<PAGE>
As filed with the Securities and Exchange Commission on July 10, 1998
REGISTRATION NO. 333-53459
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
Amendment No. 1
To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ALL-TECH INVESTMENT GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 13-2581640
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
160 SUMMIT AVENUE
MONTVALE, NEW JERSEY 07645
(201) 782-0200
(Address and Telephone Number of Registrant's Principal Executive Offices)
HARVEY I. HOUTKIN
CHIEF EXECUTIVE OFFICER
ALL-TECH INVESTMENT GROUP, INC.
160 SUMMIT AVENUE
MONTVALE, NEW JERSEY 07645
(201) 782-0200
(Name, Address, Telephone Number of Agent for Service)
---------------------
Copies to:
RICHARD A. FRIEDMAN, ESQ. LAWRENCE B. FISHER, ESQ.
SICHENZIA, ROSS & FRIEDMAN LLP. ORRICK, HERRINGTON & SUTCLIFFE LLP
135 WEST 50TH STREET 666 FIFTH AVENUE
NEW YORK, NEW YORK 10020 NEW YORK, NEW YORK 10103
Telephone No.: (212) 664-1200 Telephone No.: (212) 506-5000
Facsimile No.: (212) 664-7329 Facsimile No.: (212) 506-5151
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------
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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OF DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
AN 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 COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Class of Amount Maximum Maximum
Securities Title of Each to to be Offering Price Aggregate Registration
be Registered Registered Per Security(1) Offering Price(1) Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units, each Unit consisting of two
shares of Common Stock, $.001
par value, and one Redeemable
Common Stock Purchase
Warrant (2) ......................... 3,593,750 $ 16.10 $ 57,859,375 $ 17,068.52
- --------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value
per share (3) ....................... 7,187,500 $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------
Redeemable Common Stock
Purchase Warrants (4) ............... 3,593,750 $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value,
per share (5) ....................... 3,593,750 $ 12.00 $ 43,125,000 $ 12,721.88
- --------------------------------------------------------------------------------------------------------------
Representative's Warrants (6) ........ 625,000 $ .0001 $ 62.50 (7)
- --------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value
(8) ................................. 625,000 $ 9.60 $ 6,000,000 $ 1,770.00
- --------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants
(9) ................................. 312,500 $ .12 $ 37,500 $ 11.06
- --------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value
(10) ................................ 312,500 $ 12.00 $ 3,750,000 $ 1,106.25
- --------------------------------------------------------------------------------------------------------------
Totals .............................................................. $ 110,771,937.50 $ 32,677.71
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to rule 457(a) of the Securities Act of 1933, as amended.
(2) Includes 468,750 Units issuable upon exercise of the Underwriters'
Over-Allotment Option.
(3) Includes 937,500 shares of Common Stock (the "Common Stock") subject to
sale upon exercise of the Underwriters' Over-Allotment Option granted to
the Underwriters.
(4) Includes 468,750 redeemable Common Stock purchase warrants (the "Warrants")
subject to sale upon exercise of the Underwriters' Over-Allotment Option
granted to the Underwriters.
(5) Issuable upon exercise of the Warrants, together with such indeterminate
number of securities as may be issuable by reason of anti-dilution
provisions contained therein.
(6) Represents warrants to be issued to the Representative of the several
Underwriters to purchase 625,000 shares of Common Stock and/or 312,500
Warrants (the "Representative's Warrants"). See "Underwriting."
(7) No fee due pursuant to Rule 457(g).
(8) Represents shares of Common Stock issuable upon the exercise of the
Representative's Warrants, together with such indeterminate number of
securities as may be issuable by reason of anti-dilution provisions
contained therein.
(9) Represents Warrants issuable upon exercise of the Representative's
Warrants.
(10) Represents shares of Common Stock issuable upon the exercise of Warrants
issuable upon exercise of the Representative's Warrants, together with such
indeterminate number of securities as may be issuable by reason of
anti-dilution provisions contained therein.
<PAGE>
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 JULY 10, 1998
PROSPECTUS
[GRAPHIC OMITTED]
ALL-TECH INVESTMENT GROUP, INC.
6,250,000 Shares of Common Stock
3,125,000 Redeemable Common Stock Purchase Warrants
(as units, each consisting of two shares of Common Stock and
one Redeemable Common Stock Purchase Warrant)
Of the 6,250,000 shares of Common Stock $.001 par value (the "Common
Stock") of All-Tech Investment Group, Inc., a Delaware corporation ("All-Tech"
or the "Company") offered hereby, 5,625,000 shares of Common Stock are being
issued and sold by All-Tech and 625,000 shares of Common Stock are being sold by
certain shareholders (the "Selling Shareholders") of All-Tech. All-Tech will not
receive any of the proceeds from the sale of Common Stock by the Selling
Shareholders. See "Use of Proceeds." All of the 3,125,000 Warrants (the
"Warrants") offered hereby are being issued and sold by All-Tech. The shares of
Common Stock and the Warrants will initially be sold as units, each unit
consisting of two shares of Common Stock and one Warrant. The shares of Common
Stock and the Warrants are sometimes hereinafter collectively referred to as the
"Securities." Until the completion of this offering (the "Offering"), the Common
Stock and Warrants may only be purchased together on the basis of two shares of
Common Stock and one Warrant, but will be transferable separately immediately
following completion of this Offering. Each Warrant entitles the holder thereof
to purchase one share of Common Stock at an exercise price of $12.00, subject to
adjustment, at any time from , 1999 (six months after the date of this
Prospectus) until , 2001 (30 months after the date of this Prospectus) and
from such date until , 2004 (60 months after the date of this Prospectus) at
an exercise price of $14.00 per share, subject to adjustment. Commencing ,
2000, the Warrants will be subject to redemption by the Company, in whole but
not in part, at $0.10 per Warrant on 30 days prior written notice, provided that
the average closing sale price of the Common Stock as reported on the American
Stock Exchange (the "Amex") equals or exceeds $20.00 per share of Common Stock,
subject to adjustment, for any 20 trading days within a period of 30 consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption. See "Description of Capital Stock-Warrants."
Prior to the Offering, there has been no public market for the Common Stock
or the Warrants and there can be no assurance that such a market will develop
after the Offering or, if developed, that it will be sustained. It is currently
anticipated that the initial public offering price of the Units will be $16.10
per Unit or $8.00 per share and $.10 per Warrant. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
prices of the Securities and the terms of the Warrants. All-Tech has applied to
include the Common Stock and Warrants on the Amex under the symbols "ATN" and
"ATNW," respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
================================================================================
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Shareholders(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Unit (comprised of) ........ $ $ $ $
- ------------------------------------------------------------------------------------------------
Per share of Common Stock ..... $ $ $ $
- ------------------------------------------------------------------------------------------------
Per Warrant ................... $ $ $ $
- ------------------------------------------------------------------------------------------------
Total (4) ...................... $ $ $ $
</TABLE>
================================================================================
(1) Does not include additional compensation payable to Security Capital
Trading, Inc., the representative (the "Representative") of the several
underwriters (the "Underwriters"), consisting of (i) a non-accountable
expense allowance equal to 1 1/2% of the gross offering proceeds, or
$754,687.50 ($867,890.62 if the Underwriter's over-allotment option is
exercised in full), of which $50,000 has been paid to date, and (ii)
warrants ("Representative's Warrants") to be sold to the Representative
for nominal consideration to purchase up to 625,000 shares of Common Stock
and/or 312,500 Warrants, at a price of $9.60 per share of Common Stock and
$.12 per Warrant, subject to anti-dilution provisions thereof, exercisable
during the four year period commencing one year after the effective date
of this Offering. In addition, see "Underwriting" for information
concerning indemnification and contribution arrangements with the several
Underwriters and other compensation payable to the Representative.
(2) After deducting Underwriting discounts and commissions, but before
deducting estimated expenses payable by the Company of $1,054,688,
including the Representative's non-accountable expense allowance on the
Units being sold by the Company.
(3) After deducting Underwriting discounts and commissions, but before
deducting the non-accountable expense allowance upon the shares sold by
the Selling Shareholders payable by the Selling Shareholders to the
Representative.
(4) The Company and the Selling Shareholders have granted the Underwriters an
option (the "Over-Allotment Option") exercisable for a period of 45 days
after the date of this Prospectus to purchase an aggregate of up to an
additional 937,500 shares of Common Stock and 468,750 Warrants upon the
same terms and conditions set forth above, solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Shareholders will
be $ , $ , $ , and $ , respectively.
The Securities are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to approval of certain legal matters by their counsel and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify this Offering and to reject any order in whole or in part. It is expected
that delivery of the Securities offered hereby will be made against payment at
the offices of Security Capital Trading, Inc., New York, New York on or about ,
1998.
Security Capital Trading, Inc.
The date of this Prospectus is , 1998
<PAGE>
INSIDE COVER OF PROSPECTUS-EDGAR VERSION ONLY
[Trading Room and ATTAIN Screen]
[Map Showing Location of All-Tech's
Principal and Branch Offices and Remote Customers]
[Picture of Harvey I. Houtkin and Mark D. Shefts]
ATTAIN(R) is a registered trademark of All-Tech. This Prospectus also contains
trademarks and trade names of other companies.
- --------------------------------------------------------------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE OR MAINTAIN THE PRICE OF THE COMMON STOCK AND WARRANTS AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET, INCLUDING ENTERING
STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR IMPOSING PENALTY
BIDS. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
INFORMATION ON THE COMPANY'S WEBSITE SHALL NOT BE DEEMED TO BE PART OF THIS
PROSPECTUS.
------------
The Company intends to mail to all of its shareholders an annual report
containing financial statements audited by its independent accountants for each
fiscal year and shall make available to all of its shareholders quarterly
reports containing unaudited financial information for each of the first three
quarters of each fiscal year.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including "Risk Factors" and
the financial statements and Notes thereto, appearing elsewhere in this
Prospectus. This Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results suggested by the forward-looking statements and from the results
historically experienced. Factors that may cause or contribute to such
differences include, but are not limited to, those discussed under "Risk
Factors" and elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus gives effect to a 68.75 for 1 forward stock split
of the outstanding shares of Common Stock effected in May 1998 as part of the
Company's reincorporation into Delaware and assumes (i) no exercise of the
Underwriters' Over-Allotment Option, (ii) no exercise of the Warrants, (iii) no
exercise of the Representative's Warrants and (iv) no exercise of any
outstanding options.
The Company
All-Tech Investment Group, Inc. ("All-Tech" or the "Company"), a
registereed broker-dealer, through its proprietary ATTAIN(R) trading system
software, provides its customers with real-time computerized access to
comprehensive price information for over-the-counter ("OTC") securities traded
on The Nasdaq Stock Market ("Nasdaq") and securities traded on various national
and regional exchanges, and enables its customers to instantaneously transmit
buy and sell orders for execution. All-Tech also provides its customers with
discounted commissions, electronic reports regarding the customer's orders and
account status, customizable display screens, analytical modeling tools and news
media reports. The Company has also developed and commenced operation of its
ATTAIN(R) ECN (the "ATTAIN ECN"), an electronic communications network ("ECN").
ECNs provide investors an alternative trading system to traditional Nasdaq
trading. Through the ATTAIN(R) trading system, subscribers can directly place
buy and sell orders for Nasdaq traded stocks. Matching orders are paired off and
the trade is executed by the ATTAIN ECN. Additionally, the best bid and offer in
each security which is placed on the ATTAIN ECN will be displayed automatically
and dynamically on a real-time basis on Nasdaq along with market maker
quotations. The ATTAIN trading system permits the customer to eliminate the need
to have the customer's order placed through a market maker, therefore
eliminating the market maker and the costs associated with such market maker.
The Company's services are primarily utilized by self-directed "day
traders." Day traders actively engage in the buying and selling of securities,
based on short-term price volatility, many times during the course of a day.
They typically close out all open positions by the end of the day in order to
manage risk when the markets are closed. Frequently, a position may be closed
within minutes of the initial purchase or sale. All-Tech has over 1,500 active
customers, consisting of day traders and active retail customers. The Company's
average aggregate customer transaction volume has ranged between 2,500 and 3,000
trades per trading day for the last 12 months. All-Tech's customers can access
All-Tech's ATTAIN trading system at All-Tech's main office, at one of its 21
branch offices or in their homes or offices through a computer connected to the
ATTAIN trading system via dedicated telephone lines or the Internet. Access to
the Company's ATTAIN trading system from remote locations requires the use of
the Company's proprietary software, which the Company provides to its customers
free of charge.
All-Tech's objectives are to become the leading provider of electronic
brokerage services to self-directed traders and investors and to expand the
range of services and business activities engaged in by the Company. The
Company's strategy to accomplish its objectives includes (i) enhancing
awareness of the Company's ATTAIN trading system and ATTAIN ECN through
marketing and advertising, (ii) expanding its customer base through an
aggressive marketing campaign, opening additional branch offices and expanding
services to attract less active traders, (iii) analyzing and exploring
opportunities to commence new business activities, including electronic trading
of financial instruments other than stocks and options, underwriting securities
offerings, and other traditional investment banking and merchant banking
activities, (iv) expanding proprietary trading and (v) pursuing opportunities
to offer the Company's services internationally through use of the Internet and
telecommunications systems.
3
<PAGE>
All-Tech was incorporated in New York under the name Concord Capital Corp.
in 1981. The Company changed its name to All-State Investment Group, Inc. in
March 1988 and changed its name to All- Tech Investment Group, Inc. in December
1988. In May 1998, the Company reincorporated in the State of Delaware. Its
principal executive offices are located at 160 Summit Avenue, Montvale, New
Jersey 07645. The Company's telephone number is (201) 782-0200; its world-wide
website is located at www.attain.com. Information contained in the Company's
website shall not be deemed to be part of this Prospectus.
The Offering
<TABLE>
<S> <C>
Securities offered by the Company ...................... 5,625,000 shares of Common Stock and 3,125,000
Warrants. The Common Stock and the Warrants will
be separately tradeable immediately following
completion of this Offering.
Securities offered by the Selling Shareholders ......... 625,000 shares of Common Stock.
Terms of Warrants ...................................... Each Warrant entitles the holder thereof to purchase
one share of Common Stock at an exercise price of
$12.00, subject to adjustment, at any time from
, 1999 (six months after the date of this
Prospectus) until , 2001 (30 months after the date
of this Prospectus) and from such date until ,
2004 (60 months after the date of this Prospectus) at
an exercise price of $14.00 per share. Commencing
, 2000 (18 months after the date of this
Prospectus), the Warrants will be subject to redemption
by the Company, in whole but not in part, at $0.10
per Warrant on 30 days prior written notice, provided
that the average closing sale price of the Common
Stock as reported on the Amex equals or exceeds
$20.00 per share of Common Stock, subject to
adjustment, for any 20 trading days within a period
of 30 consecutive trading days ending on the fifth
trading day prior to the date of the notice of redemp-
tion. See "Description of Capital Stock-Warrants."
Securities Outstanding after the Offering: (1)
Common Stock ......................................... 21,093,750
Warrants ............................................. 3,125,000
Use of Proceeds ........................................ For working capital and other general corporate pur-
poses, development or acquisition of new areas of
brokerage business, marketing and proprietary
trading. See "Use of Proceeds." The Company will not
receive any proceeds from the sale of shares of Com-
mon Stock by the Selling Shareholders. See "Use of
Proceeds."
Proposed Amex symbols .................................. Common Stock ATN
Warrants ATNW
</TABLE>
- -------------
(1) Excludes (i) 1,500,000 shares of Common Stock issuable upon exercise of
options pursuant to grants effective on the effective date of this
Offering under the Company's 1998 Stock Option Plan (the "Plan") at an
exercise price equal to the initial public offering price of the Common
Stock and (ii) 750,000 shares of Common Stock issuable pursuant to options
which may be granted under the Plan. See "Management-1998 Stock Option
Plan."
4
<PAGE>
Summary Financial Data
The following summary financial data is qualified by the more detailed
financial statements of the Company and the notes thereto included elsewhere in
this Prospectus and should be read in conjunction with such financial statements
and notes thereto and the discussion under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------- -------------- ---------------- -------------- --------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Total revenues ............ $ 11,268 $ 14,738 $ 2,962 $ 11,075 $ 16,064
Total costs and expenses .. 10,707 14,968 2,973 9,714 14,462
Pre-tax income (loss) ..... 561 (230) (11) 1,361 1,602
Net income (loss) ......... 286 (230) (3) 751 937
Basic earnings
(loss) per common share .. .02 (.02) (.00) .05 .06
Weighted average
shares outstanding........ 15,468,750 15,468,750 15,468,750 15,468,750 15,468,750
<CAPTION>
Nine Months Ended March 31,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Statement of
Operations Data:
Total revenues ............ $ 11,887 $ 13,149
Total costs and expenses .. 9,551 12,920
Pre-tax income (loss) ..... 2,336 229
Net income (loss) ......... 1,727 202
Basic earnings
(loss) per common share .. .11 .01
Weighted average
shares outstanding........ 15,468,750 15,468,750
</TABLE>
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1998 March 31, 1998
Actual Actual As Adjusted(1)
--------------- ---------------- ---------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ......... $ 641 $ 604 $41,966
Total assets ...................... 3,799 3,046 44,358
Shareholders' equity .............. 1,855 1,886 43,199
</TABLE>
- -------------
(1) As adjusted to give effect to the sale of 5,625,000 shares of Common Stock
and 3,125,000 Warrants offered by the Company hereby at an assumed initial
public offering price of $8.00 per share of Common Stock and $.10 per
Warrant and the application of the estimated net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Words or phrases such as "should result, are expected to, we
anticipate, we estimate, we project" or similar expressions are intended to
identify forward-looking statements. These statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from the Company's historical experience and its present expectations or
projections. Caution should be taken not to place undue reliance on any such
forward-looking statements, since such statements speak only as of the date of
the making of such statements. Actual results could differ materially from those
discussed in the forward-looking statements as a result of certain factors,
including those set forth below and elsewhere in this Prospectus. The following
risk factors should be considered carefully in addition to the other information
contained in this Prospectus before purchasing the Common Stock and Warrants
offered hereby.
Growth of ECN; Risks of Collection of ECN Accounts Receivable
All-Tech has recently developed and commenced operation of its ATTAIN ECN.
The ATTAIN ECN began to generate revenues in February 1998 and is expected to
become a significant source of revenues. All-Tech engages in trading for its own
account, primarily utilizing the ATTAIN ECN. Any discontinuance of trading on
the ATTAIN ECN by All-Tech, whether voluntarily or as a result of government
regulation, could have a material adverse effect on the Company's business,
financial condition and operating results.
Revenues are recognized by the Company with respect to its ATTAIN ECN on a
transaction date basis; users are billed monthly. The Company's accounts
receivable have dramatically increased since the commencement of the operation
of its ATTAIN ECN. For the period from February 1998 (commencement of the ECN)
through June 15, 1998, the Company recognized ECN fee revenues of approximately
$1,637,000, of which approximately $434,000, $510,000, $491,000 and $202,000
were recognized as of March 31, 1998, April 30, 1998, May 31, 1998 and June 15,
1998, respectively. As of June 15, 1998, approximately $357,000 of such ECN fees
have been paid to the Company and approximately $1,280,000 of such ECN fees were
unpaid outstanding accounts receivable of the Company. In addition, as of May
31, 1998, the Company had established a doubtful account reserve for ECN fees in
the amount of approximately $335,000.
The Company is continuously monitoring the fees it charges and such fees
may either be reduced as a result of competitive pressures or to adhere to
maximum fees permitted pursuant to the SEC no-action letter under which the
Company operates the ATTAIN ECN. A reduction in rates unaccompanied by a rise in
usage would negatively impact ATTAIN ECN revenues. The Company currently has
only three (3) active ECN subscribers, one of which is owned and operated by
Harry Lefkowitz, a director of the Company. However, the Company has accepted
applications from an additional eight (8) broker-dealers to become ECN
subscribers, and the Company is currently in the process of arranging for the
necessary communication links which will allow such subscribers to access the
ATTAIN ECN. As a result of the new subscribers, with respect to which the
Company has agreed to charge fees which will effectively be no higher than $.005
per share, the Company may be required to lower its per transaction fee to
non-subscribers to approximately $.005 once such new subscribers commence their
trading activity. See "Business -- The ATTAIN ECN."
There has been a great deal of discussion in the industry regarding the
amount of fees non-subscribers are charged to utilize ECNs and the fact that
such fees are charged upon usage and not pursuant to a contract. The Company is
currently denying access to 26 former ATTAIN ECN users because they have stated
to the Company that they would not pay their ATTAIN ECN bills. The Company has
requested that the U.S. Department of Justice investigate what the Company
believes to be misconduct of Nasdaq market making participants in their refusal
to pay the Company's ECN fees. In addition, the Company has commenced an
arbitration against a former significant ATTAIN ECN user to collect unpaid ECN
fees. The Company has been informed by the National Association of Securities
Dealers, Inc. (the "NASD") that, based upon complaints lodged by two
broker-dealers, it is conducting an investigation as to whether the Company's
denial of access to the ATTAIN ECN constituted "backing away." Although the
Company does not believe that there is any merit to such claims,
6
<PAGE>
and it intends to vigorously contest any such charge, there can be no assurance
that such claims would not result in a formal investigation being commenced or
that the Company would not incur substantial fees in contesting such claims.
The Company believes that it maintains adequate reserves to account for the
non-collection of its accounts receivable. However, the Company has only
recently commenced billing users of the ATTAIN ECN and has very limited actual
experience on which to base the amount of doubtful accounts receivable relating
to revenues from the ATTAIN ECN. There can be no assurance that the rate of
non-collection of accounts receivable will not increase as the level of usage
of the ATTAIN ECN increases. Such an increase could materially adversely affect
the Company's business, financial condition and results of operations. Although
the Company intends to vigorously pursue its legal remedies to recover unpaid
accounts receivable, there can be no assurance that such efforts will be
successful. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Risks Associated with Securities Business
The Company, like other securities firms, is directly affected by national
and international economic and political conditions, broad trends in business
and finance, the level and volatility of interest rates, legislative and
regulatory changes, tax law changes, currency fluctuations, inflation, flows of
funds into and out of mutual and pension funds, the availability of short-term
and long-term funding and capital and substantial fluctuations in volume of
securities transactions, all of which may negatively affect trading volume
levels generally and by the Company's customers specifically. In recent months,
the U.S. securities markets have established record levels of trading which, the
Company believes, has favorably impacted its business. A general decrease in
trading activity on these markets could adversely affect the level of individual
trading activity by All-Tech's customers, which would materially adversely
affect the Company's operating results because certain expenses, consisting
primarily of salaries and benefits, computer hardware and software costs and
occupancy expenses, remain relatively fixed. Certain of the Company's
competitors with more diverse product and service offerings may be better
positioned to withstand decreased volatility in the securities markets. See
"Risk Factors--Competition." Since 1988, the U.S. equity markets have generally
risen and have not experienced an extended bear market. There can be no
assurance that volume of trading and volatility will not substantially diminish,
thereby negatively affecting the Company's commission income.
All-Tech's brokerage business, by its nature, is subject to various other
risks, including customer default, fraud, employees' misconduct and errors,
failures in connection with the processing of securities transactions and
litigation. The Company guarantees all customer transactions to its clearing
broker, which extends margin credit to the Company's customers. To the extent
All-Tech's customers purchase securities on margin, the Company is subject to
risks inherent in the extension of credit, especially during periods of rapidly
declining markets in which the value of the collateral held by the clearing firm
could fall below the amount of a customer's indebtedness. Failure of customers
to maintain cash deposit levels at all times at least equal to the value of the
related securities could subject All-Tech to risk of loss, should the parties to
the borrowing and lending transactions fail to honor their commitments. Risk can
be increased dramatically during periods of volatility. Any such losses could
have a material adverse effect on the Company's business, financial condition
and operating results.
Concentration of Services
Substantially all of the Company's revenues since inception have been
derived from commissions on the intraday trading activity of the Company's
customers through the Company's electronic brokerage services. The Company
expects that a substantial portion of its future revenues will continue to be
derived from customers' day trading activity. As a result, any factor resulting
in reductions in commissions received by the Company or declines in demand for
the Company's electronic brokerage services would have a material adverse effect
on the Company's business, financial condition and results of operations. There
can be no assurance that the Company will continue to be successful in marketing
its electronic brokerage services offered through its ATTAIN trading system or
any new or enhanced versions thereof. Competitive pressures or other factors in
the day trading area of the securities industry may result in significant
declines in the Company's commissions, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
Policy of Regulating Authorities
"Day trading" involves the buying and selling of securities based upon
short-term volatility in the price of a security and closing out that position
on the same trading day, perhaps within minutes of the initial purchase
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or sale. To the extent there is a lack of intra-day volatility, the
opportunities to profit from day trading will be diminished. The Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. ("NASD") generally seek opportunities to adopt rules which tend to
decrease volatility in the securities markets. To the extent that new rules or
regulations or market conditions generally decrease volatility, opportunities
for the Company's customers to profit from day trading will decline.
Additionally, any regulatory change which limits the ability of individual
investors to engage in active day trading or which disadvantages investors who
participate in day trading would materially adversely affect the Company's
business and results of operations.
Lack of liquidity could also affect volatility. A Nasdaq proposal presently
before the SEC could reduce the liquidity available from market makers to order
entry firms such as All-Tech by allowing market makers to reduce the number of
shares they are obligated to trade from 1,000 to 100 in all Nasdaq quoted
stocks. If the proposal is approved in its present form by the SEC, such
potential reduction in liquidity could be substantial. A substantial decrease in
overall liquidity in the OTC market could materially adversely affect All-Tech's
customers' ability to obtain execution of their orders and therefore could
result in a decline in the Company's commission revenues. In addition, any
decrease in trading activities of individual investors in equity securities due
to tax law changes, recession, depression, increased interest rates on fixed
income investments or otherwise could have a material adverse effect on the
Company's business, financial condition or results of operations.
