2003, under the same terms and conditions except as may be amended herein." 2. Article 1.11 of the Basic Provisions of the Lease, Scheduled Commencement Date "December 15, 1997" is replaced with the New Scheduled Commencement Date of "January 1, 2001." 3. Article 1.12 of the Lease is deleted and replaced with the following New Article 1.12: 1/1/01 through 12/31/01 $4,004.17 per month based on rental rate of $15.50 a square foot. 1/1/02 through 12/31/02 $4,133.33 per month based on rental rate of $16.00 a square foot. 1/1/03 through 12/31/03 $4,262.50 per month based on rental rate of $16.50 a square foot. 4. Article 1.14 of the Basic Provisions of the Lease, the Base Year costs: the year "1998" is hereby deleted and "2000" is substituted. 5. Line 1 of Article 1.8 of the Basic Provisions of the Lease "4,364" rentable square feet is replaced with "3,100" rentable square feet. 6. Line 2 of Article 1.8 of the Basic Provisions of the Lease, Suite 201 is deleted to the end of Suite 207. 7. Exhibit G "WORKLETTER" having been fully satisfied is hereby deleted in its entirety. 8. Article 33 "EARLY MOVE-IN" having been fully satisfied is hereby deleted in its entirety. 9. Number 33 of the Table of Contents having been fully satisfied is hereby deleted. 10. The following is added to the end of 6.1 Operating Costs: in no event shall the increase in Controllable Operating costs exceed six percent (6%) per year from the previous year's Controllable Operating costs. Controllable Operating costs are defined as those operating costs except taxes, insurance and utilities. 11. All other terms and conditions of this Lease, as amended, remain in full force and effect as heretofore. IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument by proper persons thereunto duly authorized so to do on the day and year first hereinabove. LANDLORD TENANT PRESSON ADVISORY L.L.C. Dimensional Vision Group, Ltd. an Arizona Limited Liability Company A Delaware Corporation By Presson Corporation, An Arizona Corporation Its: General Manager By: /s/ Daryl R. Burton By: /s/ Roy D. Pringle ----------------------- ------------------------------- Its President Its: CFO EX-21.1 6 ex21-1.txt SUBSIDIARIES Exhibit 21.1 NAME STATE OF INCORPORATION - ---- ---------------------- InfoPak, Inc. Delaware EX-24.2 7 ex24-2.txt CONSENT OF GITOMER & BERENHOLZ, P.C. Exhibit 24.2 INDEPENDENT AUDITORS' CONSENT We consent to the use of our report dated October 7, 1999, in the Registration Statement on Form SB-2 of Dimensional Visions Incorporated appearing in the prospectus which is part of this Registration Statement. We also consent to the reference to us under the headings "Selected Financial Data" and "Experts" in such prospectus. /s/ Gitomer & Berenholz, P.C. Gitomer & Berenholz, P.C. Huntingdon Valley, Pennsylvania Dated: March 6, 2001 EX-24.3 8 ex24-3.txt CONSENT OF KOPPLE & GOTTLIEB, LLP Exhibit 24.3 INDEPENDENT AUDITORS' CONSENT We consent to the use of our report dated September 1, 2000, in the Registration Statement on Form SB-2 of Dimensional Visions Incorporated appearing in the prospectus which is part of this Registration Statement. We also consent to the reference to us under the headings "Selected Financial Data" and "Experts" in such prospectus. /s/ Kopple & Gottlieb, LLP Kopple & Gottlieb, LLP Jenkintown, Pennsylvania Dated: March 6, 2001 -----END PRIVACY-ENHANCED MESSAGE-----