Management of Growth and Changing Business
Over the past several years, the Company has experienced significant growth
and change in its business activities and operations. Such changes have involved
the Company's brokerage business and have included providing the Company's
customers with computerized access to securities price information and analysis
and enabling the Company's customers to transmit buy and sell orders for
execution via computer, as well as opening branch offices. The Company also
commenced operating the ATTAIN ECN in February 1998. The Company is still
assessing the full demands of the ATTAIN ECN on the Company's management and the
Company's financial and management systems and controls. The Company's growth
has required, and will continue to require, increased investment in management
personnel, financial and management systems and controls and facilities. The
Company's past expansion has placed, and any future expansion would place,
significant demands on the Company's administrative, operational, financial and
other resources. The Company intends to continue to expand its business and
operations, including entry into new markets, which will place additional strain
on the Company's management and operations. The Company's future operating
results will depend, in part, on its ability to continue to broaden the
Company's senior management group and administrative infrastructure, and its
ability to attract, hire and retain skilled employees. The Company's success
will also depend on the ability of its officers and key employees to continue to
implement and improve the Company's operational and financial control systems
and to expand, train and manage its employee base. In addition, the Company's
future operating results will depend on its ability to expand its sales and
marketing capabilities and expand its customer support operations commensurate
with its growth, should such growth occur. If the Company's revenues do not
increase in proportion to its operating expenses, the Company's management
systems do not expand to meet increasing demands, the Company fails to attract,
assimilate and retain qualified personnel, or the Company's management otherwise
fails to manage the Company's expansion effectively, there would be a material
adverse effect on the Company's business, financial condition and operating
results.
Dependence on Third Party Vendors
The Company's viability depends on its ability to obtain for itself and its
customers access to a breadth of quality and comprehensive real-time and
historical financial market data from third party vendors whose products are
technically compatible with the Company's ATTAIN software and its future
products and services. The Company currently depends substantially upon
relationships with third-party data vendors to ensure such access, including PC
Quote, Inc. ("PC Quote"), Dow Jones & Company, Inc., the Nasdaq Stock Market,
Inc., and other trading systems or ECNs, including Datek Securities Corp.'s
Island system and Terra Nova Trading LLC's Archipelago system. Although the
Company has written agreements with each of such third party vendors, if the
Company's access to or use of the data provided by any of these third party
vendors were interrupted or terminated, the Company would have to make
alternative arrangements, either to produce such data itself or with a
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third party or to obtain comparable data from a different third party. It has
been publicly reported that PC Quote is experiencing severe financial
difficulties. With respect to obtaining quotation information, which the
Company currently receives from PC Quote, the Company has entered into an
agreement with Standard & Poors Comstock, Inc. in order to have a readily
available alternative source for quotation information. There can be no
assurance, however, that similar arrangements could be accomplished in a timely
and cost effective manner, if at all, or that alternative sources would be
available on commercially reasonable terms, if at all. To the extent the
Company experiences disruptions, its customers will be inconvenienced and may
be adversely affected. As a result, the Company's relationship with such
customers would be adversely affected. There is also the risk that such
contractual relationships will not be renewed on terms favorable to the
Company, if at all. Vendors may also strengthen their alliances with the
Company's competitors, discontinue their relationships with the Company, or
develop strategic initiatives which involve eliminating or limiting
compatibility between the Company's services and the vendor's services. There
can be no assurance that the Company will be able to increase the number of
compatible data vendors available to it or encourage other trading systems to
become compatible with the ATTAIN ECN, or that the Company's existing data
sources will continue to exist or cooperate in maintaining technical
compatibility with the Company's ATTAIN trading system or the ATTAIN ECN. If
the Company were unable to secure additional key data sources and compatibility
with other trading systems, or were to lose access to significant amounts of
data or to significant trading systems or ECNs, the Company's business,
financial condition and results of operations would be materially adversely
affected. To the extent third party vendor trading systems do not timely
program their trading systems to be compatible with the ATTAIN ECN, the
Company's business opportunities would be adversely affected. See
"Business--All-Tech's Strategy" and "--Competition."
Lack of Access to Instinet ECN
Instinet Corporation currently operates the largest ECN ("Instinet"), which
is responsible for over 15% of all Nasdaq trading and a more significant portion
of trading in the 100 most actively traded Nasdaq stocks. Historically, Instinet
has offered and continues to offer its subscribers access to better stock prices
than are available on Nasdaq. Instinet's customers' orders are not displayed by
Instinet on Nasdaq unless the Instinet subscriber affirmatively requests that
its order be displayed on Nasdaq. Additionally, only the best bid and asked
quotations with respect to a specific Nasdaq traded security and for which
Nasdaq display is requested by the Instinet subscriber are accessible to
non-subscribers on Nasdaq. Moreover, the comprehensive list of bid and ask
orders of all Instinet subscribers at any time may be viewed only by Instinet
subscribers. This lack of access results in better prices for Instinet
subscribers and limits the ability of individual investors, including the
Company's customers, to discover trends or the magnitude of trends. Finally,
Instinet subscribers are offered price improvement, while non-subscribers who
access Instinet through Nasdaq do not receive price improvement. All-Tech has
applied to Instinet for subscriber privileges in order to provide access to
Instinet to the Company's customers, but Instinet has refused to grant
privileges to All-Tech, severely limiting All-Tech's ability to offer these
better execution prices to its customers. All-Tech has instituted an arbitration
proceeding against Instinet, seeking to become an Instinet subscriber, as well
as monetary damages, claiming that Instinet's denial of access was illegal and
violates state and federal laws as well as NASD rules. Although the Company
believes it has meritorious claims, there can be no assurance as to the outcome
of such arbitration.
Competition
The marketplace for electronic trading brokerage firms is intensely
competitive and rapidly changing. All-Tech believes that due to anticipated
growth of the market for electronic brokerage services, active stock trading
facilities and other factors, competition will substantially increase and
intensify in the future. The Company believes its ability to compete will depend
upon many factors both within and outside its control, including the timing and
market acceptance of new services, products and enhancements developed by the
Company and its competitors, functionality of such services and products, data
availability, ease of use, pricing, reliability, customer service and support
and sales and marketing efforts.
The Company faces direct competition from a number of publicly-traded and
privately-held companies. It competes directly with other firms whose customers
engage in active electronic day trading, other ECN systems, large Wall Street
securities firms, securities subsidiaries of major commercial bank holding
companies, major
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regional firms and smaller niche players. This competition is based primarily
on the quality of services offered and price. The Company's principal
competitors in providing electronic brokerage services to day traders currently
include such firms as Datek Securities Corp., Terra Nova Trading, LLC. and
Block Trading Corp. The Company's ATTAIN ECN competes principally with market
makers, Instinet, Datek Securities Corp.'s Island ECN, Terra Nova Trading,
LLC's Archipelago ECN, Bloomberg Tradebook LLC's Tradebook System ECN, Spear,
Leeds & Kellogg's REDI ECN and Brass Utility Inc.'s BRUTE ECN. The Company also
competes with on-line trading systems available on the Internet, such as
Charles Schwab & Co., Inc., E*Trade Capital Inc. and Accutrade Inc. In
addition, the Company faces competition from data vendors, which offer
investment analysis software, news quotations and other securities industry
products.
Nasdaq has recently filed a new rule proposal with the SEC to operate a
limit order file (essentially an ECN). Should this proposal be adopted and
Nasdaq offers a low-cost alternative to privately operated ECNs on which
substantial numbers of limit orders are reflected, this could have a negative
competitive impact on the ATTAIN ECN, which could materially adversely affect
the Company's business, financial condition and results of operations. There can
be no assurance whether such proposal will be approved and, if approved, when
Nasdaq's ECN might become operational.
Many of the Company's existing and potential competitors have longer
operating histories, significantly greater financial, technical and market
resources, greater name recognition and a larger installed customer base than
the Company.
One or more of these competitors may be able to respond more quickly to new
or emerging technologies or changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their services and
products than the Company. There can be no assurance that the Company's existing
or potential competitors will not develop services and products comparable or
superior to those developed by the Company or adapt more quickly than the
Company to new technologies, evolving industry trends or changing customer
requirements. Larger competitors are also able to advertise their products and
services on a national or regional basis and may have a greater number and
variety of distribution outlets for their services. On-line discount brokerage
firms market their services through aggressive pricing and promotional efforts.
The Company's average commission per transaction has fallen from $24.32 for
the year ended June 30, 1996 to $23.05 for the nine months ended March 31, 1998,
due to competitive pressures. In addition, the Company is continuously
monitoring the fees it charges and such fees may either be reduced as a result
of competitive pressures or to adhere to maximum fees permitted pursuant to the
SEC no-action letter under which the Company operates the ATTAIN ECN. A
reduction in rates unaccompanied by a rise in usage would negatively impact
ATTAIN ECN revenues. See "Business -- The ATTAIN ECN." Increased competition
could result in additional price reductions, reduced margins or loss of market
share, any one of which could materially adversely affect the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors, or that competitive pressures faced by the Company will
not have a material adverse effect on its business, financial condition and
results of operations.
Competition from commercial banks may increase because of recent
acquisitions of securities firms by commercial banks, as well as internal
expansion by commercial banks into the securities business. In addition, the
Company expects competition from domestic and international banks to increase as
a result of recent and anticipated legislative and regulatory initiatives in the
United States to remove or relieve certain restrictions on commercial banks. See
"Business--Competition."
Competition for Retaining and Recruiting Personnel
The Company's business is dependent on the highly skilled, and often highly
specialized, individuals it employs. Retention of sales, trading, management and
administrative professionals is particularly important to the Company's
prospects. From time to time, other companies in the securities industry have
experienced losses of sales and trading personnel as well as management and
administrative professionals. The level of competition for key personnel is
expected to increase due to the increasing number of companies offering
electronic brokerage services and ECNs. There can be no assurance that losses of
key personnel due to such competition or otherwise will not occur in the future.
The loss of such professionals, particularly a senior professional, could
adversely affect the Company's growth and operating results.
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The Company expects further growth in the number of its personnel.
Additionally, the Company expects that continuing competition will cause its
compensation costs to increase in the future. There can be no assurance that the
Company will be able to recruit a sufficient number of new employees with the
desired qualifications in a timely manner. The failure to recruit new employees
could materially and adversely affect the Company's future operating results.
While the Company generally does not have employment agreements with its
employees, it attempts to retain its employees with incentives, such as bonuses.
Additionally the Company intends to issue options to buy Company stock that vest
over a number of years of employment. These incentives, however, may be
insufficient in light of the increasing competition for experienced
professionals in the securities industry, particularly if the value of the
Company's stock declines or fails to appreciate sufficiently to be a competitive
incentive for professional compensation. See "Business--Employees" and
"Management."
Dependence on Key Personnel
The Company is substantially dependent upon the efforts and skills of its
executive officers, particularly Harvey I. Houtkin and Mark D. Shefts, the
Company's Chairman of the Board and Chief Executive Officer, and its President,
Chief Operating Officer and Chief Financial Officer, respectively. The loss of
the services of either of these executive officers would have a material adverse
effect on the Company. The Company has entered into employment agreements with
both Messrs. Houtkin and Shefts and is applying for key man life insurance on
the lives of Messrs. Houtkin and Shefts in the amount of $1,000,000 each,
payable to the Company. The benefits received under these policies would not be
sufficient to compensate the Company for the loss of the services of Mr. Houtkin
or Mr. Shefts should suitable replacements not be employed. There can be no
assurance that key man insurance will be obtained in such amount, if at all. See
"Management--Employment Agreements; Key Man Insurance."
Significant Fluctuations in Quarterly Operating Results
The Company's revenues and operating results may fluctuate from quarter to
quarter and from year to year due to a combination of factors, including access
to public markets, fluctuations in the valuation of securities in which the
Company has invested as a principal, the level of retail and institutional
brokerage transactions, variations in expenditures for personnel, litigation
expenses and expenses of establishing new business units. In addition, the
timing of the Company's recognition of revenue from a significant transaction
can materially affect the Company's quarterly operating results. Due to the
foregoing and other factors, there can be no assurance that the Company will be
able to sustain profitability on a quarterly or annual basis. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Securities Regulation in General
The securities business is subject to extensive regulation under federal
and state laws in the United States and the rules and regulations of self
regulatory organizations ("SROs"), such as the NASD and the various exchanges,
and is also subject to regulation in the foreign countries in which All-Tech may
wish to conduct its activities. One of the most important regulations with which
the Company must continually comply is Rule 15c3-1 under the Securities Exchange
Act of 1934, as amended (the "Net Capital Rule"), which requires the Company to
maintain a minimum amount of net capital, as defined under such Rule.
Compliance with many of the regulations applicable to the Company involves
a number of risks, particularly in areas where applicable regulations may be
subject to interpretation. In the event of non-compliance with an applicable
regulation, governmental regulators and the NASD may institute administrative or
judicial proceedings that may result in censure, fine, civil penalties
(including treble damages in the case of insider trading violations), issuance
of cease-and-desist orders, deregistration or suspension of the non-compliant
broker-dealer or investment adviser, suspension or disqualification of the
broker-dealer's officers or employees or other adverse consequences. The
imposition of any such penalties or orders on the Company could have a material
adverse effect on the Company's operating results and financial condition.
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The Company's ability to engage in business is also regulated by the terms
of its NASD membership agreement. The Company's membership agreement currently
permits the Company to engage in the following business activities: broker or
dealer retailing corporate equity securities over-the-counter; broker or dealer
retailing corporate debt securities; mutual fund retailer; put and call broker
or dealer or option writer; broker or dealer selling tax shelters or limited
partnerships; non-exchange member arranging for transactions in listed
securities by an exchange member; market maker in corporate OTC securities;
municipal securities broker or dealer; underwriter or selling group member in
firm commitment and best efforts offerings; and trading for the Company's
account. Activities which are not currently permitted by the Company's
membership agreement include the following: exchange member engaged in exchange
commission business, other than floor activities; exchange member engaged in
floor activities; mutual fund underwriter or sponsor; U.S. government securities
dealer; broker or dealer selling variable life insurance or annuities; solicitor
of time deposits in a financial institution; real estate syndicator; broker or
dealer selling oil and gas interests; broker or dealer selling securities of
only one issuer or associated issuers; broker or dealer selling securities of
non-profit organizations; investment advisory services; and broker or dealer
selling interests in mortgages or other receivables. To the extent new business
activities are not already permitted under that agreement, the Company is
required to seek modification of the agreement. While the Company is not
currently seeking any modifications to its membership agreement, there can be no
assurance that any modification which may be requested will be made on a timely
basis, if at all. The failure to obtain such modification would prohibit the
Company from engaging in the activity at issue and could impair the Company's
ability to grow or to expand into other areas or business.
Underwriting commitments, should the Company engage in underwriting and
they be incurred, require a charge against net capital and, accordingly, the
Company's ability to make underwriting commitments in the future, should it
determine to do so, may be limited by the requirement that it must at all times
be in compliance with the applicable net capital regulations. See
"Business--Government Regulation."
The regulatory environment in which the Company operates is subject to
change. The Company may be adversely affected as a result of new or revised
legislation or regulations imposed by the SEC, other United States or foreign
governmental regulatory authorities or SROs. The Company also may be adversely
affected by changes in the interpretation or enforcement of existing laws and
rules by these governmental authorities and the NASD. Furthermore, the Company's
businesses may be materially affected not only by regulations applicable to it
as a financial market intermediary, but also by regulations of general
application.
Benefits of the Offering to Current Shareholders
Upon completion of this Offering, the current shareholders of the Company
will realize significant benefits, including, (i) the creation of a public
market for their securities, (ii) assuming the Offering price of the Common
Stock included in the Units is $8.00 per share, the receipt of approximately
$4,600,000 in net proceeds from the sale of 625,000 shares of Common Stock
included in the Units (and an additional $3,450,000 in net proceeds, assuming
the Over-Allotment Option is exercised in full, from the sale of an additional
468,750 shares of Common Stock included in the Units subject to the
underwriter's Over-Allotment Option), (iii) an unrealized gain of approximately
$117.1 million with respect to the securities owned by the Company's parent,
Rushmore, which is wholly-owned by Messrs. Mark D. Shefts and Harvey I. Houtkin,
shareholders, officers and directors of the Company and (iv) the Company will
repay $611,000 of borrowings to Rushmore. In addition, the current shareholders
will experience an immediate increase in book value per share owned by them from
$.12 per share to $1.93 per share, while the purchasers of Common Stock in this
Offering will experience immediate substantial dilution as described above.
Potential Conflicts of Interest
The Company engages in proprietary trading and acts as a market maker.
Therefore, the Company may be competing with its own customers with respect to
certain trades. In addition, executive officers, directors and employees of the
Company invest in public companies in which the Company acts as a market maker
or in which the Company performs proprietary trading. Accordingly, there are
certain risks that, as a result of such investment or profits interest, a
director, officer or employee may take actions which would conflict with the
best interests of the Company. All-Tech Training Group, Inc. ("ATTG") trains
potential customers of the Company. The Company, if these trainees open All-Tech
accounts, offers them per trade rebates up to, in the aggregate, the
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amount a customer paid for his or her training. ATTG is owned by a company,
Rushmore Financial Services, Inc. ("Rushmore"), which is wholly owned by Harvey
I. Houtkin and Mark D. Shefts, officers and directors of the Company. Messrs.
Houtkin and Shefts perform duties for other companies directly or indirectly
owned by them, such as ATTG and various real estate companies, as well as trade
for accounts owned or controlled by them. Although neither Mr. Houtkin nor Mr.
Shefts spends a substantial amount of time on such activities at the present
time, there can be no assurance that their duties as directors or officers of
such other entities will not present conflicts of interest with their duties to
the Company in the future. See "Business--Proprietary Trading" and "Certain
Transactions."
Risk Associated with Increased Trading
The Company has recently executed a joint back office agreement and a stock
purchase agreement with its clearing firm, which agreements have not yet been
executed by the clearing firm or approved by the New York Stock Exchange. In the
event that the agreements are executed by the clearing firm and are approved by
the New York Stock Exchange, of which no assurance can be given, such agreements
would permit All-Tech to trade the Company's proprietary account at increased
margin levels. Such increased leverage will permit the Company to greatly
increase the amount of proprietary trading it engages in. Proprietary trading
subjects the Company to risk of loss of the capital invested; trading at such a
highly leveraged rate increases the risk of loss proportionately. Any losses, if
significant, would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Proprietary
Trading."
Risks Associated with Entry into Institutional Market
The Company has historically sold its services primarily to individuals and
has little experience in marketing its services directly to institutions. The
Company believes its future success will depend in part on its ability to move
beyond its traditional customer base and market its services to institutions,
including brokerage firms with whom the Company currently competes. There can be
no assurance that the Company's services will be accepted by institutional
investors, which could have a material adverse effect on the Company's business
growth. See "Business--All-Tech's Strategy."
Rapid Technological Change and Dependence on New Services
Electronic stock trading is characterized by rapidly changing technology,
evolving industry standards in computer hardware, programming tools, programming
languages, operating systems, database technology and information delivery
systems, changes in customer requirements and frequent new service introductions
and enhancements. The Company's future success will depend upon its ability to
maintain and develop competitive technologies, to continue to enhance its
current services and to develop and introduce new services in a timely and
cost-effective manner that meets changing conditions such as evolving customer
needs, new competitive service offerings, emerging industry standards and
changing technology. Any failure by the Company to anticipate or to respond
quickly to changing market conditions, or any significant delays in development
or introduction of new services, could cause potential customers to delay or
decide against utilizing the Company's services and existing customers to
conduct their trading at competitors of the Company, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--All-Tech's Strategy" and "--Future Growth and
Development."
Risks Associated with Future Reliance on the Internet
The Company believes that future development of its service and customer
base, and the future growth of the Company, particularly outside of the United
States, depends in part upon the utilization of the Internet as a widely used
medium for communication of trading information and the delivery of high-quality
financial market data, orders, account status information and customer support.
The Company currently has a limited number of customers who communicate with the
Company via the Internet. If the number of customers accessing All-Tech through
the Internet increases, the Company will have to develop additional Internet
technical compatibility and adjust its marketing and customer support approaches
accordingly. There can be no assurance that the
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Company will accomplish any of such tasks on a timely, cost-effective basis, if
at all. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols to handle increased levels of Internet
activity, or due to governmental regulation. Global commerce and online
exchange of information on the Internet and other similar open wide area
networks are new and evolving; therefore, it is difficult to predict whether
Internet technology developments will keep pace with the demand for Internet
services. If the necessary infrastructure or complementary services do not
continue to be developed, or if the Internet does not continue as a viable
commercial marketplace, or if the Company does not adequately and timely
develop the necessary technical compatibility and adjust its marketing and
customer support approaches accordingly, the Company's business, financial
condition and results of operations could be materially adversely affected. See
"Business--Regulatory Background and Development of Active Electronic Trading"
and "--All-Tech's Strategy."
Risk of Software Defects
As a result of their complexity, all software products, including the
Company's software, may contain errors. Despite testing by the Company and
initial use by customers, when new services and products are introduced or new
versions of services and products are released, there can be no assurance that
errors will not be found and persist after commencement of use, resulting in
loss of revenues, delay in market acceptance or damage to the Company's
reputation, any of which could have a material adverse effect upon the Company's
business, financial condition and results of operations. All software is
inherently limited by the accuracy of the data utilized. The monitoring,
collection, storage and delivery of financial market data by data vendors and by
the Company's software is inherently complex; therefore, it is subject to delay
and to containing errors. The effectiveness of the Company's services is limited
by the accuracy of such data. See "Business--Services--ATTAIN Trading System."
Risk of Litigation; Lack of Insurance Coverage
There has been substantial litigation in the software industry involving
intellectual property rights. Although the Company does not believe that it is
infringing the intellectual property rights of others, or that others are
infringing on its intellectual property rights, there can be no assurance that
infringement claims, if asserted against the Company, would not have a material
adverse effect on the Company's business, financial condition and results of
operations, or that any infringement claim asserted by the Company would be
successfully resolved.
The Company and an affiliate instituted an arbitration against Instinet
Corporation for wrongful denial of service, seeking access to the Instinet ECN
as well as monetary damages. The Company has limited access to Instinet, the
largest ECN, through Nasdaq and through its clearing firm. The Company's failure
to obtain full access to Instinet could have a material adverse effect on the
Company's ability to provide the best trading opportunities to its customers and
on the Company's business, financial condition and results of operations. There
can be no assurance as to the outcome of this arbitration.
In June 1998, the Company instituted an arbitration against Knight
Securities, Inc. ("Knight") by filing a Statement of Claim with the NASD. The
arbitration seeks compensatory damages in the amount of $97,537.50, punitive
damages in the amount of $500,000, as well as interest, costs, and disbursements
and attorneys fees. The arbitration was commenced as a result of Knight's
refusal to pay the Company's ECN fees arising from Knight's entering trades
involving OTC securities with the ATTAIN ECN. The allegations set forth in the
Statement of Claim include claims based upon breach of contract, quantum meruit
and fraud. The Company is also currently denying access to Knight, as well as
approximately 25 other ATTAIN ECN users, because they have stated to the Company
that they will not pay their ATTAIN ECN bills. The Company intends to vigorously
pursue its legal remedies to recover unpaid accounts receivable. However, there
can be no assurance that such efforts will be successful.
The Company has requested that the U.S. Department of Justice investigate
what the Company believes to be misconduct of the market making participants in
their refusal to pay the Company's ECN fees. In addition,
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<PAGE>
the Company has been informed by the NASD that, based upon complaints lodged by
two broker-dealers, it is conducting an investigation as to whether the
Company's denial of access to the ATTAIN ECN constituted "backing away."
Although the Company does not believe that there is any merit to such claims,
and it intends to vigorously contest any such charge, there can be no assurance
that such claims would not result in a formal investigation being commenced or
that the Company would not incur substantial fees in contesting such claims.
As the Company's services are designed to enable investors to make improved
investment and trading decisions, an investor who uses the Company's services
and sustains losses or fails to make profits in the securities or financial
markets may allege that the Company's services contributed to or resulted in
such losses or lost profits and that the Company should be held liable to the
investor for such losses. While the Company's account documentation contains
certain warnings and disclaimers, they may not be effective in certain
jurisdictions or under certain circumstances. The Company currently does not
maintain errors and omissions insurance to cover such liability risks, and there
can be no assurance that such insurance would be available to the Company on
reasonable terms, or at all, or, if obtained, that such insurance would be
adequate to cover the amount of such liabilities, if imposed on the Company, or
that such insurance would cover the types of claims which might be asserted
against the Company. While the Company has never had such a claim successfully
asserted against it, there can be no assurance that such claims will not be
asserted and that, if asserted, the results will not materially adversely affect
the Company's business, financial condition and results of operations. See
"Business--Services."
Risks Associated with International Expansion
A component of the Company's strategy is its planned expansion into
international markets. This strategy is dependent, in part, on international
customers having access to the appropriate financial market data and on the
Company's ability to provide such potential customers with brokerage services
under the laws of that jurisdiction. To date, the Company has only limited
experience in marketing, selling and delivering its services internationally.
There can be no assurance that the Company will be able to successfully market,
sell and deliver its services in international markets. In addition, there are
certain risks inherent in doing business on an international level, including
unexpected changes in regulatory requirements, difficulties in staffing and
managing foreign operations, dependence upon strategic partners needed to
succeed in certain countries, difficulties in protecting intellectual property
rights, longer payment cycles, problems in collecting accounts receivable,
political instability, unfamiliarity with local laws and customs, fluctuations
in currency exchange rates, and potentially adverse tax consequences. There can
be no assurance that one or more of such or other factors will not have a
material adverse effect on the Company's ability to expand into international
markets or on the Company's future international operations if any, and,
consequently, on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will expand into
international markets. See "Business--Sales and Marketing."
Dependence upon Microsoft's Windows Operating System
The Company's services are currently designed for use on computers using
Microsoft's 32-bit Windows operating system, requiring Windows 95 and Windows
NT. The Company may attempt to modify its software to take advantage of later
versions of the Windows operating system, such as Windows 98, by Microsoft. To
the extent any such later version is not compatible with Windows 95, All-Tech's
customers trading from their own locations ("remote customers") would be
required to purchase such new version. Any factor adversely affecting the demand
for, or the current trends of increasing and expanding use of, the current
Windows operating system could have an impact on demand for the Company's
services, causing a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, changes to the underlying
components of the Windows operating system may require changes to the Company's
ATTAIN trading system and ECN software. If the Company is not able to
successfully develop or implement appropriate modifications to its ATTAIN
trading system and ECN software in a timely fashion, the Company's business,
financial condition and results of operations could be materially adversely
affected. See "Business--Services--The ATTAIN Trading System."
Emerging Market for Electronic Trading
The market for computer-automated investment and trading on personal
computers is relatively new and will be subject to frequent and continuing
changes. Any future growth of this market depends upon continued
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<PAGE>
customer acceptance of this type of trading as a viable method of implementing
trading strategies. Historically, the Company's policy has been that
prospective customers be educated as to the potential advantages of the
Company's services and be trained in the trading strategies appropriate for
this type of trading. The Company expects that the need for such education will
continue for the foreseeable future. There can be no assurance that the Company
will be successful in obtaining a sufficient number of educated customers or
that the Company will be able to respond effectively to changing customer
preferences in this market. If the size of the market is substantially smaller
than the Company believes, or if the market for electronic trading fails to
grow or grows more slowly than the Company currently anticipates, or if the
Company fails to respond effectively to the evolving requirements of this
market, the Company's business, financial condition and results of operations
would be materially adversely affected. See "Business--Overview."
The education of prospective customers in electronic day trading strategies
is conducted almost wholly by ATTG, a wholly-owned subsidiary of Rushmore, a
company which is wholly owned by Messrs. Harvey Houtkin and Mark Shefts,
Chairman of the Board, Chief Executive Officer and Secretary and President,
Chief Operating Officer, Chief Financial Officer and Treasurer, respectively, of
the Company. A substantial number of the Company's customers have received
training from ATTG. Should ATTG determine to discontinue this business, the
Company would have to develop its own educational capabilities or purchase
ATTG's operations. The Company has no current intention of developing its own
training capabilities. See "Certain Transactions."
Protection of Intellectual Property
The Company's success is heavily dependent upon its proprietary technology.
The Company relies primar-ily on a combination of copyright, trade secret and
trademark laws, non-disclosure and other contractual provisions and technical
measures to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials through trade secret and
copyright laws, which provide only limited protection. As part of its
confidentiality procedures, the Company enters into non-disclosure agreements
with its employees, consultants and third party vendors. The Company uses
agreements with its customers and ATTAIN ECN subscribers in order to protect its
copyrights and trade secrets and to prevent such users from commercially
exploiting such copyrights and trade secrets for their own gain. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
copy or otherwise obtain, use or exploit the Company's products or technology
independently. Policing unauthorized use of the Company's products is difficult,
and the Company is unable to determine the extent to which unauthorized use, if
any, of its software products exists. Piracy can be expected to be a persistent
problem, particularly in international markets and as a result of the growing
use of the Internet. In addition, effective protection of intellectual property
rights may be unavailable or limited in certain countries, including some in
which the Company may attempt to expand its sales efforts. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate or that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technologies or products, either of which could result in a material
adverse effect on the Company's business, financial condition and results of
operations.
There has been substantial litigation in the software industry involving
intellectual property rights. The Company does not believe that it is infringing
the intellectual property rights of others. There can be no assurance that
infringement claims would not have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, to the
extent that the Company acquires or licenses a portion of the software or data
included in its software from third parties, its exposure to infringement
actions may increase because the Company must rely upon such third parties for
information as to the origin and ownership of such acquired or licensed software
or data. In the future, litigation may be necessary to establish, enforce and
protect trade secrets, copyrights, trademarks and other intellectual property
rights of the Company. The Company may also be subject to litigation to defend
against claimed infringement of the rights of others or to determine the scope
and validity of the intellectual property rights of others. Any such litigation
could be costly and divert management's attention, either of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Adverse determinations in such litigation could result in
the loss of proprietary rights, subject the Company to significant liabilities,
require the Company to seek licenses from third parties, which could be
expensive, or prevent the Company from selling its services or using its
trademarks, any one of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Intellectual Property and Other Proprietary Rights."
16
<PAGE>
Risks Associated with Possible Acquisitions
The Company may acquire businesses, assets, products and technologies that
the Company believes could complement or expand the Company's business. The
Company currently has no specific plan, commitments or agreements with respect
to any acquisitions and there can be no assurance that the Company will be able
to identify any appropriate acquisition candidates. If the Company identifies an
acquisition candidate, there can be no assurance that the Company will be able
to successfully negotiate the terms of any such acquisition, finance such
acquisition or integrate such acquired business, assets, products or
technologies into the Company's existing business. Furthermore, the negotiation
of potential acquisitions as well as the integration of an acquired business
could cause diversion of management's time and resources, and require the
Company to use proceeds from this Offering to consummate a potential
acquisition. See "Business--All-Tech's Strategy."
Possibility of Losses Associated with Principal and Trading Activities
The Company's securities trading and market-making activities as principal
subject the Company's capital to significant risks, including market, credit,
leverage, counter-party and liquidity risks. Sudden sharp declines in market
values of securities can result in illiquid markets and the failure of issuers
and counterparties to perform their obligations, as well as increases in claims
and litigation. In such markets, the Company may incur reduced revenues or
losses in its principal trading activities. These activities often involve the
purchase, sale or short sale of securities as principal in markets that may be
characterized by relative illiquidity or that may be particularly susceptible to
rapid fluctuations in liquidity and price. The Company intends to use a portion
of the net proceeds from this Offering for its proprietary trading activities.
See "Business."
Year 2000
The Company's review of its own operating systems does not indicate any
Year 2000 problems. However, the Company is highly dependent on third party
vendors. Failures and interruptions, if any, resulting from the inability of
certain computing systems of third party vendors, including the Company's
clearing broker, to recognize the Year 2000 could have a material adverse effect
on the Company's results of operations. There can be no assurance that the Year
2000 issue can be resolved by any of such third parties prior to the upcoming
change in the century. Although the Company may incur substantial costs,
particularly costs resulting from increased charges by its third party service
providers, as a result of such third party service providers correcting Year
2000 issues, such costs are not sufficiently certain to estimate at this time.
Lack of Off-Site Disaster Recovery Facility
The Company's principal disaster recovery system is located at the
Company's principal offices. The Company's principal backup recovery system
includes (i) backup computers which are standing by which have already been
loaded with duplicate software to run the ATTAIN trading system and ATTAIN ECN,
(ii) additional "shadow" T-1 communication lines which will be used in the event
that the primary T-1 communication lines used by the Company's Internet
customers fail, (iii) ISDN communications lines which serve as backup to the T-1
communication lines which connect the Company to its branch offices, and (iv)
T-1 communication lines which serve as backups to the satellite transmission
feeds from which the Company obtains its quotation information. Finally, all of
the Company's servers, routers and communication equipment is connected to
uninteruptable power supplies for protection in the event of short-term
electrical outages. No off-site disaster recovery system exists at this time.
Recently, the Company experienced certain systems failure resulting from the
malfunctioning of two telecommunications satellites, which resulted in the
Company being unable to obtain listed quotation information at all of its
offices for that trading day and any quotation information at a majority of its
branch offices for the trading day. The Company has since implemented a full
high speed wire back-up system which will allow the Company to obtain quotations
and other information in the event of any future satellite malfunctions. There
can be no assurance that the Company will not suffer any other systems failure
or interruption, including one caused by a fire, other natural disaster, power
or telecommunications failure, act of God, act of war or otherwise, or that the
Company's back-up procedures and capabilities in the event of any such failure
or interruption, in light of the fact that they are not off-site, will be
adequate.
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<PAGE>
Dependence upon Availability of Capital and Funding
The Company's business is dependent upon the availability of adequate
required capital under applicable regulatory requirements. Historically, the
Company has satisfied these needs from internally generated funds. While the
proceeds of the Offering can be expected to satisfy the Company's funding and
capital needs for the next 12 months, there can be no assurance that any, or
sufficient, funding or regulatory capital will continue to be available to the
Company thereafter on terms that are acceptable to it. The Company's ability to
expand and grow its business in accordance with its current plan, to make
acquisitions and to meet its long-term capital requirements beyond any such
12-month period will depend on many factors, including, but not limited to, the
receipt of the net proceeds of this Offering, the rate, if any, at which the
Company's cash flow increases, the ability and willingness of the Company to
accomplish acquisitions and develop new business areas with its capital stock,
and the availability to the Company of additional public and private
subordinated debt and/or equity financing. No assurance can be given that
additional financing will be available or that, if available, it will be
available on terms favorable to the Company. See "Use of Proceeds,"
"Business--Government Regulation," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
Broad Discretion of Management in Use of Proceeds
The Company has not made specific allocations for the use of the net
proceeds from the sale by the Company of the Common Stock and Warrants offered
hereby. Rather, the Company intends to use the net proceeds primarily for
general corporate purposes, including principal investments and working capital.
Accordingly, management will have significant discretion in applying the net
proceeds of the Offering. See "Use of Proceeds."
Control by Insiders
Prior to this Offering, all of the outstanding shares of Common Stock are
held by Harvey I. Houtkin, Chairman, Chief Executive Officer and Secretary of
the Company, Mark D. Shefts, President, Chief Operating Officer, Chief Financial
Officer and Treasurer of the Company, and Rushmore, a company wholly owned by
Messrs. Houtkin and Shefts. Upon completion of the Offering, Messrs. Houtkin and
Shefts will beneficially own in the aggregate 70.4% of the outstanding Common
Stock (and 66.7% of the Common Stock if the Over-Allotment Option is exercised
in full) and therefore will be able to control the outcome of all corporate
actions requiring shareholder approval. Therefore, investors' ownership of
Common Stock will not provide them with any ability to determine the outcome of
matters requiring a shareholder vote, including the election of directors, and
any merger, consolidation or sale of all or substantially all of the Company's
assets. Additionally Messrs. Houtkin and Shefts shall effectively retain control
over the management and affairs of the Company through their significant stock
ownership. Such concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of the Company or a merger,
consolidation, takeover or other business combination involving the Company or
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control of the Company. See "Management" and "Principal and
Selling Shareholders."
Speculative Nature of the Warrants
The Warrants do not confer any rights of Common Stock ownership on their
holders, such as voting rights or the right to receive dividends, but rather
merely represent the right to acquire shares of Common Stock at a fixed price
for a limited period of time. Specifically, commencing , 1999 (six months after
the date of this Prospectus), through , 2001 (30 months after the date of this
Prospectus), holders of the Warrants may exercise their right to acquire Common
Stock at an exercise price of $12.00 per share (150% of the initial public
offering price of the Common Stock), and commencing , 2001 (30 months after the
date of this Prospectus), holders of Warrants may exercise their right to
acquire Common Stock at an exercise price of $14.00 per share (175% of the
initial public offering price of the Common Stock), subject to adjustment upon
the occurrence of certain dilutive events, until , 2004 (60 months after the
date of this Prospectus), after which date any unexercised Warrants will expire
and have no further value. Moreover, following the completion of the Offering,
the market value of the Warrants will be uncertain and there can be no assurance
that the market value of the Warrants will equal or exceed their initial public
offering price. There can be no assurance that the market price of the Common
Stock will ever equal or exceed the exercise price of the Warrants and,
consequently, whether it will ever be profitable for holders of the Warrants to
exercise the Warrants.
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<PAGE>
Potential Adverse Effect of Redemption of Warrants
Commencing , 2000 (18 months after the date of this Prospectus), the
Warrants will be subject to redemption by the Company at $.10 per Warrant on
thirty days prior written notice to the warrantholders if the average closing
sale price of the Common Stock as reported on the Amex equals or exceeds $20.00
per share of Common Stock for any 20 trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. If the Warrants are redeemed, holders of the Warrants
will lose their right to exercise the Warrants after the expiration of the
30-day notice of redemption period. Upon receipt of a notice of redemption,
holders would be required to: (i) exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for them to do so, (ii) sell the
Warrants at the current market price, if any, when they might otherwise wish to
hold the Warrants or (iii) accept the redemption price, which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Capital Stock--Warrants."
Legal Restrictions on Sale of Shares Underlying the Warrants
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company has agreed to use
its best efforts to keep a registration statement covering the shares of Common
Stock issuable upon the exercise of the Warrants effective for the term of the
Warrants, if it fails to do so for any reason, the Warrants may be deprived of
value. Additionally, the Company has the right, under certain circumstances, to
redeem the Warrants. If the Company does not have a current prospectus on or
before the redemption date, the Warrants may be deprived of value.
The Shares and Warrants are detachable and separately transferable
immediately following completion of the Offering. Purchasers may buy Warrants in
the aftermarket in or may move to jurisdictions in which the shares underlying
the Warrants are not so registered or qualified during the period that the
Warrants are exercisable. In this event the Company would be unable to issue
shares of Common Stock underlying the Warrants. Holders of Warrants would have
no choice but to attempt to sell the Warrants in a jurisdiction where such sale
is permissible or allow them to expire unexercised. See "Description of Capital
Stock."
Possible Issuance of Preferred Stock; Barriers to Takeover
The Company's Certificate of Incorporation and By-Laws, as well as Delaware
corporate law, contain certain provisions that could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of the Company. These provisions could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. Certain of these provisions impose various procedural
and other requirements that could make it more difficult for shareholders to
effect certain corporate actions. The Company's Certificate of Incorporation
also authorizes the Board of Directors to issue, without shareholder approval,
5,000,000 shares of Preferred Stock with voting, conversion and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of Common Stock. Following the Offering, no shares of Preferred Stock of
the Company will be outstanding. Any issuances of Preferred Stock could be used
for anti-takeover purposes or to discourage, delay or prevent a change of
control of the Company. See "Description of Capital Stock."
Absence of Prior Market; Possible Volatility of Securities Prices; Arbitrary
Determination of Offering Prices
Prior to the Offering, there has been no public market for the Common Stock
or the Warrants, and there can be no assurance that an active public market will
develop or, if developed, will be sustained following the Offering. Certain
factors, such as sales of the Securities into the market by existing
shareholders, fluctuations in operating results of the Company or its
competitors, market conditions for similar stocks, and market conditions
generally for other companies in the investment banking industry or in the
financial services or technology industries, could cause the market price of the
Common Stock and the Warrants to fluctuate substantially. In addition, the stock
market has experienced significant price and volume fluctuations that have
particularly
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<PAGE>
affected the market prices of equity securities of companies and that have
often been unrelated to the operating performance of such companies.
Accordingly, the market price of the Securities may decline even if the
Company's operating results or prospects have not changed. The initial public
offering prices of the Securities and the terms of the Warrants will be
determined through negotiations among the Company, the Selling Shareholders and
the Representative and shall not necessarily bear any relationship to the
Company's book value, assets, past operating results, financial condition or
any other established criteria of value. There can be no assurance that the
Securities offered by this Prospectus will trade at market prices in excess of
the initial public offering prices. See "Underwriting."
Potential Decreases in the Market Price of Securities Resulting from Future
Sales of Securities
Sales of a substantial number of shares of Common Stock and Warrants in the
public market, whether by purchasers in the Offering or other shareholders of
the Company, could adversely affect the prevailing market price of the
Securities and could impair the Company's future ability to raise capital
through an offering of its equity securities. Without giving effect to exercise
of the Underwriters' Over-Allotment Option, there will be 21,093,750 shares of
Common Stock and 3,125,000 Warrants outstanding immediately after completion of
the Offering, of which 6,250,000 shares of Common Stock and all of the Warrants
will be freely tradeable in the public markets, subject, if purchased by
"affiliates", to the volume and other limitations set forth in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The remaining 14,843,750 shares of Common Stock outstanding immediately
following the Offering will be "restricted" securities, as that term is defined
under Rule 144. Under lock-up agreements (the "Lockup Agreements") each existing
shareholder has agreed that such shareholder will not directly or indirectly
sell, assign or otherwise transfer any shares of Common Stock for a period of
twelve (12) months after the effective date of the Offering, unless released by
the Representative. Any shares subject to the Lockup Agreements may be released
by the Representative at any time without notice to the public. All of such
14,843,750 shares of Common Stock would be eligible for sale, subject to
compliance with the volume limitations of Rule 144 by the holders of these
shares commencing upon the later of (i) ninety (90) days after the effective
date of the Offering or (ii) the expiration or waiver of the Lockup Agreements.
See "Shares Eligible for Future Sale" and "Underwriting."
Immediate and Substantial Dilution
Purchasers of Common Stock in the Offering will experience immediate
substantial dilution of $5.95 based on the net tangible book value of the
Company at March 31, 1998, and on an initial public offering price of $8.00 per
share and $.10 per Warrant. See "Dilution."
Lack of Experience of Representative
Security Capital Trading, Inc., the Representative, commenced operations in
June 1995. The Representative has only co-managed two recent public offerings of
securities; therefore, the Representative does not have extensive experience as
a co-manager or underwriter of public offerings of securities. The Underwriters
are required to make an independent investigation reasonably calculated to
reveal all facts pertinent to a prudent investor regarding the Company and the
price of the securities offered hereby. See "Underwriting."
Limited Marketing Capabilities
The Company's operating results will depend to a large extent on its
ability to successfully market the ATTAIN trading system, the ATTAIN ECN and
other services to public customers who are active traders and who require
real-time market information. In addition, the Company also hopes to market its
services to institutions, including brokerage firms. The Company currently has
limited marketing capability. The Company intends to use a portion of the
proceeds of the Offering to hire additional sales and marketing personnel and
conduct additional advertising. There can be no assurance that any marketing
efforts undertaken by the Company will be successful or will result in any
significant increase in usage of the ATTAIN trading system, the ATTAIN ECN or
other services of the Company. See "Business--All-Tech's Strategy."
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<PAGE>
No Dividends and None Anticipated
Although the Company has paid dividends on the Common Stock in the past, it
is anticipated that income received from operations, if any, will be retained
for the Company's future operations. Accordingly, no dividends are anticipated
in the future. See "Dividend Policy."
Limitation on Liability of Directors
The Company's Certificate of Incorporation limits personal liability of
directors to the fullest extent permitted by the General Corporation Law of the
State of Delaware. In addition, the Company's By-Laws provide for
indemnification of directors, officers, employees or agents of the Company under
certain circumstances. See "Description of Capital Stock."
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
5,625,000 of the shares of the Common Stock and 3,125,000 Warrants offered
hereby by the Company, based on an assumed initial public offering price of
$8.00 per share and $.10 per Warrant, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be $41,312,500 ($44,805,600 assuming exercise of the Over-Allotment
Option in full). The net proceeds will be used for general corporate purposes,
the development or acquisition of new areas of the brokerage business,
advertising and marketing, principal investments, proprietary trading activities
and working capital, including the repayment of a loan in the amount of $611,000
to the Company's parent, Rushmore. The Company will not receive any of the
proceeds from the sale of the shares of Common Stock by the Selling
Shareholders. See "Principal and Selling Shareholders."
DIVIDEND POLICY
The Company has declared and paid cash dividends on its capital stock in
the past. The Company currently intends to retain all of its earnings, if any,
for use in its business and does not anticipate paying any dividends in the
foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon a number of
factors, including future earnings, the success of the Company's business
activities, regulatory capital requirements, the general financial condition and
future prospects of the Company, general business conditions and such other
factors as the Board of Directors may deem relevant.
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<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1998
(after giving effect to the Company's Delaware reincorporation and 68.75 for 1
forward stock split that occurred in May 1998), was approximately $1,835,000 or
$.12 per share of Common Stock. Pro forma net tangible book value per share
represents the Company's pro forma tangible assets less total liabilities
divided by the number of shares of Common Stock outstanding as of March 31,
1998. Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Common Stock in the Offering made hereby and the
pro forma net tangible book value per share of Common Stock immediately after
completion of the Offering. Without taking into account any changes in such pro
forma net tangible book value after March 31, 1998, other than to give effect to
the sale of 5,625,000 shares of Common Stock and 3,125,000 Warrants (but not the
Underwriters' Over-Allotment Option) by the Company in this Offering at an
assumed initial pubic offering price of $8.00 per share and $.10 per Warrant and
the application of the estimated net proceeds therefrom (after deducting the
underwriting discount and commissions and estimated Offering expenses), the pro
forma as adjusted net tangible book value of the Company as of March 31, 1998,
would have been approximately $43,148,000, or $2.05 per share assuming no value
is attributed to the Warrants. This represents an immediate increase an pro
forma net tangible book value of $1.93 per share to existing shareholders and an
immediate dilution in pro forma as adjusted net tangible book value of $5.95 per
share to new investors. The following table illustrates this dilution on a per
share basis:
<TABLE>
<S> <C>
Assumed initial public offering price per share ................................... $8.00
Pro forma net tangible book value per share as of March 31, 1998........ $ .12
Increase per share attributable to Offering............................. 1.93
-----
Pro forma as adjusted net tangible book value per share after the Offering......... 2.05
-----
Dilution per share to new investors ............................................... $5.95
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the difference between the total consideration paid for the number of shares of
Common Stock purchased from the Company and the average price per share paid by
existing shareholders and by new investors purchasing shares of Common Stock
pursuant to this Offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------ ------------------------- Average Price
Number Percent Amount Percent Per Share
------------ --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders ......... 15,468,750 73.3% $ 1,682,595 3.6% $ .11
New Investors ................. 5,625,000 26.7 45,000,000 96.4 $ 8.00
---------- ---- ----------- ----
Total ...................... 21,093,750 100% $46,682,595 100%
========== ==== =========== ====
</TABLE>
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 (i) on an actual basis and (ii) as adjusted to reflect the sale
by the Company of 5,625,000 shares of Common Stock and 3,125,000 Warrants
offered hereby at an assumed initial public offering price of $8.00 per share
and $.10 per Warrant, and the receipt of the estimated net proceeds therefrom,
after deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company. This table should be read in conjunction with
the financial statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
March 31, 1998
-----------------------------
Actual As Adjusted
------------ --------------
<S> <C> <C>
Shareholders' equity:(1) ..........................................
Preferred Stock, $.01 par value, 5,000,000 shares authorized, none
outstanding .................................................... $ -- $ --
Common Stock, $.001 par value, 55,000,000 shares authorized,
15,468,750 shares outstanding, actual; and 21,093,750 shares
outstanding, as adjusted(2) .................................... 15,469 21,094
Additional paid-in capital ....................................... 1,548,299 42,855,174
Retained earnings ................................................ 321,757 321,757
---------- -----------
Shareholders' equity ........................................... 1,885,525 43,198,025
---------- -----------
Total capitalization ........................................ $1,885,525 $43,198,025
========== ===========
</TABLE>
- ------------
(1) After giving effect to the Delaware reincorporation and the
recapitalization.
(2) Excludes as of March 31, 1998: 2,250,000 shares of Common Stock reserved
for issuance under the Company's 1998 Stock Option Plan, none of which had
been granted. The Company intends to grant 1,500,000 of such options, such
grant to be effective upon the effective date of this Offering. See
"Management--1998 Stock Option Plan" and Note 11 of Notes to financial
statements.
24
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial information with respect
to the Company as of and for the periods indicated. The financial information as
of and for the years ended June 30, 1993, June 30, 1994, 1995, 1996 and 1997,
has been derived from the audited financial statements of the Company. The
financial information as of and for the nine months ended March 31, 1997 and
1998 has been derived from unaudited financial statements of the Company, which
in the opinion of Management have been prepared on the same basis as the audited
financial statements and contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for such periods. The results of operations for the nine months ended
March 31, 1998, are not necessarily indicative of results to be expected for the
full fiscal year. This selected financial information should be read in
conjunction with the financial statements and Notes thereto and the discussion
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------- ---------------- ---------------- -------------- --------------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Revenues:
Brokerage ................... $ 12,524 $ 15,113 $ 2,826 $ 10,704 $ 15,393
Trading ..................... (1,256) (377) 115 64 132
ECN ......................... -- -- -- -- --
Other ....................... -- 2 21 307 539
------------ ----------- ----------- ------------ ------------
Total revenues ............. 11,268 14,738 2,962 11,075 16,064
------------ ----------- ----------- ------------ ------------
Costs and Expenses:
Cost of services ............ 4,659 6,925 1,494 5,218 7,307
Technology
development ................ 86 38 43 209 366
Selling, general and
administrative
expenses:
Employee compensa-
tion and benefits .......... 4,720 6,667 741 2,376 4,679
Occupancy costs ............. 55 96 67 106 386
Other ....................... 1,187 1,242 628 1,805 1,724
------------ ----------- ----------- ------------ ------------
Total costs and
expenses .................. 10,707 14,968 2,973 9,714 14,462
------------ ----------- ----------- ------------ ------------
Income (loss) before
provision for income
taxes ....................... 561 (230) (11) 1,361 1,602
Provision (benefit)
for income taxes ............ 275 (0) (8) 610 665
------------ -------------- -------------- ------------ ------------
Net income (loss) ............ $ 286 $ (230) $ (3) $ 751 $ 937
============ ============= ============= ============ ============
Earnings (loss) per share $ .02 $ (.02) $ (.00) $ .05 $ .06
============ ============= ============= ============ ============
Weighted average shares
outstanding ................. 15,468,750 15,468,750 15,468,750 15,468,750 15,468,750
============ ============= ============= ============ ============
<CAPTION>
Nine Months Ended
March 31,
--------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Revenues:
Brokerage ................... $ 11,267 $ 12,423
Trading ..................... 139 (147)
ECN ......................... -- 434
Other ....................... 481 439
------------ ------------
Total revenues ............. 11,887 13,149
------------ ------------
Costs and Expenses:
Cost of services ............ 5,118 5,585
Technology
development ................ 232 344
Selling, general and
administrative
expenses:
Employee compensa-
tion and benefits .......... 2,507 3,857
Occupancy costs ............. 276 795
Other ....................... 1,418 2,339
------------ ------------
Total costs and
expenses .................. 9,551 12,920
------------ ------------
Income (loss) before
provision for income
taxes ....................... 2,336 229
Provision (benefit)
for income taxes ............ 609 27
------------ ------------
Net income (loss) ............ $ 1,727 $ 202
============ ============
Earnings (loss) per share $ .11 $ .01
============ ============
Weighted average shares
outstanding ................. 15,468,750 15,468,750
============ ============
</TABLE>
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------
1993 1994 1995 1996 1997 March 31, 1998
-------- -------- -------- -------- -------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......... $ 106 $ 84 $ 37 $ 177 $ 641 $ 604
Total assets ...................... 2,906 1,716 1,657 3,263 3,799 3,046
Total liabilities ................. 1,157 197 141 996 1,944 1,161
Shareholders' equity .............. 1,749 1,519 1,516 2,267 1,855 1,886
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere in this Prospectus. This
discussion contains forward-looking statements. Words or phrases such as "should
result, are expected to, we anticipate, we estimate, we project" or similar
expressions are intended to identify forward-looking statements. These
statements are subject to certain risks and uncertainties including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
Prospectus that could cause actual results to differ materially from the
Company's historical experience and its present expectations or projections.
Caution should be taken not to place undue reliance on any such forward-looking
statements, since such statements speak only as of the date of the making of
such statements.
General
The Company is a registered securities broker/dealer which provides its
customers with computerized access to securities price information and enables
its customers to transmit buy and sell orders for execution. The Company also
operates an electronic communications network, the ATTAIN ECN, on which
subscribers may post bids and offers for OTC securities. Substantially all of
the Company's revenues to date have been derived from commissions on customer
transactions.
In fiscal 1995, the Company temporarily substantially discontinued dealing
with retail customers and its principals concentrated on market making
activities in an affiliated company, Domestic Securities, Inc. ("DSI"), due to
regulatory changes. DSI is a wholly-owned subsidiary of Rushmore, a company
which is wholly-owned by Messrs. Harvey I. Houtkin and Mark D. Shefts,
shareholders, officers and directors of the Company. The decision to discontinue
the Company's retail business related to the drop in the amount of retail
business generated by the Company following modifications to the SOES rules
adopted by the NASD. The rule revisions limited the maximum SOES order to 500
shares, down from 1,000 shares and prohibited short selling on SOES. The
principals of the Company assessed that these changes were detrimental to its
operations and were advantageous to market makers. Accordingly, the principals
of the Company determined to focus their efforts on market making activities
through DSI. DSI competed on the basis of price rather than the more traditional
practice of buying order flow. Due to certain price fixing conventions, the
market making business engaged in by the Company's principals through DSI proved
unsuccessful. Subsequently, in 1995, the SOES rules modifications were rescinded
and thereafter, in fiscal 1996, the Company's principals returned their focus to
All-Tech and its brokerage business. The Company's ATTAIN ECN began to generate
revenues in February 1998 and is expected to become a significant source of
revenues.
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of revenues represented by the items reflected in the Company's Statement of
Operations.
<TABLE>
<CAPTION>
Nine Months Ended March
Years Ended June 30, 31,
-------------------------------------- -----------------------
1995 1996 1997 1997 1998
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Brokerage commissions and fees ............... 95.4% 96.6% 95.8% 94.8% 94.5%
Trading gains (losses) ....................... 3.9 0.6 0.8 1.2 ( 1.1)
ECN fees ..................................... 0.0 0.0 0.0 0.0 3.3
Other ........................................ 0.7 2.8 3.4 4.0 3.3
----- ----- ----- ----- -----
Total Revenues ................................ 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs and Expenses:
Cost of services ............................. 50.4 47.1 45.5 43.0 42.5
Technology development ....................... 1.5 1.9 2.3 2.0 2.6
Selling, general and
administrative expenses:
Employee compensation and benefits ......... 25.0 21.5 29.1 21.1 29.3
Occupancy costs ............................ 2.3 0.9 2.4 2.3 6.1
Other ...................................... 21.2 16.3 10.7 11.9 17.8
----- ----- ----- ----- -----
Total Costs and Expenses ...................... 100.4 87.7 90.0 80.3 98.3
----- ----- ----- ----- -----
Income (loss) before
provision for income taxes ................... ( 0.4) 12.3 10.0 19.7 1.7
Provision (benefit) for income taxes .......... ( 0.3) 5.5 4.2 5.1 .2
----- ----- ----- ----- -----
Net income (loss) ............................. ( 0.1)% 6.8% 5.8% 14.6% 1.5%
===== ===== ===== ===== =====
</TABLE>
26
<PAGE>
Nine Months Ended March 31, 1998 Compared to Nine Months Ended March 31, 1997
Revenues. Total revenues increased approximately $1.2 million or 10.1% to
$13.1 million for the nine months ended March 31, 1998 from $11.9 million for
the nine months ended March 31, 1997. This increase resulted primarily from an
increase in brokerage commissions and fees of approximately $.4 million from the
Company's ATTAIN ECN which the Company commenced operating on February 17, 1998,
offset by trading losses of approximately $.3 million. The Company believes that
it has established adequate doubtful account reserves for non-collection of ECN
fees receivable as of March 31, 1998. Since the Company has very limited actual
experience on which to base the amount of doubtful account reserve, there can be
no assurance that such reserve will be sufficient. Brokerage commissions and
fees increased approximately $1.1 million or 10% to $12.4 million for the nine
months ended March 31, 1998, from $11.3 million for the same period in fiscal
1997. The increase in brokerage commissions and fees resulted primarily from an
increase in the number of customer transactions processed by the Company.
Customer transactions for the nine months ended March 31, 1998 were
approximately 539,000 compared to 472,000 for the comparable period in fiscal
1997, an increase of 14%. Average commissions per transaction declined from
$23.88 for the nine months ended March 31, 1997, to $ 23.05 for the same period
in fiscal 1998. Trading revenue declined approximately $286,000 or 206% from
$139,000 for the nine months ended March 31, 1997 to $(147,000) for the nine
months ended March 31, 1998.
Other income decreased by approximately $42,000 or 9% to $439,000 from
$481,000. This decrease is primarily attributable to a decrease in branch office
and remote set-up fees of $71,000 or 16% to $366,000 from $437,000 and a
decrease in book sales of $34,000 or 100%, offset by an increase in interest
income of $22,000 or 220% from $10,000 to $32,000 and a net increase of other
miscellaneous income of $41,000.
Cost of Services. Cost of services increased approximately $.5 million or
10% to $5.6 million for the nine months ended March 31, 1998 from $5.1 million
for the comparable period in fiscal 1997. This increase is primarily
attributable to the increase in customer transactions processed in the nine
months ended March 31, 1998 and to the increase in lower margin customer
transactions generated by the branch offices.
Technology Development. Technology development costs increased
approximately $112,000 or 48% to $344,000 for the nine months ended March 31,
1998, from $232,000 for the comparable period in fiscal 1997. This increase is
primarily attributable to the hiring of additional personnel to enhance, improve
and maintain the Company's extensive data processing activities and the ATTAIN
trading system and ECN software.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.8 million or 67% to $7.0
million for the nine months ended March 31, 1998 from $4.2 million for the
comparable period in fiscal 1997. The increase was primarily attributable to (i)
an increase in employee compensation and benefits of $1.4 million or 56%, of
which executive officers' salaries increased $.2 million or 13% (of which the
entire $.2 million is attributable to executive officers' bonuses), (ii) an
increase in occupancy costs of $.5 million or 167% and (iii) increases in other
selling, general and administrative expenses of $.8 million or 57% consisting
primarily of increases in data processing costs, professional fees and other
general office and operating expenses. These overall increases in selling,
general and administrative expenses were primarily the result of the openings of
additional branch offices.
Provision for Income Taxes. Provision for income taxes represents the
expense recognized by the Company for federal and state income taxes at an
effective rate of 12% for the nine months ended March 31, 1998, and 26% for the
comparable period in fiscal 1997. Provision for income taxes decreased
approximately $583,000 or 96% to $27,000 for the nine months ended March 31,
1998 from $610,000 for the nine months ended March 31, 1997.
Net Income. Net income decreased approximately $1.5 million or 88% to $.2
million for the nine months ended March 31, 1998 from $1.7 million for the nine
months ended March 31, 1997.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Revenues. Total revenues increased approximately $5.0 million or 45% to
$16.1 million for the year ended June 30, 1997 from $11.1 million for the year
ended June 30, 1996. Brokerage commissions and fees increased 44% to $15.4
million for the year ended June 30, 1997 from $10.7 million for fiscal 1996. The
increase in brokerage commissions and fees resulted primarily from an increase
in the number of customer
27
<PAGE>
transactions processed by the Company. The Company processed approximately
653,000 customer transactions for the year ended June 30, 1997, compared to
444,000 for fiscal 1996, or an increase of 47%. Average commissions per
transaction declined from $24.32 for the year ended June 30, 1996, to $23.79
for fiscal 1997.
Other income increased by approximately $232,000 or 76% to $539,000 from
$307,000. This increase is primarily attributable to an increase in branch
office and remote set-up fees of $264,000 or 122% to $480,000 from $216,000, an
increase in interest income of $9,000 or 150% from $6,000 to $15,000, and an
increase in other miscellaneous income of $8,000, offset by a decrease in book
sales of $49,000 or 59% from $83,000 to $34,000.
Cost of Services. Cost of services increased approximately $2.1 million or
40% to $7.3 million in fiscal 1997 from $5.2 million in fiscal 1996. The
increase in cost of services is attributable to an increase in customer
transactions processed by the Company.
Technology Development. Technology development costs increased
approximately $157,000 or 75% to $366,000 in fiscal 1997 from $209,000 in fiscal
1996. This increase is primarily attributable to the hiring of additional
personnel to enhance, improve and maintain the Company's data processing
activities and ATTAIN trading system and ECN software.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.5 million or 58% to $6.8
million in fiscal 1997 from $4.3 million in fiscal 1996. The increase was
primarily attributable to (i) an increase in employee compensation and benefits
of $2.3 million or 96%, of which executive officers' salaries increased $1.4
million or 88%, (of which the entire $1.4 million or 467% increase is
attributable to executive officers' bonuses) (ii) an increase in occupancy costs
of $.3 million or 300% and (iii) a net decrease in other selling, general and
administrative expenses of $.1 million or 6%. These overall increases in
selling, general and administrative expenses were primarily the result of the
openings of additional branch offices.
Provision for Income Taxes. Provision for income taxes represents the
expense recognized by the Company for federal and state income taxes at an
effective rate of 41% for fiscal 1997 and 45% for fiscal 1996. Provision for
income taxes increased approximately $55,000 or 9.0% to $665,000 for the year
ended June 30, 1997 from $610,000 for the year ended June 30, 1996.
Net Income. Net income increased approximately $186,000 or 25% to $937,000
for fiscal 1997 from $751,000 for fiscal 1996.
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Revenues. Total revenues increased approximately $8.1 million to $11.1
million for the year ended June 30, 1996 from $3.0 million for the year ended
June 30, 1995. Brokerage commissions and fees increased approximately $7.9
million to $10.7 million in fiscal 1996 from $2.8 million in fiscal 1995. This
increase in brokerage commissions and fees in fiscal 1996 is primarily
attributable to the resumption of active retail brokerage services. In fiscal
1995 the Company temporarily discontinued its retail brokerage business due to
regulatory changes in the rules governing SOES trading.
Other income increased by approximately $286,000 to $307,000 from $21,000.
This increase is primarily attributable to an increase in branch office and
remote set-up fees of $216,000 from $0 to $216,000, and an increase in book
sales of $70,000 to $83,000 from $13,000.
Cost of Services. Cost of services increased approximately $3.7 million or
247% to $5.2 million in fiscal 1996 from $1.5 million in fiscal 1995. The
increase in cost of services is attributable to an overall increase in customer
transactions processed by the Company due to the resumption of active retail
brokerage activities in fiscal 1996.
Technology Development. Technology development costs increased
approximately $166,000 or 386% to $209,000 in fiscal 1996 from $43,000 in fiscal
1995. This increase was primarily attributable to the hiring of additional
personnel to enhance, improve and maintain the Company's continuously expanding
data processing operations.
28
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.9 million or 207% to $4.3
million in fiscal 1996 from $1.4 million in fiscal 1995. The increase was
primarily attributable to (i) an increase in employee compensation and benefits
of $1.7 million or 243%, of which executive officers' salaries increased $1.0
million or 167%, (including an increase in executive officers' bonuses of $.3
million, or 300%) and (ii) increases in other selling, general and
administrative expenses of $1.2 million or 200%, consisting primarily of
increases in data processing costs, professional fees and other general office
and operating expenses. These increases in selling, general and administrative
expenses were the result of the resumption of retail brokerage activities in
fiscal 1996.
Provision (Benefit) for Income Taxes. Provision for income taxes represents
the expense recognized by the Company for federal and state income taxes at an
effective rate of 45% for fiscal 1996 and 0% for fiscal 1995. Provision
(benefit) for income taxes increased approximately $617,000 to $610,000 for the
year ended June 30, 1996 from ($7,000) for the year ended June 30, 1995.
Net Income (Loss). Net income (loss) increased approximately $754,000 to
$751,000 for fiscal 1996 from ($3,000) for fiscal 1995.
29
<PAGE>
Quarterly Results
The following table sets forth certain unaudited quarterly financial data
for the seven quarters ended March 31, 1998. In the opinion of the Company's
management, this unaudited information has been prepared on the same basis as
the audited financial statements contained herein and includes all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
information set forth therein when read in conjunction with the Financial
Statements and Notes thereto. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Three Months Ended
September 30, December 31, March 31,
1996 1996 1997
--------------- -------------- -----------
(In thousands)
<S> <C> <C> <C>
Revenues:
Brokerage commissions
and fees .................... $ 3,152 $ 3,946 $ 4,168
Trading gains (losses) ....... 77 204 (142)
ECN fees ..................... -- -- --
Other ........................ 79 225 177
-------- -------- -------
Total revenues .............. 3,308 4,375 4,203
-------- -------- -------
Costs and expenses:
Cost of services ............. 1,420 1,857 1,840
Technology
development ................. 77 78 76
Selling, general and
administrative expenses:
Employee compensation
and benefits ............... 367 833 1,305
Occupancy costs ............. 55 105 116
Other ....................... 306 460 654
-------- -------- -------
Total costs and expenses 2,225 3,333 3,991
-------- -------- -------
Income (loss) before
provision for income
taxes ........................ 1,083 1,042 212
Provision (benefit) for
income taxes ................. 305 305 --
-------- -------- -------
Net income (loss) ............. $ 778 $ 737 $ 212
======== ======== =======
As a Percentage of Total Revenues
----------------------------------------------
Revenues:
Brokerage commissions
and fees .................... 95.3% 90.2% 99.2%
Trading gains (losses) ....... 2.3 4.7 ( 3.4)
ECN fees ..................... -- -- --
Other ........................ 2.4 5.1 4.2
----------- -------- -------
Total revenues .............. 100.0 100.0 100.0
----------- -------- -------
Costs and expenses:
Cost of services ............. 42.9 42.4 43.8
Technology development ....... 2.4 1.8 1.8
Selling, general and
administrative expenses:
Employee compensation
and benefits ............... 11.1 19.1 31.0
Occupancy costs ............. 1.7 2.4 2.8
Other ....................... 9.2 10.5 15.6
----------- -------- -------
Total costs and expenses 67.3 76.2 95.0
----------- -------- -------
Income (loss) before
provision for income
taxes ........................ 32.7 23.8 5.0
Provision (benefit) for
income taxes ................. 9.2 7.0 --
----------- -------- -------
Net income (loss) ............. 23.5% 16.8% 5.0%
=========== ======== =======
<CAPTION>
Three Months Ended
June 30, September 30, December 31, March 31,
1997 1997 1997 1998
------------ --------------- -------------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Revenues:
Brokerage commissions
and fees .................... $ 4,126 $ 4,041 $ 4,518 $ 3,864
Trading gains (losses) ....... (6) 68 (34) (181)
ECN fees ..................... -- -- -- 434
Other ........................ 57 176 260 3
---------- -------- ------- --------
Total revenues .............. 4,177 4,285 4,744 4,120
---------- -------- ------- --------
Costs and expenses:
Cost of services ............. 2,190 1,755 1,705 2,125
Technology
development ................. 134 121 129 95
Selling, general and
administrative expenses:
Employee compensation
and benefits ............... 2,174 1,202 1,494 1,161
Occupancy costs ............. 110 240 288 267
Other ....................... 304 632 675 1,032
---------- -------- ------- --------
Total costs and expenses 4,912 3,950 4,291 4,680
---------- -------- ------- --------
Income (loss) before
provision for income
taxes ........................ (735) 335 453 (560)
Provision (benefit) for
income taxes ................. 55 80 92 (145)
---------- -------- ------- --------
Net income (loss) ............. $ (790) $ 255 $ 361 $ (415)
========== ======== ======= ========
Revenues:
Brokerage commissions
and fees .................... 98.8% 94.3% 95.2% 93.8%
Trading gains (losses) ....... (0.2) 1.6 (0.7) (4.4)
ECN fees ..................... -- -- -- 10.5
Other ........................ 1.4 4.1 5.5 .1
---------- -------- ------- --------
Total revenues .............. 100.0 100.0 100.0 100.0
---------- -------- ------- --------
Costs and expenses:
Cost of services ............. 52.4 41.0 35.9 51.6
Technology development ....... 3.2 2.8 2.7 2.3
Selling, general and
administrative expenses:
Employee compensation
and benefits ............... 52.1 28.1 31.5 28.2
Occupancy costs ............. 2.6 5.6 6.1 6.5
Other ....................... 7.3 14.7 14.2 25.0
---------- -------- ------- --------
Total costs and expenses 117.6 92.2 90.4 113.6
---------- -------- ------- --------
Income (loss) before
provision for income
taxes ........................ (17.6) 7.8 9.6 (13.6)
Provision (benefit) for
income taxes ................. 1.3 1.9 2.0 ( 3.5)
---------- -------- ------- --------
Net income (loss) ............. (18.9)% 5.9% 7.6% (10.1)%
========== ======== ======= ========
</TABLE>
30
<PAGE>
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors, including, but
not limited to, the timing of introductions of enhancements to financial
services and products offered by the Company or its competitors; market
acceptance of financial services and products; changes in transaction volume on
the securities markets; trends in the securities markets; domestic and
international regulation of the brokerage industry; changes in pricing policies
by the Company or its competitors; changes in strategy; the success of or costs
associated with acquisitions or other strategic relationships; changes in key
personnel; seasonal trends; the extent of expansion; the mix of sales; changes
in the level of operating expenses to support projected growth; and general
economic conditions. Due to the foregoing factors, quarterly revenues and
operating results are difficult to forecast, and the Company believes that
period-to-period comparisons of its operating results will not necessarily be
meaningful and should not be relied upon as an indication of future performance.
It is likely that the Company's future quarterly operating results from time to
time will not meet the expectations of securities analysts or investors, which
may have an adverse effect on the market price of the Company's Common Stock and
the Warrants.
The securities industry is subject to extensive regulation under federal,
state and applicable international laws. As a result, the Company is required to
comply with many complex laws and rules and its ability to do so is dependent in
large part upon the establishment and maintenance of a qualified compliance
system. See "Risk Factors--Securities Regulation in General."
Liquidity and Capital Resources
The Company has financed its activities in the periods discussed above from
cash provided by operations. The Company currently anticipates that its
available cash resources from operations and the net proceeds of this Offering
will be sufficient to meet its presently anticipated working capital and capital
expenditure requirements for at least the next 12 months. During April 1998, the
Company borrowed, on an interest-free basis, an aggregate of $611,000 from its
parent, Rushmore, in order to provide additional funds for the Company's
proprietary trading activities. The loan remains outstanding as of the date
hereof and is payable on demand. The Company intends to repay such loan with a
portion of the net proceeds of the Offering.
For the period from February 1998 (commencement of the ECN) through June
15, 1998, the Company recognized ECN fee revenues of approximately $1,637,000,
of which approximately $434,000, $510,000, $491,000 and $202,000 were recognized
as of March 31, 1998, April 30, 1998, May 31, 1998 and June 15, 1998,
respectively. As of June 15, 1998, approximately $357,000 of such ECN fees have
been paid to the Company and approximately $1,280,000 of such ECN fees are
unpaid outstanding accounts receivable of the Company. In addition, as of June
15, 1998, the Company had established a doubtful account reserve in the amount
of approximately $335,000. The Company is continuously monitoring the fees it
charges and such fees may either be reduced as a result of competitive pressures
or to adhere to maximum fees permitted pursuant to the SEC no-action letter
under which the Company operates the ATTAIN ECN. A reduction in rates
unaccompanied by a rise in usage would negatively impact ATTAIN ECN revenues.
See "Business -- The ATTAIN ECN." To the extent that the Company continues to
have difficulty in realizing its ECN receivables, the Company's liquidity and
results of operations could be adversely impacted.
Cash provided by operating activities was $257,000 for the nine months
ended March 31, 1998, compared to $2,185,000 for the nine months ended March 31,
1997. This decrease in cash provided by operating activities of $1,928,000 was
primarily attributable to a decrease in net income of $1,525,000, and a net
increase in operating assets over liabilities of $686,000, offset by an increase
in depreciation of $139,000 and an increase in allowance for doubtful accounts
of $144,000.
Cash provided by operating activities was $1,312,000 for the year ended
June 30, 1997, compared to $195,000 for the year ended June 30, 1996. This
increase in cash provided by operating activities of $1,525,000 was primarily
attributable to an increase in net income of $187,000, a net decrease in
operating assets over liabilities of $851,000, an increase in depreciation of
$35,000 and a non-cash charge for abandoned equipment of $44,000.
Cash provided by operating activities was $195,000 for the year ended June
30, 1996 compared to $1,000 for the year ended June 30, 1995. This increase in
cash provided by operating activities of $194,000 was primar-ily attributable to
an increase in net income of $754,000 and an increase in operating assets over
liabilities of $569,000, offset by an increase in depreciation of $9,000.
Cash used by investing activities was $283,000 for the nine months ended
March 31, 1998, compared to $243,000 for the nine months ended March 31, 1997.
Cash used in investing activities for the years ended June 30, 1997, 1996 and
1995 was $381,000, $43,000 and $97,000, respectively. Cash used in investing
activities is attributable to purchases of property and equipment.
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Cash used by financing activities was $12,000 for the nine months ended
March 31, 1998, compared to $694,000 for the nine months ended March 31, 1997.
This decrease in cash used is primarily attributable to decreased loan
activities with the Company's parent, affiliate and related parties during 1998,
offset by deferred offering costs in 1998.
Cash used in financing activities was $466,000 in fiscal 1997, an increase
from $12,000 in fiscal 1996. This increase is primarily attributable to
dividends paid of $1,350,000 and a net repayment of a loan to the parent in the
amount of $900,000.
Cash used in financing activities was $12,000 in fiscal 1996, an increase
from cash provided of $49,000 in fiscal 1995. This increase is primarily
attributable to decreased loan activity.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. Since the Company
intends to set the exercise price of the Company's employee stock options to be
granted prior to this Offering equal to the market price of the underlying stock
on the date of grant, no compensation expense will be recognized.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The new
rules are effective for both interim and annual financial statements for the
periods ending after December 15, 1997. SFAS 128 supersedes APB No. 15 to
conform earnings per share with international standards as well as to simplify
the complexity of the computation under APB No. 15. The previous primary
earnings per share ("EPS") calculation is replaced with a basic EPS calculation.
The basic EPS differs from the primary EPS calculation in that the basic EPS
does not include any potentially dilutive securities. Fully dilutive EPS is
replaced with diluted EPS and should be disclosed regardless of dilutive impact
to basic EPS. Accordingly, the Company has adopted SFAS 128 effective December
31, 1997.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement, which is effective for fiscal years beginning after December 15,
1997, expands or modifies disclosures and should have no impact on the Company's
financial position, results of operations or cash flows.
Year 2000
The Company's review of its own operating systems does not indicate any
Year 2000 problems. However, the Company is highly dependent on third party
vendors. Failures and interruptions, if any, resulting from the inability of
certain computing systems of third party vendors, including the Company's
clearing broker to recognize the Year 2000 could have material adverse effect on
the Company's results of operations. There can be no assurance that the Year
2000 issue can be resolved by any of such third parties prior to the upcoming
change in the century. Although the Company may incur substantial costs,
particularly costs resulting from increased charges by its third party service
providers, as a result of such third party service providers correcting Year
2000 issues, such costs are not sufficiently certain to estimate at this time.
Trends
The Company anticipates that its average commission per customer
transaction will continue to decline in order to remain competitive.
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BUSINESS
The following discussion of the Company's business contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including, but not limited to, those set forth
under "Risk Factors" and elsewhere in this Prospectus.
Overview
All-Tech, a registerd broker dealer, through its proprietary ATTAIN trading
system software, provides its customers with real-time computerized access to
comprehensive price information for OTC securities traded on Nasdaq and
securities traded on various national and regional exchanges, and enables its
customers to instantaneously transmit buy and sell orders for execution.
All-Tech also provides its customers with discounted commissions, electronic
reports regarding the customer's orders and account status, customizable display
screens, analytical modeling tools and news media reports. The Company has also
developed and commenced operation of its ATTAIN ECN, an electronic
communications network ("ECN"). ECNs provide investors an alternative trading
system to traditional Nasdaq trading. Through the ATTAIN trading system,
subscribers can directly place buy and sell orders for Nasdaq traded stocks.
Matching orders are paired off and the trade is executed by the ATTAIN ECN.
Additionally, the best bid and offer in each Security which is placed on the
ATTAIN ECN will be displayed automatically and dynamically on a real-time basis
on Nasdaq along with market maker quotations. The ATTAIN trading system permits
the customer to eliminate the need to have the customer's order placed through a
market maker, therefore eliminating the market maker and the costs associated
with such market maker.
The Company's services are primarily utilized by self-directed traders who
engage in "day trading." Day traders engage in the buying and selling of
securities many times during the course of a day based on short-term price
volatility. They typically close out all open positions by the end of the day in
order to manage risk when the markets are closed. Frequently, a position may be
closed within minutes of the initial purchase or sale. All-Tech has over 1,500
active customers, consisting of day traders and active retail customers. The
Company's average aggregate customer transaction volume has ranged between 2,500
and 3,000 trades per trading day for the last 12 months. All-Tech's customers
can access All-Tech's ATTAIN trading system at All-Tech's main office, at one of
its 21 branch offices or in their homes or offices through a computer connected
to the ATTAIN trading system via dedicated telephone lines or the Internet.
Access to the Company's ATTAIN trading system from remote locations requires the
use of the Company's proprietary software, which the Company provides to its
customers free of charge.
All-Tech's objectives are to become the leading provider of electronic
brokerage services to self-directed traders and investors and to expand the
range of services and business activities engaged in by the Company. The
Company's strategy to accomplish its objectives includes (i) enhancing awareness
of the Company's ATTAIN trading system and ATTAIN ECN through marketing and
advertising, (ii) expanding its customer base through an aggressive marketing
campaign, opening additional branch offices and expanding services to attract
less active traders, (iii) analyzing and exploring opportunities to commence new
business activities, including electronic trading of financial instruments other
than stocks and options, underwriting securities offerings, and other
traditional investment banking and merchant banking activities, and (iv)
pursuing opportunities to offer the Company's services internationally through
use of the Internet and telecommunications systems.
Regulatory Background and Development of Active Electronic Trading
The National Association of Securities Dealers Automated Quotations System
was developed by Harris Corporation and commenced operating in the early 1970s.
For the first time there was a uniform public display of over-the-counter
securities prices. This ability to discover prices is called transparency.
Several years later the NASD purchased this system from Harris. Today, Nasdaq
provides a dynamic display of quotes from both market makers (broker/dealers
which agree to continuously buy and sell securities at their posted prices) and
ECNs (electronic trading systems which display bids to buy and offers to sell
Nasdaq securities received from subscribers of the ECN and which match bids and
offers for the same security at the same price).
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In 1984, Nasdaq developed the Small Order Execution System ("SOES"). SOES
is a computerized, order execution system which automatically executes small
retail orders to buy or sell securities against market makers quoting the best
price available. Each market maker is required to execute orders received, up to
the size of its quotation, while that quotation is outstanding (the "Firm Quote
Rule", a violation of which is called "backing away"). During the market break
of October 1987, many Nasdaq market makers informally withdrew from their
markets by refusing to answer the telephone. In the illiquid Nasdaq market which
resulted, prices then declined precipitously as customers were left with no way
to obtain execution of their orders.
Following a number of governmental studies of the problem, the NASD
required market maker participation in SOES. Market makers could no longer back
away because they would receive up to five automatic executions of up to 1,000
shares each. At about the same time All-Tech began to utilize SOES to execute
customer orders. The sudden receipt by market makers of these executed orders
upset them because they could no longer engage in backing away. The market
makers pressured the NASD to eliminate SOES trading, and for several years the
Company and other firms utilizing SOES in this manner were subjected to the
highest level of scrutiny by the NASD. As a result, the NASD found that the
Company had violated certain SOES rules and imposed fines and the NASD suspended
the Company from utilizing SOES for seven months in 1988. Additionally, as a
result of market maker pressure, the NASD adopted rules designed to severely
curtail active trading on SOES. These rules negatively impacted the Company's
earnings in the fiscal years ended June 30, 1992 through 1994 by causing the
Company to incur significant legal expenditures in connection with its legal
battles with the NASD and in the fiscal year ended June 30, 1995, by
substantially reducing the number of shares which could be traded via SOES.
The Company and its principals opposed entrenched industry interests and
undertook to enhance the Company's business outlook by bringing pressure to bear
to level the playing field for public investors, which the Company believed
would encourage them to risk becoming active traders. In 1996, the United States
Department of Justice ("DOJ") and the SEC entered into agreements with 24 major
market makers and with the NASD, respectively. The DOJ and SEC concluded that
these market makers had colluded to fix prices and maintain artificially wide
spreads in the over-the-counter market and found that the NASD had, at the
urging of market makers, subjected firms such as the Company to disparate
treatment, to their detriment.
In 1996, the SEC adopted rules which brought about sweeping changes in the
structure of the over-the-counter market and were very beneficial for the
Company and its customers, as well as to public companies and their
shareholders. These rules, known as the Order Handling Rules, permitted the
creation and operation of electronic communication networks (ECNs). The Order
Handling Rules require market makers to display certain limit orders in their
quotations or to send those orders to an ECN for display. The increased
regulatory emphasis on enforcing compliance with the duty of brokers to obtain
the best execution for their customers has fostered the growing importance of
ECNs, which provide an ever-increasing source of liquidity (having a ready
market to buy or sell stock) in the over-the-counter market. See "--Government
Regulation."
The growth in importance of the ECNs reduces the reliance of the market on
quotes from market makers, who continue to lobby the NASD, the SEC and the
Congress for ways to reduce their Firm Quote Rule obligations.
Applicable Nasdaq Rules
Active trading is dependent upon liquidity -- the ability to buy or sell
stock at any given time. Until recently, this liquidity was primarily provided
by Nasdaq and an alternative trading system called Instinet. Both systems
display quoted bid and ask prices for stock and have automatic execution
capacity. However, the liquidity on Instinet is available only to institutional
customers and certain brokerage firms. In addition, until recently, liquidity on
Nasdaq was defined by certain SOES rules, and was either 1,000, 500 or 200
shares, depending on the trading characteristics of each particular stock. Thus,
active electronic traders generally traded the most highly capitalized stocks
with high trading volume, the Nasdaq 100, trading at least 1,000 shares at a
time (the maximum permitted by applicable SOES rules). When active electronic
trading was first popularized, each market maker was obligated for five trades
of 1,000 shares each at its posted bid or ask quote (the number regulatory
officials thought necessary after the 1987 market break). As a result of
pressure by market makers, that number of trades has been brought down to two
trades of 1,000 shares each, and for 150 Nasdaq selected stocks, market makers
are obligated to trade only 100 shares at their posted quote before being given
17 seconds
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to change that quote. Since the adoption of the Order Handling Rules, ECNs have
provided an increasing share of liquidity to the public, lessening, to a
certain extent, dependence on market maker quotations. Simultaneously, market
makers have continued to press their case to be able to quote all stocks for as
little as 100 shares and at their urging the NASD has submitted a rule proposal
to the SEC for its approval to accomplish this goal.
Services
The Company's services are offered to its customers through its proprietary
trading system, ATTAIN, which was designed to serve the person actively trading
his or her own account. Customers can trade securities at All-Tech's main
office, at one of its 21 nationwide branch offices, or from their home or office
"remotely."
The ATTAIN Trading System
Trading. The Company's proprietary ATTAIN trading system is a fully
automated system by which a customer can transmit an order for exchange listed
or OTC stocks and for equity and index options to the Company for execution.
Through the ATTAIN trading system, the customer can place a long or short,
market or limit order (good til canceled, day or limited time period). The
Company then, through the ATTAIN trading system, instantaneously reviews the
order for compliance with regulatory, margin and risk management guidelines,
transmits the order to the customer selected marketplace for execution and
immediately and dynamically notifies the customer of the status of that order,
as well as of the customer's account generally.
With just three mouse clicks a customer can place an order to buy or sell a
security. In a fraction of a second the order is sent to the marketplace chosen
by the customer--a Nasdaq electronic trading system, an ECN such as ATTAIN or a
stock exchange. Because All-Tech's customers generally choose a marketplace with
automatic execution capacity, the execution frequently takes place within
several seconds. The customer electronically receives immediate confirmation of
the trade execution.
Executions through the ATTAIN trading system always take place at the price
and on the market the customer, not the Company, deems best. The Company does
not participate in payment for order flow arrangements. Broker/dealers that
participate in payment for order flow arrangements receive a per share fee for
all orders sent to a particular market maker. The Company believes that the sale
of its customers' orders for a fee would represent a conflict of interest and
influence the choice of where these orders are sent, perhaps not in the
customer's best interest. All-Tech's customers therefore frequently receive
price improvement (executions at better than the National Best Bid/Offer ("NBBO"
or "inside price")).
The ATTAIN trading system was developed for the active, self-directed
trader. However, the Company intends to adapt the ATTAIN trading system for use
by less active investors who wish to avail themselves of a point and click
system for their occasional trades. All-Tech can provide an easy to use
graphical interface used via the Internet. Although active traders generally
purchase dedicated telecommunications service for the communication of their
orders, the service is available through the Internet as well.
All-Tech continually makes improvements to its ATTAIN trading system,
adding features and additional instruments to trade, such as exchange traded
index options, and additional information to assist them with their trading
decisions. All-Tech's goal is to enable investors everywhere to trade any
instrument traded on any marketplace in the world and to make the financial
markets readily accessible anywhere, anytime they are open.
Market Information. The Company currently purchases quotation information
and news through PC Quote and other vendors. All on-site customers receive, free
of charge, real-time, dynamically updated information regarding the inside
prices for all securities. Some of the Company's well-known on-line competitors
require the customer to wait until an order is placed to receive such
information. All-Tech believes the customer cannot intelligently place an order
without this information. Customers who trade at All-Tech's main office or one
of its branch offices receive at no charge, on ATTAIN's easy to use point and
click system, detailed real-time, dynamically updated information regarding all
quotations of all market makers in OTC securities, as well as trade data, a
ticker of trades effected by All-Tech for its customers, all bid and offer
quotations in the ATTAIN ECN, news, and real-time analytic charts and graphs.
Remote customers must pay $250 monthly for such service plus an additional
charge for news, but high volume traders have their monthly fees waived.
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Account Information. Through the ATTAIN trading system, each All-Tech
customer can receive, on a continuous basis, account information setting forth
all open positions and, on an intra-day basis, realized and unrealized profit
and loss. In addition to screen displays of account activity and profit and
loss, active customers receive a daily printout of trade confirmations and
buying power, and receive detailed monthly statements.
Account Security. All-Tech utilizes a combination of proprietary and
industry standard security measures to protect customers assets. Customers are
assigned unique account numbers and user identifications and select their own
passwords that must be used each time they log on to the ATTAIN trading system.
The Company relies on encryption and authentication technology, including
technology licensed from Check Point Software Technologies Ltd., to provide the
security and authentication necessary to effect the secure exchange of
information. In addition, the Company uses secure socket layer technology for
data encryption (the system will permit communications only from recognized
account sources) to protect the ATTAIN trading system. A second level of
password protection must be used prior to order placement. Telephone
transactions are secured through a personal identification number.
The ATTAIN ECN
All-Tech's proprietary ATTAIN ECN is a system by which subscribers
(broker/dealers) can post bids and offers expressing their customer's trading
interest in a particular over-the-counter security. The best bid and offer for
each security is posted on Nasdaq. Customers frequently utilize the ATTAIN ECN
to post a new "inside" buy or sell order (at a price better than the current
NBBO) on Nasdaq and thereby attract any party interested in buying or selling at
that price. All-Tech attracts customers by offering its ATTAIN ECN service free
of charge to All-Tech accounts. Pursuant to the no-action letter issued by the
SEC to the Company, the Company is permitted to charge NASD members who execute
against the ATTAIN ECN order displayed in Nasdaq no more than the fee the
Company charges a substantial portion of its broker-dealer subscribers, and in
any event, no more than $.015 per share. Accordingly, subscribers of the ATTAIN
ECN are charged from $1.00 per transaction up to $.015 per share for using the
ATTAIN ECN and non-subscribers who access the ATTAIN ECN through Nasdaq are
charged up to $.015 per share for each executed order. In light of the
requirements of the SEC no-action letter and competitive pressures, the Company
is continuously monitoring the fees its charges and such charges may be
voluntarily, or may be required to be, reduced. All-Tech has recognized
approximately $1,637,000 in revenues through June 15, 1998, from the operation
of the ATTAIN ECN since it commenced operating in February 1998. Of such
revenues, approximately 2% has been generated by ECN subscribers, while 98% has
been generated by non-subscribers who access the ECN through Nasdaq.
The Company is continuously monitoring the fees it charges and such fees
may either be voluntarily reduced or be required to be reduced as a result of
competitive pressures or the SEC's no-action position. A reduction in rates
unaccompanied by a rise in usage would negatively impact ATTAIN ECN revenues.
The Company currently has only three (3) active ECN subscribers, one of which is
owned and operated by Harry Lefkowitz, a director of the Company. However, the
Company has accepted applications from an additional eight (8) broker-dealers to
become ECN subscribers, and the Company is currently in the process of arranging
for the necessary communication links which will allow such subscribers to
access the ATTAIN ECN. As a result of the new subscribers, with respect to which
the Company has agreed to charge fees which will effectively be no higher than
$.005 per share, the Company may be required to lower its per transaction fee to
non-subscribers to approximately $.005 once such new subscribers commence their
trading activity.
Controversy as well as competitive pressures exist regarding the fees
charged by various ECNs to non-subscribers, and, as discussed above, All-Tech
may not continue to charge its current rates. The Company has experienced some
resistance and delay in collecting these fees. See "Business--Legal
Proceedings." For the period from February 1998 (commencement of the ECN)
through June 15, 1998, the Company recognized ECN fee revenues of approximately
$1,637,000, of which approximately $434,000, $510,000, $491,000 and $202,000
were recognized as of March 31, 1998, April 30, 1998, May 31, 1998 and June 15,
1998, respectively. As of June 15, 1998, approximately $357,000 of such ECN
fees have been paid to the Company and approximately $1,280,000 of such ECN
fees are unpaid outstanding accounts receivable of the Company. In addition, as
of May 31, 1998, the Company had established a doubtful account reserve in the
amount of approximately $335,000. The resistance to paying the ECN fees has
been primarily generated by non-subscriber, broker-dealers, especially
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marker makers, who feel that they should not be required to pay for access to
ECN's. All-Tech is pursuing vigorously its legal remedies to enforce such
collection. Additionally, Nasdaq itself has proposed that it be permitted to
operate a limit order book (essentially an ECN). Should this proposal be
adopted and Nasdaq offer a low-cost alternative to privately operated ECNs on
which substantial numbers of limit orders were reflected, this could have a
negative competitive impact on the ATTAIN ECN. There can be no assurance
whether such proposal will be approved and, if approved, when Nasdaq' s ECN
might become operational. This proposal is vigorously opposed by a number of
industry participants, including All-Tech, as potentially anti-competitive.
There can be no assurance as to when, if at all, such proposal will be approved
by the SEC. See "--Government Regulation."
Branch Offices
The Company conducts retail business at its 21 branch offices located
throughout the United States, one of which is located in property owned by Mark
D. Shefts, President, Chief Operating Officer, Chief Financial Officer and
Treasurer of the Company, and is not as active as the other 20 branch offices.
Each branch office is managed by one or more branch managers, who are employees
of the Company. In general, branch managers pay a one-time, non-refundable,
negotiated fee for the opportunity to manage a branch. All operational policies
and procedures of the branch offices are controlled by the Company.
The branch office and branch office managers operate pursuant to a standard
branch office management agreement, which agreement is for a three (3) year
term, and is automatically renewed for two additional three year terms unless
terminated earlier. All orders received by or generated from any of the
Company's branch offices are transmitted to the Company's main office for
execution. The branch office manager bears complete financial responsibility for
opening and operating the branch office, including entering into a lease
agreement, as the lessee, for the space in which the branch office is located.
The Company, in turn, subleases the branch office from the manager pursuant to
an oral agreement. In addition, the branch office may be required to maintain an
error account fund which fund is established by the Company withholding a fee on
each transaction effected by the branch office until the fund reaches the
required amount. Upon termination of the branch office agreement, the fund may
be used to offset any amounts owed by the branch office under the agreement. The
Company also may charge the branch office a ticket charge for each ticket for
national advertising, marketing and public relations. In consideration of
agreeing to operate the branch office, the branch office manager receives all of
the "monthly gross revenue" (which includes all commission revenue generated
during a month through the efforts of the branch office personnel and received
by the Company prior to the 20th day of the immediately succeeding month)
generated by the branch office less the branch expenses for the monthly gross
revenues generated in the immediately preceding month. Finally, the branch
office management agreement subjects the branch office manager to certain
non-compete and confidentiality provisions.
Proprietary Trading
All-Tech engages in trading for its own account, primarily utilizing the
ATTAIN ECN. All-Tech has recently executed a joint back office agreement and a
stock purchase agreement with Southwest Securities, Inc. ("Southwest"), its
clearing firm, which agreements are subject to execution by Southwest and review
and approval by the New York Stock Exchange. No assurance can be given as to
when, or if, the joint back office arrangement will be executed by Southwest or
approved by the New York Stock Exchange. Pursuant to the proposed joint back
office arrangement All-Tech would become a shareholder of Southwest. As a
result, All-Tech would no longer be deemed a customer of Southwest, and would
qualify for an exemption available under Regulation T promulgated by the Board
of Governors of the Federal Reserve System, which exemption would allow the
Company to trade its proprietary account at increased margin levels. All-Tech
also acts as a market maker in a limited number of securities.
All-Tech's Strategy
The Company's objective is to maintain a leadership position in the
electronic trading industry and to increase the range of the Company's business
activities. The key elements of the Company's strategy to accomplish this
objective include:
(1) Enhancing awareness of the Company's identity and its ATTAIN trading
system and ATTAIN ECN services through a significant advertising and
marketing campaign;
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(2) Expanding the customer base through an aggressive marketing campaign,
the opening of additional branch offices and attracting less active
traders through aggressive promotion of the Company as an electronic
trading company which provides many additional profit enhancing
features for average investors;
(3) Broadening the range of the Company's activities. The Company is
analyzing a number of business options which it could pursue, such as
underwriting, investment banking, merchant banking, entering additional
domestic and foreign markets and promoting electronic trading on
exchanges and in instruments other than stocks, general retail
business, market data vending and market making; and
(4) Expanding internationally by obtaining permission to offer brokerage
services around the world, utilizing Internet or private
telecommunications systems.
The Company's strategy will require substantial investment of time and
money by the Company. The Company's ability to engage in business is regulated
by the terms of its NASD membership agreement. There can be no assurance that
the Company will obtain any necessary NASD, SEC or other regulatory approvals to
engage in new activities or undertake any new activities or that any new
activities can be accomplished or will be successful.
Strategic Relationships
The Company has a number of relationships with third party vendors which
are essential to the operation of its business. All-Tech clears on a fully
disclosed basis through Southwest, a large regional brokerage firm, pursuant to
a written clearing agreement. The Company enjoys a good relationship with
Southwest, which also offers its correspondents connection to All-Tech's ATTAIN
ECN. While alternative clearing firms are available at competitive rates, there
can be no assurance that All-Tech would achieve the same level of credit
availability, financial security or service with another firm.
The Company obtains quotation information from PC Quote, which in turn
obtains its quotations from exchanges and Nasdaq. While the Company is
satisfied with its service from PC Quote, it has been publicly reported that PC
Quote has been experiencing severe financing difficulties. Any interruption in
quotation service would materially adversely affect the Company. There can be
no assurance that PC Quote will not continue to experience such difficulties or
that they will continue to offer their quotation service. The Company has
arranged back-up quotation service from Standard & Poor's Comstock, and is
developing its own back-up service directly from Nasdaq.
The Company utilizes the news service of Dow Jones & Company, Inc. ("Dow
Jones"), which recently has been offered for sale by its current owner. If Dow
Jones is sold there can be no assurance that service prices and/or reliability
will remain the same for service currently provided by Dow Jones. The Company
also utilizes the services of Nasdaq. Nasdaq has experienced operating problems
in the past and there can be no assurance that such problems will not worsen or
that rates will not be increased. The Company's success also depends on its
ability to obtain for itself and its customers access to a breadth of quality
and comprehensive real-time and historical financial market data from vendors
whose products are technically compatible with the Company's ATTAIN trading
system software and its future products and services. The Company believes that
satisfactory alternative arrangements are available from other firms, but there
can be no assurance that the terms or level of service would be as satisfactory.
The Company subscribes to the Island and Archipelago ECNs. Instinet has not
permitted the Company to subscribe to its services. Instinet is currently the
largest ECN (responsible for over 15% of Nasdaq trading and a greater percentage
of trading in the largest, most actively traded Nasdaq stocks). Instinet
executions can be more economically advantageous to its subscribers than to
non-subscribers who access Instinet through Nasdaq's SelectNet system. The
Company's business has been negatively affected by the inability to offer
Instinet to its subscribers; therefore, the Company has commenced, together with
an affiliated company, an arbitration against Instinet for wrongful denial of
service in violation of federal and state law and NASD rules. The Company is
seeking access to Instinet service, as well as monetary damages. There can be no
assurance that the Company will be successful in its arbitration or that it will
obtain Instinet service. A failure to obtain such service would continue to have
a material adverse effect on the Company's business, financial condition and
results of operations.
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Risk Management
The Company has established various policies and procedures to manage its
exposure to risk. The Company closely monitors its core business, which consists
of servicing active day traders and operating its ATTAIN ECN. Specifically, the
Company requires each day trading customer to open his or her day trading
account with a minimum balance of $50,000. In addition, the Company monitors
each of its customers via computer analysis to assess the risk of each trade and
the customer's overall account position. The Company takes appropriate steps
with respect to customers who appear to hold overly concentrated or risky
positions, including limiting or rejecting undercapitalized trades or requiring
a customer to close out a position or, if required, liquidate securities.
Although the Company has established certain risk policies and procedures,
there can be no assurance that such procedures will prevent or substantially
limit all losses to the Company. In addition, if the Company diversifies its
activities following completion of the Offering, as it intends to do, the
Company will become subject to new risk management concerns. The Company may be
required to incur substantial expenditures and to implement significant
management controls to address such new risk management concerns.
Similar to other broker/dealers, the Company faces operating, principal and
credit risks. Operating risk arises out of the daily conduct of the Company's
business and relates to the possibility that one or more of the Company's
personnel could cause the Company to engage in imprudent business activities.
Principal risk relates to the fact that the Company holds securities that are
subject to changes in value and could result in the Company incurring material
losses. Credit risk occurs because the Company guarantees credit extended
through its clearing broker to various of its customers in the form of margin
loans, activities which constitute normal industry practice.
All-Tech also engages in trading for its own account, primarily utilizing
the ATTAIN ECN. Pursuant to a proposed joint back office arrangement with the
Company's clearing firm, the Company would be permitted to trade its proprietary
account at increased margin levels. The monetary risks associated with
proprietary trading are managed through real-time monitoring of the amount and
types of securities held from time to time by the Company and limiting the
exposure to any one investment or type of investment. These risks are monitored
both by the Company's own operations personnel and by the Company's clearing
broker. See "Business--Proprietary Trading."
Sales and Marketing
The Company markets its services directly, through its own sales personnel,
and on its Website at www.attain.com. All-Tech advertises in national and
regional print and radio and television media. The Company intends to increase
its sales and marketing expenditures and efforts following the completion of the
Offering.
The most significant source of customers for the Company has been the
All-Tech Training Group, Inc. ("ATTG") day trading training program. ATTG is an
affiliate of the Company and a wholly-owned subsidiary of Rushmore. Rushmore, a
principal shareholder of the Company and a Selling Shareholder in this Offering,
is owned by Harvey I. Houtkin, the Chairman, Chief Executive Officer and
Secretary of the Company, and Mark D. Shefts, the President, Chief Operating
Officer, Chief Financial Officer and Treasurer of the Company. See "Certain
Transactions" and "Principal and Selling Shareholders." ATTG students are not
required to become customers of All-Tech, but the majority of them do so.
All-Tech offers ATTG students a discounted commission equal, in the aggregate,
up to the amount of their tuition. All-Tech strongly encourages all of its
customers to take training at ATTG or elsewhere if they are not experienced
traders, but no training is required. ATTG attracts its students through
national and local advertising. ATTG offers an intensive three week training
course in electronic day trading on All-Tech's ATTAIN trading system and the
ATTAIN ECN adjacent to the Company's offices in Montvale, New Jersey and
Seattle, Washington. ATTG also offers two-day weekend courses from time to time
at each of the Company's branch office locations. ATTG does not charge All-Tech
for offering its training course at All-Tech's facilities and All-Tech does not
charge ATTG for use of its facilities. There can be no assurance that ATTG and
the Company will continue these arrangements, or that ATTG will continue to
train people who wish to become active day traders. Although the Company could
commence its own training program, it has no plan to do so at this time.
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<PAGE>
Competition
The marketplace for electronic trading firms is intensely competitive and
rapidly changing. All-Tech believes that due to the anticipated growth of the
market for electronic brokerage services, active stock trading facilities, and
other factors, competition will increase in the future, even if there is a
consolidation among electronic trading firms. The Company believes its ability
to compete will depend upon many factors, both within and outside its control,
including the timing and market acceptance of new services and enhancements
developed by the Company and its competitors, functionality of such services,
data availability, ease of use, customer service and support, pricing,
reliability, and sales and marketing efforts.
All-Tech faces direct competition from a number of publicly-traded and
privately-held companies. It competes directly with other firms whose customers
engage in active day trading, other ECN systems, large Wall Street securities
firms, securities subsidiaries of major commercial bank holding companies and
major regional firms, as well as small niche players. The Company's principal
competitors in providing electronic brokerage services currently include such
firms as Datek Securities Corp., Terra Nova Trading, LLC, Block Trading Corp.
and Instinet Corporation, a division of Reuters. The Company's ATTAIN ECN
competes principally with Nasdaq market makers, Instinet, Datek Securities
Corp.'s Island ECN, Terra Nova Trading, LLC's Archipelago ECN, Bloomberg
Tradebook LLC's System ECN and Spear, Leeds & Kellogg's REDI ECN. The Company
also competes with on-line trading systems available on the Internet, such as
Charles Schwab & Co. Inc., E*Trade Capital Inc. and Accutrade Inc. In addition,
the Company faces competition from data vendors which offer investment analysis
software, news, quotations and other securities industry products.
Additionally, Nasdaq recently made a rule filing with the SEC which
contains a proposal to operate a limit order book (essentially an ECN). All-Tech
believes the operation of an ECN by Nasdaq represents a potential conflict of
interest for Nasdaq, which is supposed to act as a neutral operator and
regulator of the OTC marketplace. The ECN proposed to be operated by Nasdaq
would substantially favor market makers over order-entry firms such as All-Tech.
All-Tech vigorously opposes Nasdaq operation of this ECN, as do many brokerage
firms.
All-Tech seeks to offer its customers low prices, quality services and
continuous innovation. Although All-Tech offers competitively discounted
commissions, it does not seek to offer the very lowest commission rates, which
at some firms can be as low as $7.50 per trade. Such low rates are generally
offered by firms that also earn revenues from directing order flow to another
broker/dealer for execution in exchange for a per share fee. The ATTAIN trading
system permits the Company's customers to decide where their orders are
displayed and executed. The Company does not direct order flow because it
believes that the practice of directing order flow interferes with the broker's
fiduciary duty to its customer to obtain the best available price for the
customer.
The general financial success of companies engaging in electronic day
trading within the securities industry over the past several years has
strengthened existing competitors and has led to the entrance into this field of
many existing and newly established brokerage firms. Management believes that
such success will continue to attract new competitors. Additionally, it is
possible that new alliances among competitors may also emerge, with such
alliances acquiring significant market share.
Many of the Company's existing and potential competitors have longer
operating histories, significantly greater financial, technical and market
resources, greater name recognition and a larger installed customer base than
the Company. One or more of these competitors may be able to respond more
quickly to new or emerging technologies or changes in customer requirements, or
to devote greater resources to the development, promotion and sale of their
services and products than the Company. Larger and better capitalized
competitors are able to more aggressively advertise their products and services
on a national basis and many have a greater number and variety of distribution
outlets for their services. So-called on-line discount brokerage firms market
their services through aggressive pricing and promotional efforts.
The average commission per transaction earned by the Company has declined
from $24.32 for the year ended June 30, 1996 to $23.05 for the nine months ended
March 31, 1998, due to competitive factors. The Company is continuously
monitoring the fees it charges and such fees may either be reduced as a result
of competitive pressures or to adhere to maximum fees permitted pursuant to the
SEC no-action letter under which the Company operates the ATTAIN ECN. A
reduction in rates unaccompanied by a rise in usage would negatively impact
ATTAIN ECN revenues. See "Business--The ATTAIN ECN." Increased competition could
result in
40
<PAGE>
additional price reductions, reduced margins or loss of market share, any of
which could materially adversely affect the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will be able to compete successfully against current or future competitors, or
that competitive pressures faced by the Company will not have a material
adverse effect on its business, financial condition and results of operations
or the Company's ability to attract and retain highly skilled individuals.
Intellectual Property and Other Proprietary Rights
The Company's success depends to a significant extent on its proprietary
technology. The Company relies primarily on copyright, trade secret and
trademark law to protect its technology. The Company has no patents. The Company
has registered its ATTAIN trademark in the United States, but has not yet
registered it in any foreign countries. There can be no guarantee of effective
trademark protection available for the Company's trademarks, trade names or
service marks. The Company's name has not been registered except with the SEC
and the NASD. The possible inability of the Company to effectively protect its
trade name and trademarks outside the United States could have an adverse effect
on the Company but at this time such effect is not expected to be material.
The source code for the Company's proprietary software is protected both as
a trade secret and as a copyrighted work. The Company enters into
confidentiality and/or assignment agreements with its associates, consultants
and vendors with access to the Company's proprietary information to control
access to, and distribution of, its software, documentation and other
proprietary information. Notwithstanding the precautions taken by the Company,
it may be possible for a third party to copy or otherwise obtain and use the
Company's software or other proprietary information without authorization or to
develop similar software independently. The laws of other countries may afford
the Company little or no effective protection of its intellectual property. The
inability of the Company to protect its intellectual property rights could have
a material adverse effect on the Company's business, financial condition and
operating results.
The Company may, in the future, receive notices of claims of infringement
of other parties' proprietary rights. Any such claims, with or without merit,
could be time consuming to defend, result in costly litigation, divert
management's attention and resources or require the Company to enter into
royalty or licensing agreements. There can be no assurance that such licenses
would be available on reasonable terms, if at all, and the assertion or
prosecution of any such claims could have a material adverse effect on the
Company's business, financial condition and operating results.
Government Regulation
Securities Industry Regulation:
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. The SEC is the federal agency
responsible for the administration of the federal securities laws. All-Tech is
registered with the SEC as a broker/dealer. Most of the regulation of
broker/dealers has been delegated by the SEC to self-regulatory organizations
("SROs"), principally the NASD, which is the Company's primary regulator. These
SROs adopt rules (subject to SEC approval) that govern the industry. They
conduct periodic examinations of all the operations of all broker/dealers.
Pursuant to a membership agreement, the NASD sets forth activities a member firm
is permitted to engage in. Some of the new activities the Company may wish to
engage in may require modification of the Company's membership agreement, the
obtaining of a modification, if required, cannot be assured. Broker/dealers are
also subject to extensive regulation by the states and the District of Columbia.
The Company also is or will be subject to regulation by any foreign jurisdiction
or subdivision thereof where it seeks to conduct business. See "Risk Factors --
Securities Regulation in General."
The Company is licensed as a broker/dealer to conduct business in 44 states
and is applying for licenses in most of the remainder of the states and the
District of Columbia. There can be no assurance that the balance of such
licenses will be granted. The Company, as a foreign broker/dealer, may not be
granted a license to conduct business in certain foreign jurisdictions.
Broker/dealers are subject to regulations covering all aspects of the
securities business, including sales methods, trade practices among
broker/dealers, use and safekeeping of customers funds and securities, capital
structure, record-keeping and the conduct of officers, directors and employees.
The Company is required to
41
<PAGE>
comply with many complex and evolving laws and rules, including rules relating
to electronic trading. All-Tech's operation of the ATTAIN trading system and
the ATTAIN ECN, for example, subjects the Company to Rule 17a-23 of the
Exchange Act, which regulates certain communications carried by on-line trading
systems, requiring the Company to conduct certain record keeping and reporting
activities.
Additional legislation, changes in rules promulgated by the SEC, the NASD,
other SROs or one or more states, or changes in the enforcement of existing laws
and rules, may directly affect the mode of operation and profitability of
broker/dealers in general, and electronic trading firms such as All-Tech in
particular. The SEC, the NASD, other SROs and state securities commissions may
conduct administrative proceedings, which can result in censure, fine, the
issuance of cease-and-desist orders or the suspension or expulsion of a
broker/dealer or any of its officers or employees. The Company's ability to
comply with all applicable laws and rules is dependent in large part upon the
maintenance of a compliance system reasonably designed to ensure such
compliance. The principal purpose of regulation and discipline of broker/dealers
is the protection of customers and the securities markets, rather than
protection of creditors and shareholders of broker/dealers.
The Company anticipates that it may be subject to additional regulation as
the market for online commerce evolves. Currently, the ATTAIN ECN does not
subject All-Tech to regulation as an exchange. The SEC has proposed and
published for comment a new regulatory framework for alternative trading
systems. There can be no assurance as to the effect, if any, of any rules which
may be adopted based on such proposal. However, due to operation of the ATTAIN
ECN, the Company may have to choose to register as broker-dealer with certain
additional requirements or alternatively, as an exchange. The SEC has drafted
this proposal to address certain regulatory gaps created by the growth of ECNs.
Any changes to the current regulatory structure could impose additional
compliance costs on the Company and could adversely affect the Company's
competitive position.
In addition, Congress has also held hearings on whether to regulate
providers of services and transactions in the electronic commerce market, and
federal or state authorities could enact laws, rules or regulations affecting
the Company's business or operations. The Company may be subject to federal,
state and foreign money transmitter laws and state and foreign sales and use tax
laws. If enacted or deemed applicable to the Company, such laws, rules or
regulations could be imposed on the Company's activities or its business.
Due to the increasing popularity of the Internet, it is possible that laws
and regulations may be enacted with respect to the Internet, covering issues
such as user privacy, pricing, content and quality of products and services. The
Telecommunications Act of 1996 (the "Telecommunications Act"), which was enacted
in January 1996, prohibits the transmission over the Internet of certain types
of information and content. Although certain of these prohibitions have been
held unconstitutional, the increased attention focused upon these liability
issues as a result of the Telecommunications Act could adversely affect the
growth of the Internet, private network use and electronic trading.
All-Tech is a member of Securities Investor Protection Corporation
("SIPC"), which provides, in the event of the liquidation of a broker/dealer,
protection for customers accounts held by such broker/dealer of up to $500,000
for each customer account, subject to a limitation of $100,000 for claims for
cash balances. Additionally, the Company's clearing firm, Southwest, which
carries customer funds and securities for All-Tech, has obtained additional
insurance, in the amount of $24.5 million for each customer account, in the form
of an excess securities bond from American International Group.
The Company plans to institute an aggressive marketing campaign following
the closing of this Offering. All advertising materials are subject to NASD
review and prior to use must be reviewed by All-Tech's compliance officer to
ensure that they comply with applicable rules.
The Company currently does not solicit orders from its customers or make
investment recommendations. However, if the Company were to engage in such
activities, it would become subject to additional rules and regulations
governing, among other things, the suitability of recommendations to customers
and sales practices.
The Company intends to expand its business internationally. In order to
expand globally, the Company will be required to comply with regulations of each
specific country in which it does business. Such regulations may limit the
Company's rate of international expansion.
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<PAGE>
Net Capital Requirements:
As a registered broker/dealer and member of the NASD, All-Tech is subject
to net capital rules, which specify minimum net capital requirements for
broker/dealers and are designed to measure the general financial integrity and
liquidity of a broker/dealer. Such rules require that at least a minimum part of
its assets be kept in relatively liquid form.
As of May 31, 1998, All-Tech is required to maintain minimum net capital,
as defined in the Net Capital Rule, equal to the greater of (i) $100,000 or (ii)
$2,500 for each stock the Company posts a quote in, up to $1,000,000. Failure to
maintain the required net capital may subject a firm to suspension or revocation
of registration by the SEC and/or suspension or expulsion by the NASD and other
regulatory bodies and ultimately could require a firm's liquidation. The Net
Capital Rule prohibits payments of dividends, redemption of stock, the
prepayment of subordinated indebtedness, and the making of any unsecured advance
or loan to a shareholder, employee or affiliate, if aggregate debit items (i.e.
assets that have, as their source, transactions with customers (primarily margin
loans)) rise beyond 5% of net capital. The Net Capital Rule also provides that
the SEC may restrict, for up to 20 business days, any withdrawal of equity
capital, or unsecured loans or advances to shareholders, employees or affiliates
("capital withdrawal") if such capital withdrawal, together with all other net
capital withdrawals during a 30-day period, exceeds 30% of excess net capital
and the SEC concludes that the capital withdrawal may be detrimental to the
financial integrity of the broker/dealer.
Net capital is essentially defined as net worth (assets minus liabilities)
plus qualifying subordinated borrowing and certain discretionary liabilities,
less certain mandatory deductions that result from excluding assets that are not
readily convertible into cash and from valuing conservatively certain other
assets. Among these deductions are adjustments (called "haircuts") which reflect
the possibility of a decline in the market value of an asset prior to its
disposition.
A change in the Net Capital Rule, the imposition of new rules or any
unusually large charge against net capital could limit those operations of the
Company that require the intensive use of capital, such as underwriting, trading
activities and the financing of customer account balances, and also could
restrict the Company's ability to pay dividends, repay debt and redeem or
purchase shares of its outstanding stock.
The Company believes that at all times it has been in compliance with the
applicable minimum net capital rules of the SEC and the NASD. As of May 31,
1998, the Company had net capital of approximately $934,000, or approximately
$585,000 in excess of the minimum amount required.
The failure of a broker/dealer to maintain its minimum required net capital
would require it to cease executing customer transactions until it came back
into compliance, and could cause it to lose its NASD membership, its
registration with the SEC, or require its liquidation. Further, the decline in a
broker/dealer's net capital below certain "early warning levels," even though
above minimum net capital requirements, could cause material adverse
consequences to the broker/dealer.
Employees
As of July 6, 1998, the Company had a total of 116 employees. Of the total,
42 were in management (including branch management), seven were in technology
development and service, one was in sales and marketing and 66 were in
administration and operations. None of the Company's employees are represented
by a labor union or are subject to a collective bargaining agreement. The
Company has not experienced any work stoppages and considers its relations with
its employees to be good. Additionally, many of the Company's employees,
including the Company's proprietary traders, employees who deal with customers
or with the execution of customer orders, and all persons who supervise the
activities of the previously mentioned employees, are required to be registered
with the NASD. The registration process for such employees includes passing
certain examinations and obtaining certain licenses which are required by the
NASD.
Facilities
The Company's executive offices, technology development and administrative
functions are located in Montvale, New Jersey, in approximately 12,395 feet of
space in a building owned by a company which is wholly owned by Messrs. Houtkin
and Shefts. The annual rent and maintenance for the facility are approximately
$265,000. See "Certain Transactions."
Fourteen of the Company's eighteen branch offices are leased by
unaffiliated third parties directly to the branch managers or companies
controlled by them. In order not to be liable for the primary lease obligations,
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<PAGE>
the Company sublets such branch offices on a month-to-month basis. Although the
Company is not liable on such leases, it has a right to sublet the facility
from the primary lessor should the branch manager not remain in his position.
Three of the remaining four branch office facilities are subleased from Double
H Management, a wholly-owned subsidiary of Rushmore, at an aggregate annual
rental of $80,242, and the fourth facility is located in property owned by Mark
D. Shefts, President, Chief Operating Officer, Chief Financial Officer and
Treasurer of the Company, and is utilized at no cost to the Company.
Legal Proceedings
The Company is not a party to any material legal proceedings except as
follows:
The Company and an affiliate instituted an arbitration against Instinet
Corporation for wrongful denial of service, seeking access to the Instinet ECN
as well as monetary damages. The Company has limited access to Instinet, the
largest ECN, through Nasdaq and through its clearing firm. The Company's failure
to obtain full access to Instinet could have a material adverse effect on the
Company's ability to provide the best trading opportunities to its customers and
on the Company's business, financial condition and results of operations. There
can be no assurance as to the outcome of this arbitration.
In June 1998, the Company instituted an arbitration against Knight
Securities, Inc. ("Knight") by filing a Statement of Claim with the National
Association of Securities Dealers, Inc. The arbitration seeks compensatory
damages in the amount of $97,537.50, punitive damages in the amount of $500,000,
as well as interest, costs, and disbursements and attorneys fees. The
arbitration was commenced as a result of Knight's refusal to pay the Company's
ECN fees arising from Knight's entering trades involving OTC securities with the
ATTAIN ECN. The allegations set forth in the Statement of Claim include claims
based upon breach of contract, quantum meruit and fraud. The Company is also
currently denying access to Knight, as well as approximately 25 other ATTAIN ECN
users, because they have stated to the Company that they will not pay their
ATTAIN ECN bills. The Company intends to vigorously pursue its legal remedies to
recover unpaid accounts receivable. However, there can be no assurance that such
efforts will be successful.
The Company has requested that the U.S. Department of Justice investigate
what the Company believes to be misconduct of Nasdaq market making participants
in their refusal to pay the Company's ECN fees. In addition, the Company has
been informed by the NASD that, based upon complaints lodged by two
broker-dealers, it is conducting an investigation as to whether the Company's
denial of access to the ATTAIN ECN constituted "backing away." Although the
Company does not believe that there is any merit to such claims, and it intends
to vigorously contest any such charge, there can be no assurance that such
claims would not result in a formal investigation being commenced or that the
Company would not incur substantial fees in contesting such claims.
From time to time the Company has been threatened with, or named as a
defendant in, lawsuits and administrative claims. Compliance, trading and
administrative problems that are reported to the NASD, SEC or state regulators
by dissatisfied customers are investigated by such regulators and, if pursued by
such customers, may rise to the level of arbitration or disciplinary action. The
Company's management does not believe any current investigations or claims are
material. There can be no assurance that one or more future lawsuits, claims or
disciplinary actions, if decided adversely to the Company, would not have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company is also subject to periodic audits and
inspections.
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MANAGEMENT
Directors and Executives Officers
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ----------------------------- ----- ----------------------------------------------------
<S> <C> <C>
Harvey I. Houtkin ........... 49 Chairman of the Board, Chief Executive Officer,
Secretary
Mark D. Shefts .............. 40 President, Chief Operating Officer, Chief Financial
Officer, Treasurer, Director (1)
Harry M. Lefkowitz .......... 42 Senior Vice President--Operations, Director
Linda Lerner ................ 55 Executive Vice President, General Counsel
Josef A. Ross ............... 68 Director-Nominee (1)(2)
Robert D. Kashan ............ 44 Director-Nominee (1)(2)
</TABLE>
(1) To become a member of the Compensation, Audit and Option Committees upon
completion of the Offering.
(2) Appointment to become effective upon completion of the Offering.
Harvey I. Houtkin joined All-Tech in 1991 and has been the Company's
Chairman of the Board, Chief Executive Officer and Secretary since March 1993.
From September 1996 to January 1997 he also served as President of the Company
but not as Secretary. Mr. Houtkin has over 30 years experience in the securities
industry. He graduated from Baruch College of the City University of New York in
1970 with a Bachelor of Science Degree and in 1973 with a Masters Degree in
Business Administration. His masters thesis was entitled "The Impact of Nasdaq
on the Over-the-Counter Market." He is an associate member of the American Stock
Exchange. He held a seat on the New York Stock Exchange for several years and
co-owns a broker/dealer which operated a floor brokerage business on that
Exchange. He also has been a member of the New York Futures Exchange. He is the
author of The SOES Bandits' Guide-Day Trading in the 21st Century and Secrets of
the SOES Bandit.
Mark D. Shefts has been a principal of All-Tech since early 1988 and has
been its President, Chief Operating Officer, Chief Financial Officer, Treasurer
and a Director since such time. From September 1996 to January 1997 he was the
Secretary of the Company and during such period he did not hold the office of
President. Mr. Shefts has over 17 years experience in the industry. Mr. Shefts
graduated in 1979 from Brooklyn College of the City of New York with a Bachelor
of Science Degree in Accounting. He is a member of the Chicago Stock Exchange
and co-owns a broker/dealer which operated a floor brokerage business on the New
York Stock Exchange. Mr. Shefts is licensed as a Commodity Pool Operator and a
Commodity Trading Advisor by the National Futures Association. He is also a
Certified Financial Services Auditor, a Certified Fraud Examiner and an
arbitrator for the American Arbitration Association and NASD Regulation, Inc. In
the Fall of 1997, he was an Adjunct Professor of Business at Ramapo College of
the State University of New Jersey.
Harry M. Lefkowitz has over 16 years experience in the securities industry.
He has been with All-Tech since 1991. Mr. Lefkowitz is the Senior Vice
President-Operations and a Director of All-Tech. He is also the sole officer,
director and shareholder of HMS Securities, Inc., an NASD registered
broker/dealer which engages in only very limited activity at present and to
which Mr. Lefkowitz now devotes only an insubstantial amount of time. Mr.
Lefkowitz obtained as Associate Degree at Kingsborough Community College in
1977.
Linda Lerner has been General Counsel to All-Tech since January 1993. In
May 1998 she became Executive Vice President of the Company. Prior to joining
All-Tech, Ms. Lerner practiced law in various law firms from 1976 through May
1991, when she joined Home Box Office, Inc. as counsel. Ms. Lerner obtained a
Bachelor of Arts from Brandeis University in 1964, a Masters of Science from
Columbia University in 1976 and a Juris Doctor from Brooklyn Law School in 1976.
Ms. Lerner is a member of the Market Operations Committee and the Trading Rules
Subcommittee of The Nasdaq Stock Market, Inc.
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<PAGE>
Josef A. Ross is the Chairman of the Board and Chief Executive Officer of
Universal Travel Corp., a manufacturer, importer and distributor of luggage
products and fine art graphic display systems which he founded in 1963. Mr. Ross
also owns several other businesses.
Robert D. Kashan has been the Chairman and Chief Executive Officer of Earth
Color Group., Inc. and its predecessors, a printer of promotional material for
Fortune 500 companies since 1983. Mr. Kashan obtained a Bachelor of Science
degree in marketing from the University of Maryland in 1976.
All directors hold office until the next annual meeting of shareholders and
until their successors shall have been duly elected and qualified. All executive
officers of the Company are elected annually by the Board of Directors and serve
until their successors are duly elected and qualified. Other than Mr. Houtkin
and Mr. Shefts, who are brothers-in-law, there are no family relationships among
any of the directors and executive officers of the Company. Effective upon the
consummation of this Offering, the Board of Directors will have a Compensation
Committee, which will approve salaries and certain incentive compensation for
management and key employees of the Company; an Audit Committee, which will
review the results and scope of the audit and other services provided by the
Company's independent accountants; and an Option Committee, which will
administer the Company's 1998 Stock Option Plan. The Compensation, Audit and
Option Committees will be composed of Messrs. Shefts, Ross and Kashan.
From time to time, situations may arise in which certain of the Company's
officers and/or directors may be presented with situations in which they are
faced with a conflict of interest arising from the fact that such persons are
affiliated with entities other than the Company. Accordingly, all future
transactions and loans between the Company and its officers, directors and 5%
shareholders will be entered into on terms no less favorable than could be
obtained from unaffiliated third parties and will be approved by a majority of
the independent, disinterested directors of the Company.
Directors' Compensation
Each of the Company's independent, non-employee Directors will receive
compensation of $1,500 per meeting for each regularly scheduled meeting in which
he participates. In addition, each of the independent, non-employee members of
the Board who serve on the Audit, Compensation and/or Option Committee of the
Board of Directors will receive a $750 fee per meeting for each regularly
scheduled Committee meeting in which he participates unless such meeting is held
on the day of a regularly scheduled meeting of the Board of Directors. The
Company also will provide reimbursement to Directors for reasonable and
necessary expenses incurred in connection with attendance at meetings of the
Board of Directors or its Committees. Directors are eligible to receive stock
option grants pursuant to the Company's 1998 Stock Option Plan.
Executive Compensation
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to the Company's Chief
Executive Officer and each of the other executive officers of the Company whose
salary exceeded $100,000 (collectively, the "Named Executives") during the year
ended June 30, 1997.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Principal Position Salary Bonus
- --------------------------------------------------- ----------- ------------
<S> <C> <C>
Harvey I. Houtkin
Chairman, Chief Executive Officer and Secretary
Year ended June 30:
1997 ........................................... $618,093 $ 800,000
1996 ........................................... 595,000 156,000
1995 ........................................... 260,000 --
Mark D. Shefts
President, Chief Operating Officer, Chief Financial
Officer, Treasurer and Director
Year ended June 30:
1997 ........................................... 557,692 900,000
1996 ........................................... 600,000 176,000
1995 ........................................... 260,000 --
Linda Lerner
Executive Vice President and General Counsel
Year ended June 30:
1997 ........................................... 110,000 10,000
1996 ........................................... 100,000 5,000
1995 ........................................... 100,000 --
</TABLE>
1998 Stock Option Plan
The Company's 1998 Stock Option Plan (the "Plan") was adopted by the Board
of Directors and the shareholders of the Company on May 11, 1998. A total of
2,250,000 shares of Common Stock are reserved for issuance upon exercise of
options to be granted under the Plan, 1,500,000 of which will be granted as of
the effective date of this Offering. No other options have been granted under
the Plan. Those eligible to receive stock option grants under the Plan include
employees, Directors and consultants. The Plan will be administered by the
Option Committee of the Board of Directors of the Company, which will be
comprised of the two outside directors, Messrs. Ross and Kashan, and Mark D.
Shefts.
Subject to the provisions of the Plan, the Option Committee, as
administrator of the Plan, has the discretion to determine the optionees and/or
grantees, the type of options to be granted (incentive stock options ("ISOs")
or non-qualified stock options (" NQSOs")), the vesting provisions, the terms
of the option grants and such other related provisions as are consistent with
the Plan. The exercise price of an ISO may not be less than the fair market
value per share of the Common Stock on the date of grant or, in the case of an
optionee who beneficially owns 10% or more of the outstanding capital stock of
the Company, not less than 110% of the fair market value per share on the date
of grant.
The options terminate not more than ten years from the date of grant,
subject to earlier termination on the optionee's death, disability or
termination of employment with the Company, but provide that the term of any
options granted to a holder of more than 10% of the outstanding shares of
Common Stock may be no longer than five years. Options are not assignable or
otherwise transferable except by will or the laws of descent and distribution.
In the event of a merger or consolidation of the Company with or into another
corporation or the sale of all or substantially all of the Company's assets in
which the successor corporation does not assume outstanding options or issue
equivalent options, the Board of Directors of the Company is required to
provide accelerated vesting of outstanding options. The Plan terminates on May
10, 2008.
As of April 30, 1998, no awards had been granted by the Company under the
Plan. The Company intends to grant options to purchase 1,500,000 shares of
Common stock to its employees and director-nominees, such grants to become
effective only upon the successful completion of the Offering. Such options
will be exercisable at a price per share equal to the initial public offering
price of the shares of Common Stock, will have an expiration date of May 10,
2008, and will vest at a rate of twenty percent per year from the date of
grant.
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<PAGE>
401(k) Plan
The Company currently maintains a 401(k) salary reduction plan (the
"401(k) Plan") which is intended to qualify under Section 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"). Generally, all
employees who are not members of a collective bargaining group and who are 21
years of age or older are eligible to participate in the 401(k) Plan after they
complete six months of service. All eligible executive officers other than
Messrs. Houtkins, Shefts and Waldman participate in the 401(k) Plan.
Eligible employees electing to participate in the 401(k) Plan may defer a
portion of their compensation on a pre-tax basis by contributing a percentage
thereof to the 401(k) Plan. There is no minimum contribution, and the maximum
contribution is prescribed in Section 401(k) of the Code. Such maximum for 1998
is $10,000. The Company makes matching contributions equal to 3% of the first
6% of a participating employee's annual salary, up to $4,800. Eligible
employees who elect to participate in the Company's 401(k) Plan vest in the
Company's matching contribution as follows: less than one year of service--0%;
one year of service--20%; two years of service--40%; three years of
service--60%; four years of service--80%; and five years of service--100%.
Employment Agreements; Key-Man Insurance
On April 30, 1998, the Company entered into three-year employment
agreements with Harvey I. Houtkin Chairman, Chief Executive Officer and
Secretary of the Company, and Mark D. Shefts, President, Chief Operating
Officer, Chief Financial Officer and Treasurer of the Company. Pursuant to the
terms of these agreements, Messrs. Houtkin and Shefts are each entitled to
receive $500,000 plus 5% of net earnings before taxes per year for the terms of
the agreements, to a maximum of an additional $500,000 in the first two years
and $1,500,000 in the third year, life insurance, benefits under any Company
benefit plans, as well as reimbursement of certain employment related expenses.
In the event of a change of control of ownership of the Company, each
employment agreement will be extended so that the new term of the employment
agreement, as of the date of the change of control, will be three years. Should
such employment agreements not be renewed by the Company, Messrs. Houtkin
and/or Shefts will continue to receive compensation under the employment
agreements for an additional one-year period. If Mr. Houtkin shall not be
elected Chairman and Chief Executive Officer of the Company, or Mr. Shefts not
be elected President, Chief Operating Officer, and Treasurer of the Company, or
given authority or responsibilities appropriate to their respective positions,
Mr. Houtkin or Mr. Shefts, as the case may be, could terminate his employment
and receive all amounts that otherwise would have been paid during the three
year term or, if the unexpired portion of the term is less than two years,
compensation for a two year period. The same compensation amounts would also be
paid by the Company should Messrs. Houtkin or Shefts be terminated without
cause. Each of the employment agreements contains a prohibition against
competing with the Company or soliciting customers or employees from the
Company for a period of two years after the termination of the agreement or for
such longer period as the employee is compensated by the Company; provided,
however, that such non-compete provisions are reduced and/or eliminated in
their entirety after six or nine years, respectively. Each of the agreements
permits the Company to terminate the agreement for cause or upon the death or
disability of Mr. Houtkin or Mr. Shefts.
The Company is applying for key-man insurance on the lives of Messrs.
Houtkin and Shefts in the amount of $1 million each. There can be no assurance
that such insurance can be obtained in such amount, if at all.
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<PAGE>
CERTAIN TRANSACTIONS
During the fiscal year ended June 30, 1997, the Company made a series of
non-interest bearing, revolving loans to Messrs. Mark D. Shefts and Harvey I.
Houtkin, shareholders, officers and directors of the Company, which loans were
payable on demand. The loans to Mark D. Shefts totaled $433,722 and the loans
to Harvey I. Houtkin totaled $300,292. Said loans were repaid in full during
the fiscal year ended June 30, 1997.
During the fiscal year ended June 30, 1997, the Company made two
non-interest bearing, revolving loans to its parent Rushmore, for working
capital purposes, which loans were payable on demand. The loans to Rushmore
totaled $500,000. Said loans, together with previously outstanding loans
totaling $886,877, were repaid during the fiscal year ended June 30, 1997.
During the nine months ended March 31, 1998, the Company made a series of
non-interest bearing, revolving loans to its parent Rushmore, for working
capital purposes, which loans were payable on demand. The loans to Rushmore
totaled $1,774,323. Said loans, together with previously outstanding loans
totaling $199,941, were repaid during the nine months ended March 31, 1998.
As of the date hereof, there were no remaining outstanding loans to
officers, directors, parents or affiliates of the Company.
During April 1998, the Company borrowed, on an interest-free basis, an
aggregate of $611,000 from its parent, Rushmore, in order to provide additional
funds for the Company's proprietary trading activities. The loan remains
outstanding as of the date hereof and is payable on demand. The Company intends
to repay such loan with a portion of the net proceeds of the Offering.
During May 1998, the Company borrowed, on an interst-free basis, an
aggregate of $135,000 from its affiliate, ATTG, for working capital purposes.
The loan was repaid in June 1998.
All-Tech leases its principal office space in Montvale, New Jersey, which
consists of 12,395 square feet of space from Summit Plaza, Inc., a company
wholly owned by Messrs. Houtkin and Shefts. The annual rent, excluding certain
additional maintenance expenses, is $247,900; this lease expires on March 31,
2003. This lease was modified in May 1998. Prior to such modification, the
Company occupied 12,395 square feet of space at an annual rental of $181,460,
pursuant to both a long-term lease and a month-to-month rental arrangement.
Approximately 400 square feet of such space was subleased to affiliates of the
Company, including Rushmore and ATTG, and to a non-affiliate. The Company
believes that its lease has been and is on terms no less favorable than could
be obtained from an unaffiliated third party. Double H Management Corp.
("Double H"), another wholly owned subsidiary of the Company's parent,
Rushmore, leases space for three branch offices of the Company. The Company
reimburses Double H for the rent due pursuant to such leases. An additional
branch office is located on property owned by Mr. Shefts, at no cost to the
Company.
ATTG, a wholly owned subsidiary of the Company's parent, operates an
electronic day trading training program. ATTG students are not required to
become customers of the Company nor does the Company require its customers to
take the ATTG program; however, ATTG is a significant source of referrals for
the Company, as most of the Company's customers have completed this program.
Students who do open accounts at the Company are entitled to a discounted
commission equal, in the aggregate, up to the amount of their tuition. The
aggregate amount of discounted commissions accorded to students who attend
ATTG's electronic day trading training program was approximately $272,000 and
$299,000 for the year ended June 30, 1997 and the nine month period ended March
31, 1998, respectively. When such programs are offered at branch locations, the
Company does not charge ATTG for use of its facilities. There can be no
assurance that ATTG and the Company will continue these arrangements or that
ATTG will continue to train people who wish to become active electronic day
traders. Although the Company could commence its own training, it has no plan
to do so at this time.
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<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of June 30, 1998,
and as adjusted to reflect the sales of the shares of Common stock offered
hereby, with respect to the beneficial ownership of the Common Stock of the
Company by (i) each person known to the Company to own 5% or more of the
outstanding shares of Common Stock, (ii) each of the Company's directors and
director-nominees, (iii) each of the Named Executives, (iv) all of the
directors, director-nominees and executive officers as a group, and (v) the
Selling Shareholders.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned Prior to
Offering
Name of Beneficial Owner(1)(2) Number Percent(3)
- -------------------------------------------- ------------------- ------------
<S> <C> <C>
Harvey I. Houtkin .......................... 15,159,375(4) 98%(4)
Mark D. Shefts ............................. 15,159,375(4) 98%(4)
Rushmore Financial Services, Inc. .......... 14,850,000 96%
Harry M. Lefkowitz ......................... -- --
Linda Lerner ............................... -- --
Robert D. Kashan(7) ........................ -- --
Josef A. Ross (7) .......................... -- --
All Directors, Director-Nominees and
executive officers as a group (6 persons) . 15,468,750 100%
<CAPTION>
Shares
Number Beneficially
Of Shares Owned After the
Being Offering
Name of Beneficial Owner(1)(2) Offered Number Percent(3)
- -------------------------------------------- ---------------- ------------------------- ---------------
<S> <C> <C> <C>
Harvey I. Houtkin .......................... 309,375(5) 14,843,750(4)(6) 70.4%(4)
Mark D. Shefts ............................. 309,375(5) 14,843,750(4)(6) 70.4%(4)
Rushmore Financial Services, Inc. .......... 6,250(5) 14,843,750(6) 70.4%
Harry M. Lefkowitz ......................... -- -- --
Linda Lerner ............................... -- -- --
Robert D. Kashan(7) ........................ -- -- --
Josef A. Ross (7) .......................... -- -- --
All Directors, Director-Nominees and
executive officers as a group (6 persons) . 625,000 14,843,750 70.4%
</TABLE>
- ------------
(1) The address of each beneficial owner is in care of the Company, 160 Summit
Avenue, Montvale, New Jersey 07645.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, as amended. Generally, a person is
deemed to be the beneficial owner of a security if she/he has the right to
acquire voting or investment power within 60 days. Except as set forth in
the footnotes to this table, the persons and entity named in the table
have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by such shareholder.
(3) The applicable percentage of ownership is based on shares of Common Stock
outstanding on April 30, 1998, and shares of Common Stock outstanding
after the completion of this Offering.
(4) Includes shares beneficially owned by Rushmore, which is 50% owned by Mr.
Houtkin and 50% owned by Mr. Shefts.
(5) Shares of Common Stock being offered by such shareholder as a Selling
Shareholder in this Offering.
(6) Rushmore has granted the Underwriters an Over-Allotment Option to purchase
up to 468,750 shares of Common Stock solely to cover over-allotments, if
any. This table assumes that the Over-Allotment Option will not be
exercised by the Underwriters. See "Underwriting."
(7) Director-nominee.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 55,000,000 shares of
Common Stock, par value $0.001 per share, and 5,000,000 shares of undesignated
Preferred Stock, $.01 par value per share. As of the date of this Prospectus,
there were 15,468,750 shares of Common Stock issued and outstanding and held of
record by three shareholders. There are no shares of Preferred Stock designated
or issued. See "Capitalization."
The following statements are brief summaries of certain provisions with
respect to the Company's capital stock contained in its Certificate of
Incorporation and By-Laws, copies of which have been filed as exhibits to the
Registration Statement. The following summary is qualified in its entirety by
reference thereto.
Common Stock
Holders of shares of Common Stock are entitled to one vote for each share
held of record on matters to be voted on by the shareholders of the Company.
Subject to the rights of holders of shares of Preferred Stock, if any, holders
of shares of Common Stock will be entitled to receive dividends when, as and if
declared by the Board of Directors and to share ratably in the assets of the
Company legally available for distribution to its shareholders in the event of
the liquidation, dissolution or winding up of the Company. Holders of Common
Stock have no preemptive, subscription, redemption or conversion rights. All of
the issued and outstanding shares of Common Stock are, and all shares of Common
Stock to be sold in this Offering will be, duly authorized, validly issued,
fully paid and non-assessable. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by,
shares of any series of Preferred Stock that the Company may designate and
issue in the future.
Preferred Stock
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time, direct the issuance of any
authorized but unissued or unreserved shares of Preferred Stock in series and
may, at the time of issuance, determine the rights preferences and limitations
of each series. The holders of Preferred Stock may be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up
of the Company before any payment is made to the holders of the Common Stock.
The Board of Directors could issue Preferred Stock with voting and other rights
that could adversely affect the voting power of the holders of Common Stock and
could have certain anti-takeover effects. The Company has no present plan to
issue any shares of Preferred Stock.
Warrants
The following is a brief summary of certain provisions of the Warrants but
such summary does not purport to be complete and is qualified in all respects
by reference to the actual text of the Warrant Agreement between the Company
and Continental Stock Transfer & Trust Company (the "Warrant Agent"), a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. See "Additional Information."
Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time commencing , 1999 (6 months after date of
this Prospectus) until , 2001 (30 months after the date of this Prospectus)
one share of Common Stock at a price of $12.00 (150% of the initial public
offering price of the Common Stock) per share, and from such date until ,
2004 (60 months after the date of this Prospectus) one share of Common Stock at
a price of $14.00 (175% of the initial public offering price of the Common
Stock) per share, subject to adjustment in accordance with the anti-dilution
and other provisions referred to below. The holder of any Warrant may exercise
such Warrant by surrendering the certificate representing the Warrant to the
Warrant Agent, with the subscription form thereon properly completed and
executed, together with payment of the exercise price. No fractional shares
will be issued upon the exercise of the Warrants. The exercise price of the
Warrants bears no relationship to any objective criteria of value and should in
no event be regarded as an indication of any future market price of the
Securities offered hereby.
Adjustments. The exercise price and the number of shares of Common Stock
purchasable upon the exercise of the Warrants are subject to adjustment upon
the occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications of the Common Stock or the sale by the
Company of its Common
51
<PAGE>
Stock or other securities convertible into Common Stock at a price below the
exercise price of the Warrants. Additionally, an adjustment would be made in
the case of a reclassification or exchange of Common Stock, consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving corporation) or
sale of all or substantially all of the assets of the Company, in order to
enable warrantholders to acquire the kind and number of shares of stock or
other securities or property receivable in such event by a holder of the number
of shares of Common Stock that might otherwise have been purchased upon the
exercise of the Warrant.
Redemption Provisions. Commencing , 2000 (18 months after date of this
Prospectus), the Warrants will be subject to redemption by the Company, in
whole but not in part, at $.10 per Warrant on thirty (30) days prior written
notice to the warrantholders, if the average closing sale price of the Common
Stock as reported on the Amex equals or exceeds $20.00 per share for any twenty
(20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption.
In the event the Company exercises the right to redeem the Warrants, such
Warrants will be exercisable until the close of business on the business day
immediately preceding the date for redemption fixed in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to
be exercisable and the holder will be entitled only to the redemption price.
Transfer, Exchange and Exercise. The Warrants are in registered form and
may be presented to the Warrant Agent for transfer, exchange or exercise at any
time on or prior to their expiration date sixty (60) months after the date of
this Prospectus, at which time the Warrants will become wholly void and of no
value. If a market for the Warrants develops, the holder may sell the Warrants
instead of exercising them. There can be no assurance, however, that a market
for the Warrants will develop or, if developed, will continue.
Warrantholder not a Shareholder. The Warrants do not confer upon holders
thereof any voting, dividend or other rights as shareholders of the Company.
Modification of Warrants. The Company and the Warrant Agent may make such
modifications to the Warrants as they deem necessary and desirable that do not
adversely affect the interests of the warrantholders. The Company may, in its
sole discretion, lower the exercise price of the Warrants for a period of not
less than thirty (30) days on not less than thirty (30) days prior written
notice to the warrantholders and the Representative. Modification of the number
of securities purchasable upon the exercise of any Warrant, the exercise price
(other than as provided in the preceding sentence) and the expiration date with
respect to any Warrant requires the consent of two-thirds of the
warrantholders.
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities or "blue sky" laws of the state of
residence of the exercising holder of the Warrants. Although the Company has
undertaken to use its best efforts to have all of the shares of Common Stock
issuable upon exercise of the Warrants registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the Warrants, there can be no assurance that it will be able to
do so.
Although the Securities will not knowingly be sold to purchasers in
jurisdictions in which the Securities are not registered or otherwise qualified
for sale, investors in such jurisdictions may purchase Warrants in the
secondary market or investors may move to jurisdictions in which the shares
underlying the Warrants are not so registered or qualified during the period
that the Warrants are exercisable. In such event, the Company would be unable
to issue shares to those persons desiring to exercise their Warrants, and
holders of Warrants would have no choice but to attempt to sell the Warrants in
a jurisdiction where such sale is permissible or allow them to expire
unexercised.
Registration Rights
Pursuant to the Representative's Warrant Agreement between the
Representative and the Company, for a period of five years commencing on the
effective date of this Offering the Representative may request that the Company
file a registration statement covering the sale of the 625,000 shares of Common
Stock and/or 312,500
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<PAGE>
Warrants which may be issued upon exercise of the Representative's Warrants and
the 312,500 shares of Common Stock underlying such Warrants. In general, all
fees, costs and expenses of any such registration will be borne by the Company.
The Representative may also request that any registration statement filed by
the Company during the five year period commencing on the date of this
Prospectus cover the sale of such shares of Common Stock and Warrants, at the
Company's expense. See "Underwriting."
Limitation of Director Liability
The Certificate of Incorporation of the Company limits the liability of
directors of the Company to the Company and its shareholders to the fullest
extent permitted by Delaware law. Specifically, directors of the Company will
not be personally liable for money damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporate Law ("DGCL"),
which concerns unlawful payments of dividends, stock purchases or redemptions,
or (iv) for any transaction from which the director derived an improper
personal benefit.
In addition, the Company's By-Laws provide for indemnification of
directors, officers, employees or agents of the Company under certain
circumstances. Specifically, the Company shall indemnify any person who (i) was
or is a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Company) by reason of the fact that he
or she was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding 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 the Company, and with respect to any criminal action or
proceeding, has no reasonable cause to believe his or her conduct was unlawful,
or (ii) was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit by or in the right of the Company
to procure a judgment in its favor by reason of the fact that he or she was a
director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding 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 the Company, and except that no indemnification shall be made in
respect to any claim, issue or matter as to which such person shall have been
adjusted to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the Court of Chancery or such other court shall deem proper.
Delaware Law and Certain Charter and By-Law Provisions
Delaware Law:
The Company is subject to the provisions of Section 203 ("Section 203") of
the DGCL. In general, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless the business
combination is approved in a prescribed manner. A "business combination" is
defined generally to include mergers or consolidations, asset sales and certain
other transactions resulting in a financial benefit to the "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or, in certain cases, within three years
prior, did own) 15% or more of the corporation's outstanding voting stock.
Under Section 203, a business combination between the Company and an
"interested stockholder" is prohibited unless it satisfies one of the following
conditions: (i) the Com-pany's Board of Directors must have previously approved
either the business combination or the transaction that
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<PAGE>
resulted in the stockholder becoming an "interested stockholder," or (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
"interested stockholder," the "interested stockholder" owned at least 85% of
the voting stock of the Company outstanding at the time the transaction
commenced (excluding, for purposes of determining the number of shares
outstanding, shares owned by (a) persons who are directors and also officers
and (b) employee stock plans, in certain instances); or (iii) the business
combination is approved by the Board of Directors and authorized at an annual
or special meeting of the shareholders by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the "interested
stockholder."
Special Meetings:
The By-Laws provide that special meetings of shareholders for any purpose
or purposes can be called only upon the request of the Chairman of the Board or
the written consent of three-quarters of the entire Board.
Number of Directors; Removal; Filling Vacancies
Subject to any rights of holders of Preferred Stock to elect additional
directors under specified circumstances, the By-laws provide that the number of
directors shall be not less than two nor more than 12; provided, however, that
no decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. Directors are elected to staggered terms of
three years. Any vacancy occurring in the Board caused by death, resignation,
removal or otherwise, and any newly created directorship resulting from an
increase in the number of directors, may be filled only by the affirmative vote
of at least a majority of the directors then in office, although such directors
are less than a quorum, or by the sole remaining director. Furthermore, the
By-Laws provide that any one or more of the directors of the Company may be
removed from office only for cause and only by the affirmative vote of
three-quarters of the entire Board of Directors or by the affirmative vote of
two-thirds of the votes represented by the issued and outstanding shares of the
Company entitled to vote at a meeting called for such purpose.
The provisions of the By-Laws governing terms of office and removal may
have the effect of discouraging a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of the Company,
or of attempting to change the composition or policies of the Board of
Directors, even though such attempt might be beneficial to the Company or its
shareholders. These provisions of the By-Laws could thus increase the
likelihood that incumbent directors will retain their positions.
Amendment of Company By-Laws:
In order to adopt, repeal, alter or amend the provisions set forth
therein, the By-Laws require the unanimous written consent of all directors or
the affirmative vote of a majority of the entire Board of Directors acting at a
regular or special meeting called by written notice, which written notice shall
include notice of the proposed action to amend the By-Laws, or by the
affirmative vote of a majority of votes represented by the issued and
outstanding shares of the Company entitled to vote at a meeting called for such
purpose.
Classified Board
The Certificate of Incorporation and By-Laws provide that the Board of
Directors be divided into three classes with each class serving for a
three-year term. Each class will consist, as nearly as possible, of an equal
number of directors. Classes shall be elected in successive years.
Consent of Shareholders
The Certificate of Incorporation provides that any action required to be
taken or which may be taken at any annual or special meeting of shareholders of
the Corporation may not be taken by written consent without a meeting except in
the case of a merger in which the Corporation is the surviving corporation.
Certain provisions of Delaware Law, the Certificate of Incorporation and
the By-Laws may have the effect of discouraging a third party from initiating a
proxy contest, making a tender offer or otherwise attempting to gain control of
the Corporation, or of attempting to change the composition or policies of the
Board of Directors, even though such attempt might be beneficial to the
Corporation or its shareholders. These provisions of Delaware Law, the
Certificate of Incorporation and the By-Laws could thus increase the likelihood
that incumbent directors will retain their positions.
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<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the consummation of this Offering there will be
21,093,750 shares of Common Stock and 3,125,000 Warrants issued and
outstanding. Of these Securities, the 6,250,000 shares of Common Stock and
3,125,000 Warrants sold in this Offering will be freely transferable and
tradeable in the United States (except for shares held by affiliates of the
Company) without restriction or further registration under the Securities Act.
An additional 2,250,000 shares of Common Stock are reserved for issuance under
the Company's 1998 Stock Option Plan. The remaining 14,843,750 shares of Common
Stock outstanding will be "restricted securities" for purposes of Rule 144
under the Securities Act and may not be sold in the absence of registration
under the Securities Act unless an exemption from registration is available,
including the exemption afforded by Rule 144. Additionally, each officer,
director and holder of Common Stock of the Company and all holders of options
to acquire shares of Common Stock have agreed not to, directly or indirectly,
offer, sell, transfer, pledge, assign, hypothecate or otherwise encumber or
dispose of any securities of the Company for a period of 12 months following
the date of this Prospectus without the prior written consent of the
Representative. All of such shares of Common Stock will be eligible for resale
in the public market without registration, subject to certain volume and other
limitations, pursuant to Rule 144 upon the later to occur of (i) 90 days after
the effective date of this Offering or (ii) expiration or waiver of the Lockup
Agreements.
In general, under Rule 144(e), as currently in effect, a shareholder (or
shareholders whose shares are aggregated), including an affiliate, who has
beneficially owned for at least one year shares of Common Stock that are
treated as "restricted securities," would be entitled to sell publicly, within
any three-month period, up to the greater of 1% of the then outstanding shares
of Common Stock (210,937 shares immediately after the completion of this
Offering) or the average weekly reported trading volume in the Common Stock
during the four calendar weeks preceding the date on which notice of sale is
given, provided certain requirements are satisfied. In addition, affiliates of
the Company must comply with additional requirements of Rule 144 in order to
sell shares of Common Stock (including shares acquired by affiliates in this
Offering). Under Rule 144, a shareholder deemed not to have been an affiliate
of the Company at any time during the 90 days preceding a sale by him or her,
and who has beneficially owned for at least two years shares of Common Stock
that are treated as "restricted securities," would be entitled to sell those
shares without regard to the foregoing requirements.
No predictions can be made as to the effect, if any, that sales of
securities or the availability of securities for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of the Common Stock in the public market, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities. See "Risk Factors--Potential Decreases in the Market
Price of Common Stock Resulting from Future Sale of Common Stock."
55
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Security
Capital Trading, Inc. is acting as Representative, have severally agreed,
subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), to purchase from the Company and the Selling
Shareholders, and the Company and the Selling Shareholders have agreed to sell
to the Underwriters on a firm commitment basis, the respective number of shares
of Common Stock and number of Warrants set forth opposite their names:
Number of Number of
Underwriter Shares Warrants
- ---------------------------------------- ----------- ----------
Security Capital Trading, Inc. .........
Total .................................. 6,250,000 3,125,000
========= =========
The Underwriters are committed to purchase all of the Securities offered
hereby, if any of the Securities are purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters are subject to the
conditions precedent specified therein.
The Company and the Selling Shareholders have been advised by the
Representative that the Underwriters initially propose to offer the shares of
Common Stock and the Warrants to the public at the public offering prices set
forth on the cover page of this Prospectus and to certain dealers at such
prices less concessions not in excess of $ per share and $ per Warrant.
Such dealers may re-allow a concession not in excess of $ per share and
$ per Warrant to certain other dealers. After the commencement of the
Offering, the public offering prices, concessions and re-allowances may be
changed by the Representative. The Representative has informed the Company that
the Underwriters do not expect sales to discretionary accounts by the
Underwriters to exceed five percent of the shares of Common Stock or Warrants
offered by the Company and the Selling Shareholders hereby.
The Company and the Selling Shareholders have granted to the Underwriters
the Over-Allotment Option, exercisable during the 45-day period from the date
of this Prospectus, to purchase from the Company and the Selling Shareholders
up to an additional 937,500 shares of Common Stock and/or 468,750 Warrants in
the aggregate at the initial public offering prices, less underwriting
discounts and the non-accountable expense allowance. Such option may be
exercised only for the purpose of covering over-allotments, if any, incurred in
the sale of the Common Stock and Warrants offered hereby. To the extent such
option is exercised in whole or in part, each Underwriter will have a firm
commitment, subject to certain conditions, to purchase the number of the
additional Securities proportionate to its initial commitment.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make. The Company and the Selling Shareholders have agreed to pay to the
Representative a non-accountable expense allowance equal to 1 1/2% of the gross
proceeds derived from the sale of the Securities underwritten, or $754,687.50
($867,890.62 if the Underwriter's Over-Allotment Option is exercised in full),
of which $50,000 has been paid to date by the Company.
In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market prices of the Securities.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase the Common Stock and/or the Warrants for the purpose of stabilizing
market prices. The Underwriters also may create a short position for the
account of the Underwriters by selling more Securities in connection with the
Offering than they are committed to purchase from the Company and the Selling
Shareholders, and in such case may purchase Securities in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 937,500 shares of Common Stock and 468,750 Warrants by
exercising the Over-Allotment Option referred to above. In addition, the
Representative may impose "penalty bids" under contractual arrangements with
the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the Offering) for the account of other Underwriters, the
selling concession with respect to the Securities that are distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the prices of the Securities at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
All directors, officers and holders of shares of Common Stock, options,
warrants or other securities convertible, exercisable or exchangeable for
Common Stock have, pursuant to certain lock-up agreements, agreed not to offer,
sell or otherwise dispose of any securities of the Company for a period of 12
months following the date of this Prospectus without the prior written consent
of the Representative and the Company. An appropriate legend shall be placed on
the certificates representing such securities. The Representative has no
general policy with respect to the release of such securities prior to the
expiration of the lock-up period and no present intention to waive or modify
any of these restrictions on the sale of Company securities.
56
<PAGE>
In connection with this Offering, the Company has agreed to sell to the
Representative, and/or its designees, for nominal consideration,
Representative's Warrants to purchase from the Company up to 625,000 shares of
Common Stock and/or 312,500 Warrants. The Representative's Warrants are
initially exercisable at any time during a period of four (4) years commencing
at the beginning of the second year after their issuance and sale at a price of
$ (120% of the public offering price of the Common Stock) per share of
Common Stock and $ (120% of the public offering price of the Warrants) per
Warrant. The Warrants are initially exercisable at a price of $ (100% of
the initial exercise price of the Warrants) per share. The Representative's
Warrants provide for adjustment in the number of securities issuable upon the
exercise thereof as a result of certain subdivisions and combinations of the
Common Stock. The Representative's Warrants grant to the holders thereof
certain rights of registration for the securities issuable upon exercise
thereof. In addition, the Representative's Warrants may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one year from the date of this Prospectus except to
officers of the Representative.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Consequently, the initial public offering price of the
Common Stock, the initial offering price of the Warrants and the terms of the
Warrants have been determined by negotiation between the Company, the Selling
Shareholders and the Representative and do not necessarily bear any
relationship to the Company's asset value, net worth or other established
criteria of value. The factors considered in such negotiations, in addition to
prevailing market conditions, included the history of and prospects for the
industry in which the Company competes, an assessment of the Company's
management, the prospects of the Company, its capital structure and such other
factors as were deemed relevant.
Security Capital Trading, Inc., the Representative, commenced operations
in June 1995. The Representative has only co-managed two recent public
offerings of securities; therefore, the Representative does not have extensive
experience as a co-manager or underwriter of public offerings of securities.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a
copy of each such agreement which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. See "Additional Information."
LEGAL MATTERS
The validity of the issuance of the Common Stock and Warrants offered
hereby will be passed upon for the Company by Sichenzia, Ross & Friedman LLP,
located in New York, New York. Orrick, Herrington & Sutcliffe LLP, New York,
New York, has acted as counsel for the Underwriters in connection with the
Offering.
EXPERTS
The financial statements of All-Tech Investment Group, Inc. have been
audited by Wolinetz, Gottlieb & Lafazan, P.C., independent auditors, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting.
57
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission in
Washington, D.C., a Registration Statement under the Securities Act for the
shares of Common Stock and Warrants offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits included with the Registration Statement. Statements contained
in this Prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and with respect to any contract or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement is qualified in its entirety by this reference. For further
information about the Company and the Securities offered by this Prospectus,
reference is hereby made to the Registration Statement and exhibits included
with the Registration Statement. A copy of the Registration Statement, including
exhibits, may be inspected without charge at the Securities and Exchange
Commission's principal office in Washington, D.C., and copies of all or any part
thereof may be obtained from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of certain prescribed rates.
Upon consummation of the Offering, the Company will become subject to the
information requirements of the Exchange Act and, in accordance therewith, will
file reports and other information with the Securities and Exchange Commission
in accordance with its rules. These reports and other information concerning
the Company may be inspected and copied at the public reference facilities
referred to above as well as certain regional offices of the Securities and
Exchange Commission located at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511.
The Securities and Exchange Commission also maintains a Web Site which
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Securities and Exchange
Commission (such as the Company) at http:\\www.sec.gov.
58
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report ............................................................. F-2
Balance Sheets as of June 30, 1996 and 1997 and March 31, 1998 ........................... F-3
Statements of Operations for the Years Ended June 30, 1995, 1996 and 1997 and for the Nine
Months Ended March 31, 1997 and 1998 ..................................................... F-4
Statement of Changes in Shareholders' Equity for the Years Ended June 30, 1995, 1996, and
1997 and for the Nine Months Ended March 31, 1998 ...................................... F-5
Statements of Cash Flows for the Years Ended June 30, 1995, 1996 and 1997 and for the Nine
Months Ended March 31, 1997 and 1998 ..................................................... F-6
Notes to Financial Statements ............................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Officers and Directors
All-Tech Investment Group, Inc.
Montvale, New Jersey
We have audited the accompanying balance sheets of All-Tech Investment Group,
Inc. as of June 30, 1996 and 1997, and the related statements of operations,
changes in shareholders' equity and cash flows for each of the three years in
the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of All-Tech Investment Group,
Inc. as of June 30, 1996 and 1997, and the results of its operations and cash
flows for each of the three years in the period ended June 30, 1997 in
conformity with generally accepted accounting principles.
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
August 12, 1997
F-2
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31, 1998
----------------------------- ---------------
1996 1997 (Unaudited)
------------- ------------- ---------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ........................... $ 176,667 $ 641,414 $ 603,586
Receivable from brokers (net of allowance for
doubtful accounts of $144,374 in 1998)............. 722,852 98,033 424,385
Securities owned -- at market value ................. 1,099,371 2,243,007 1,350,841
Other receivables ................................... 34,289 195,870 108,747
Property and equipment -- net ....................... 137,260 411,322 508,510
Loan receivable -- parent ........................... 1,086,818 199,941 --
Loans receivable -- affiliates ...................... 5,966 9,000 --
Deferred offering costs ............................. -- -- 50,000
---------- ---------- ----------
Total Assets ......................................... $3,263,223 $3,798,587 $3,046,069
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Payable to clearing broker .......................... $ 257,876 $1,027,113 $ --
Accounts payable .................................... 92,834 501,766 644,118
Securities sold, not yet purchased -- at market
value ............................................. 35,291 368,800 434,242
Income taxes payable ................................ 610,000 46,250 55,184
Deferred tax liabilities ............................ -- -- 27,000
---------- ---------- ----------
Total Liabilities ................................. 996,001 1,943,929 1,160,544
---------- ---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized, none outstanding ..... -- -- --
Common stock, $.001 par value; 55,000,000
shares authorized, 15,468,750 shares issued
and outstanding ................................... 15,469 15,469 15,469
Additional paid-in capital .......................... 1,548,299 1,548,299 1,548,299
Retained earnings ................................... 703,454 290,890 321,757
---------- ---------- ----------
Total Shareholders' Equity ........................ 2,267,222 1,854,658 1,885,525
---------- ---------- ----------
Total Liabilities and Shareholders' Equity ........... $3,263,223 $3,798,587 $3,046,069
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
June 30, March 31,
--------------------------------------------------- ---------------------------------
1995 1996 1997 1997 1998
------------- ---------------- ---------------- ---------------- --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Brokerage commissions and fees $2,826,088 $ 10,703,575 $ 15,392,862 $ 11,266,719 $12,423,182
Trading gains (losses) .......... 115,290 64,112 132,421 138,706 (147,105)
ECN fees ........................ -- -- -- -- 433,556
Other ........................... 21,081 306,892 538,533 481,356 439,128
---------- ------------ ------------ ------------ -----------
Total Revenues ............... 2,962,459 11,074,579 16,063,816 11,886,781 13,148,761
---------- ------------ ------------ ------------ -----------
COSTS AND EXPENSES:
Cost of services ................ 1,493,880 5,217,329 7,306,682 5,117,421 5,585,286
Technology development .......... 43,225 208,877 366,475 232,261 344,044
Selling, general and administra-
tive expenses:
Employee compensation and
benefits ...................... 741,451 2,376,390 4,679,078 2,506,567 3,857,109
Occupancy costs ............... 67,316 105,585 386,271 276,139 794,677
Other ......................... 627,304 1,804,974 1,723,369 1,417,924 2,338,837
---------- ------------ ------------ ------------ -----------
Total Costs and Expenses ..... 2,973,176 9,713,155 14,461,875 9,550,312 12,919,953
---------- ------------ ------------ ------------ -----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES ............... (10,717) 1,361,424 1,601,941 2,336,469 228,808
PROVISION (BENEFIT) FOR INCOME
TAXES .......................... (7,469) 610,278 664,505 609,505 27,000
---------- ------------ ------------ ------------ -----------
NET INCOME (LOSS) ................ $ (3,248) $ 751,146 $ 937,436 $ 1,726,964 $ 201,808
========== ============ ============ ============ ===========
Basic earnings (loss) per common
share ........................... $ (.00) $ .05 $ .06 $ .11 $ .01
========== ============ ============ ============ ===========
Weighted average common shares
outstanding ..................... 15,468,750 15,468,750 15,468,750 15,468,750 15,468,750
========== ============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Balances -- July 1, 1994 ....................... $15,469 $1,548,299 $ (44,444) $ 1,519,324
Net Loss ....................................... -- -- (3,248) (3,248)
------- ---------- ------------ ------------
Balances -- June 30, 1995 ...................... 15,469 1,548,299 (47,692) 1,516,076
Net Income ..................................... -- -- 751,146 751,146
------- ---------- ------------ ------------
Balances -- June 30, 1996 ...................... 15,469 1,548,299 703,454 2,267,222
Net Income ..................................... -- -- 937,436 937,436
Dividends Paid ................................. -- -- (1,350,000) (1,350,000)
------- ---------- ------------ ------------
Balances -- June 30, 1997 ...................... 15,469 1,548,299 290,890 1,854,658
Net Income (unaudited) ......................... -- -- 201,808 201,808
Dividends Paid (unaudited) ..................... -- -- (170,941) (170,941)
------- ---------- ------------ ------------
Balances -- March 31, 1998 (unaudited) ......... $15,469 $1,548,299 $ 321,757 $ 1,885,525
======= ========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
-----------------------------------------------
June 30,
-----------------------------------------------
1995 1996 1997
------------- --------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) ................................. $ (3,248) $ 751,146 $ 937,436
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation ..................................... 19,240 28,159 63,026
Allowance for doubtful accounts .................. -- -- --
Loss on abandonment .............................. -- -- 43,544
Deferred tax liabilities ......................... -- -- --
Changes in Operating Assets and
Liabilities:
Receivable from brokers ......................... (58,874) (479,188) 624,819
Securities owned -- at market value ............. 106,650 (947,941) (1,143,636)
Prepaid expenses ................................ (5,684) 18,661 --
Other receivables ............................... (3,400) (30,889) (161,581)
Other ........................................... 1,700 -- --
Accounts payable ................................ (49,155) 28,391 408,932
Payable to clearing broker ...................... (6,430) 181,055 769,237
Securities sold, not yet purchased-at
market value ................................... -- 35,291 333,509
Income taxes payable .............................. -- 610,000 (563,750)
----------- ------------- -------------
Net Cash Provided by Operating Activities .......... 799 194,685 1,311,536
----------- ------------- -------------
Cash Flows from Investing Activities:
Purchases of property and equipment ............... (97,006) (43,074) (380,632)
----------- ------------- -------------
Cash Flows from Financing Activities:
Loans to parent ................................... (96,140) (1,774,378) (500,000)
Repayment of loans to parent ...................... 65,000 1,768,700 1,386,877
Dividends paid .................................... -- -- (1,350,000)
Loan to related parties and affiliates ............ (147,900) (49,429) (743,014)
Repayment of loans to related parties and
affiliates ....................................... 227,900 43,463 739,980
Deferred offering costs ........................... -- -- --
----------- ------------- -------------
Net Cash Provided (Used) by Financing
Activities ........................................ 48,860 (11,644) (466,157)
----------- ------------- -------------
Increase (Decrease) in Cash and Cash
Equivalents ....................................... (47,347) 139,967 464,747
Cash and Cash Equivalents -- Beginning of
Period ............................................ 84,047 36,700 176,667
----------- ------------- -------------
Cash and Cash Equivalents -- End of Period ......... $ 36,700 $ 176,667 $ 641,414
=========== ============= =============
Supplemental Cash Flow Disclosure:
Cash Paid for Interest ............................ $ 3,481 $ 20,174 $ 41,975
=========== ============= =============
Cash Paid for Income Taxes ........................ $ 1,325 $ -- $ 1,246,965
=========== ============= =============
<PAGE>
<CAPTION>
Nine Months Ended
------------------------------
March 31,
------------------------------
1997 1998
------------- ---------------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) ................................. $1,726,964 $ 201,808
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation ..................................... 47,270 186,102
Allowance for doubtful accounts .................. -- 144,374
Loss on abandonment .............................. -- --
Deferred tax liabilities ......................... -- 27,000
Changes in Operating Assets and
Liabilities:
Receivable from brokers ......................... 690,828 (470,726)
Securities owned -- at market value ............. (350,004) 892,166
Prepaid expenses ................................ (750) --
Other receivables ............................... (36,269) 87,123
Other ........................................... -- --
Accounts payable ................................ 50,039 142,352
Payable to clearing broker ...................... 372,737 (1,027,113)
Securities sold, not yet purchased-at
market value .................................. 294,036 65,442
Income taxes payable ............................ (610,000) 8,934
---------- -------------
Net Cash Provided by Operating Activities .......... 2,184,851 257,462
---------- -------------
Cash Flows from Investing Activities:
Purchases of property and equipment ............... (242,524) (283,290)
---------- -------------
Cash Flows from Financing Activities:
Loans to parent ................................... (500,000) (1,774,323)
Repayment of loans to parent ...................... -- 1,974,264
Dividends paid .................................... -- (170,941)
Loan to related parties and affiliates ............ (804,014) --
Repayment of loans to related parties and
affiliates ....................................... 609,980 9,000
Deferred offering costs ........................... -- (50,000)
---------- -------------
Net Cash Provided (Used) by Financing
Activities ........................................ (694,034) (12,000)
---------- -------------
Increase (Decrease) in Cash and Cash
Equivalents ....................................... 1,248,293 (37,828)
Cash and Cash Equivalents -- Beginning of
Period ............................................ 176,667 641,414
---------- -------------
Cash and Cash Equivalents -- End of Period ......... $1,424,960 $ 603,586
========== =============
Supplemental Cash Flow Disclosure:
Cash Paid for Interest ............................ $ 30,742 $ 26,020
========== =============
Cash Paid for Income Taxes ........................ $1,191,965 $ 150,580
========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 1 -- Nature of Business and Summary of Significant Accounting Policies
Nature of Business
All-Tech Investment Group, Inc., (the "Company") is a corporation formed
for the purpose of conducting business as a broker/dealer in securities. The
Company is a 96% owned subsidiary of Rushmore Financial Services, Inc., a
privately owned corporation (the "Parent").
The Company operates under the provisions of Paragraph (k)(2)(ii) of Rule
15c3-3 of the Securities and Exchange Commission and, accordingly, is exempt
from the remaining provisions of that Rule. Essentially, the requirements of
Paragraph (k)(2)(ii) provide that the Company clear all transactions on behalf
of customers on a fully disclosed basis with a clearing broker/dealer, and
promptly transmit all customer funds and securities to the clearing
broker/dealer. The clearing broker/dealer carries all of the accounts of the
customers and maintains and preserves all related books and records as are
customarily kept by a clearing broker/dealer.
The Company, through its trading system software, provides its customers
with real time computerized access to price information for over-the-counter
securities traded on Nasdaq and securities traded on various national and
regional exchanges, and enables its customers to instaneously transmit buy and
sell orders for execution. The Company has also commenced operation of an
electronic communications network ("ECN").
Revenue Recognition
The Company derives its revenues primarily from commissions related to
customer transactions. The Company records client and proprietary trading
transactions on a settlement date basis, which is generally three business days
after trade date. Revenues and expenses related to such transactions are
recorded on settlement date which is not materially different than trade date.
The Company is exposed to risk of loss on these transactions in the event a
client or broker fails to meet the terms of their contracts, in which case the
Company may have to purchase or sell the positions at prevailing market prices.
The Company records revenues from its ECN subscribers and non-subscribers
on a transaction date basis. Revenues from remote customers are recognized on
the last date of the month for the services provided for that month.
High volume users are not billed for the monthly remote service fee.
Students of ATTG (see Note 10) receive a rebate based on the amount of
trades executed during the month. This amount is recorded as a reduction of
income.
One time, non-refundable fees for the opportunity to manage a branch are
recognized upon execution of the branch office management agreement.
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 the
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents. Cash
equivalents consist primarily of money market accounts.
Marketable Securities
Securities owned and securities sold but not yet purchased are stated at
fair market value and represent equity securities in which the Company acts as
market maker and performs proprietary trading. Securities owned and securities
sold but not yet purchased consist of equity securities.
F-7
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements -- (Continued)
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 1 -- Nature of Business and Summary of Significant Accounting Policies
-- (Continued)
Securities sold but not yet purchased represent obligations of the Company
to deliver the specified security at the contracted price. A liability is
thereby created to purchase the security in the market at prevailing prices.
Accordingly, these transactions result in off-balance-sheet risk as the
Company's ultimate obligation to satisfy the sale of securities sold but not
yet purchased may exceed the amount recognized in the statement of operations.
Unrealized gains and losses on securities are reflected in the statement
of operations.
Depreciation
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is computed primarily by the straight-line method over the
estimated useful lives of the related assets, which approximate five years.
Estimated Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires the Company to report the fair
value of financial instruments, as defined. Substantially all of the Company's
assets and liabilities are carried at fair value or contracted amounts which
approximate fair value.
Brokerage receivables and payables are recorded at contracted amounts
which approximate fair value.
Cost of Services
Cost of services consist of clearing charges, direct communications costs,
and related salaries and benefits.
Technology Development Costs
Technology development costs are charged to operations as incurred.
Technology development costs include costs incurred in the development and
enhancement of software used in connection with services provided by the
Company.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes, which requires the recognition of deferred tax
liabilities and assets at tax rates expected to be in effect when these
balances reverse. Future tax benefits attributable to temporary differences are
recognized to the extent that realization of such benefits is more likely than
not.
Deferred Offering Costs
Deferred offering costs represent charges incurred in connection with a
proposed initial public offering of the Company's Common Stock and Warrants.
Upon successful completion of such Offering, the aggregate offering costs will
be charged to additional paid-in capital. In the event that the proposed
Offering is unsuccessful, the aggregate offering costs will be charged to
operations in the appropriate period.
Unaudited Interim Information
The financial information as of March 31, 1998 and for the nine months
ended March 31, 1997 and 1998 is unaudited. In the opinion of management, such
information contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of such periods.
The results for the interim period ended March 31, 1998 are not
necessarily indicative of the results to be obtained for a full fiscal year.
Reclassifications
Certain items in these financial statements have been reclassified to
conform to the current period presentation.
F-8
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements -- (Continued)
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 1 -- Nature of Business and Summary of Significant Accounting Policies
-- (Continued)
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value.
The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, compensation cost for stock options is measured
as the excess, if any, of the quoted market price of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Since the Company intends to set the exercise price of the Company's employee
stock options to be granted prior to the Company's proposed initial public
offering (see Note 9) equal to the market price of the underlying stock on the
date of grant, no compensation expense will be recognized.
New Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The
new rules are effective for both interim and annual financial statements for
the periods ending after December 15, 1997. SFAS 128 supersedes APB No. 15 to
conform earnings per share with international standards as well as to simplify
the complexity of the computation under APB No. 15. The previous primary
earnings per share ("EPS") calculation is replaced with a basic EPS
calculation. The basic EPS differs from the primary EPS calculation in that the
basic EPS does not include any potentially dilutive securities. Fully dilutive
EPS is replaced with diluted EPS and should be disclosed regardless of dilutive
impact to basic EPS. Accordingly, the Company has adopted SFAS 128 effective
December 31, 1997.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement, which is effective for fiscal years beginning after December 15,
1997, expands or modifies disclosures and should have no impact on the
Company's financial position, results of operations or cash flows.
NOTE 2 -- Brokerage Receivables and Payables
<TABLE>
<CAPTION>
June 30, March 31,
------------------------ ----------
1996 1997 1998
----------- ---------- ----------
<S> <C> <C> <C>
Receivable from brokers consist of the following:
Receivable from clearing broker-commissions and
trading .............................................. $692,159 $65,396 $114,933
Clearing broker deposit receivable .................... 30,693 32,637 25,272
Receivable from brokers--ECN fees (net of
allowance for doubtful accounts of $144,374) ......... -- -- 284,180
-------- ------- --------
$722,852 $98,033 $424,385
======== ======= ========
</TABLE>
<PAGE>
Payable to clearing broker represents net amounts owed on security
positions.
NOTE 3 -- Property and Equipment
<TABLE>
<CAPTION>
June 30, March 31,
----------------------- ----------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Property and equipment consists of the following:
Furniture and Fixtures .......................... $ 78,570 $ 78,570 $ 78,570
Office Equipment ................................ 1,950 380,632 651,922
Vehicles ........................................ 111,299 51,739 51,739
Leasehold Improvements .......................... -- -- 12,000
-------- -------- --------
191,819 510,941 794,231
Less: Accumulated Depreciation .................. 54,559 99,619 285,721
-------- -------- --------
$137,260 $411,322 $508,510
======== ======== ========
</TABLE>
F-9
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements -- (Continued)
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 4 -- Regulatory Requirements
The Company is subject to the Uniform Net Capital Rule (the "Rule") under
the Securities Exchange Act of 1934. Under this Rule, the Company is required
to maintain net capital, as defined, equal to the greater of $100,000 or $2,500
for each stock it posts a quote in, up to $1,000,000 and a net capital ratio,
as defined, of a maximum of 1500%. At June 30, 1997 the Company's net capital
was $453,672, which exceeded its net capital requirement by $353,672 and its
net capital ratio was 121%. At March 31, 1998 the Company's net capital was
$993,371, which exceeded its minimum net capital requirement by $566,871 and
its net capital ratio was 73%, as revised for post FOCUS adjustments.
NOTE 5 -- Commitments and Contingencies
Lease Commitments
The Company has entered into a lease commencing December 1, 1994 and
ending November 30, 1999 for office facilities. This lease has been modified
effective April 1, 1998 (see Note 11). The lessor is a corporation whose
shareholders are also the shareholders of both the Company's parent and the
Company. The lease provides for annual base rent of $101,906 and the payment of
other occupancy costs. The lease also provides that the Company pay for
increases in its pro-rata share of real estate taxes and utility costs above
the original base period. The Company sublets a portion of its office
facilities on a month to month basis to certain related companies.
Approximate future minimum rentals under this lease is summarized as
follows:
Year Ending June 30,
---------------------
1998 $101,906
1999 $101,906
2000 $ 42,460
Rent expense net of sublets under this lease for the years ended June 30,
1995, 1996 and 1997 was approximately $21,300, $65,100 and $69,900,
respectively. Rent expense net of sublets under this lease for the nine months
ended March 31, 1997 and 1998 was approximately $46,300 and $70,800,
respectively.
Third Party Vendors
The Company depends on third party vendors for real time and historical
financial market data. The Company has written agreements with these vendors.
If certain of these vendors become unable to perform the Company can make
alternative arrangements for backup with other vendors. These arrangements with
third party vendors are generally for one to two year periods. Minimum annual
commitments at March 31, 1998 under these agreements were approximately $90,000
expiring March 31, 1999.
Legal
The Company is involved in legal proceedings and claims which arise in the
ordinary course of its business. Management believes that the outcome of such
litigation and claims will not result in any material adverse effect on the
Company's financial position or results of operations
NOTE 6 -- Financial Instruments with Off-Balance Sheet Credit Risk
As a securities broker, the Company is engaged in buying and selling
securities for a diverse group of investors. The Company introduces these
transactions for clearance to another broker/dealer on a fully disclosed basis.
The Company's exposure to credit risk associated with non-performance of
customers in fulfilling their contractual obligations pursuant to securities
transactions can be directly impacted by volatile trading markets which may
impair the customers' ability to satisfy their obligations to the Company and
the Company's ability
F-10
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements -- (Continued)
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 6 -- Financial Instruments with Off-Balance Sheet Credit Risk
-- (Continued)
to liquidate the collateral at an amount equal to the original contracted
amount. The agreement between the Company and its clearing broker provides that
the Company is obligated to assume any exposure related to such non-performance
by its customers. The Company seeks to control the aforementioned risks by
requiring customers to maintain margin collateral in compliance with various
regulatory requirements and the clearing broker's internal guidelines. The
Company monitors its customer activity by reviewing information it receives
from its clearing broker on a daily basis, and requiring customers to deposit
additional collateral, or reduce positions when necessary.
The Company is obligated to settle transactions with brokers and/or other
financial institutions even if its customers fail to meet their obligations to
the Company. Customers are required to complete their transactions on
settlement date, generally three business days after trade date. If customers
do not fulfill their contractual obligations, the Company may incur losses. The
Company has established procedures to reduce this risk by requiring that
customers deposit cash and/or securities into their account prior to placing an
order.
The Company may at times maintain inventories in equity securities on both
a long and short basis. While long inventory positions represent the Company's
ownership of securities, short inventory positions represent obligations of the
Company to deliver specified securities at a contracted price, which may differ
from market prices prevailing at the time of completion of the transactions.
Accordingly, both long and short inventory positions may result in losses or
gains to the Company as market values of securities fluctuate. To mitigate the
risk of losses, long and short positions are marked to market daily and are
continuously monitored by the Company. In addition, the Company monitors each
of its customers via computer analysis to assess risk of each trade and the
customer's overall accept position.
NOTE 7 -- Savings Plan
The Company established a defined contribution 401(k) plan effective
January 1, 1998 that covers substantially all employees meeting certain minimum
eligibility requirements. Participating employees can elect to defer a portion
of their compensation and contribute it to the plan on a pretax basis. The
Company may also match certain amounts and/or provide additional discretionary
contributions, as defined. The Company has made discretionary contributions of
approximately $16,000 to date.
NOTE 8 -- Income Taxes
The Company and its Parent and subsidiaries are members of a group of
affiliated companies which join in filing a consolidated federal income tax
return. In addition, the Company also files separate state and local tax
returns.
Pursuant to the tax allocation arrangements, total federal and state and
local tax expense is determined on a separate company basis. Members with
losses recorded tax benefits to the extent such losses are recognized in the
consolidated federal and unconsolidated state and local tax provisions. Total
allocated federal, state and local taxes are paid to, or received from, the
Parent. At June 30, 1996, June 30, 1997 and March 31, 1998 respectively, the
Company had no taxes payable to the Parent.
The components of income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------- Nine Months Ended
1995 1996 1997 March 31, 1998
----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C>
Current:
Federal (Net of benefit of $88,000 in 1998) ......... $ -- $417,198 $512,505 $ (18,000)
State ............................................... (7,469) 193,080 152,000 18,000
-------- -------- -------- ---------
Total current .................................... (7,469) 610,278 664,505 --
Deferred ............................................ -- -- -- 27,000
-------- -------- -------- ---------
Total income tax provision (benefit) ................ $ (7,469) $610,278 $664,505 $ 27,000
======== ======== ======== =========
</TABLE>
F-11
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements -- (Continued)
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 8 -- Income Taxes -- (Continued)
Deferred income taxes are recorded when revenues and expenses are
recognized in different periods for financial statement and tax return
purposes. Temporary differences that created tax liabilities are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 Nine Months Ended
1995 1996 1997 March 31, 1998
------ ------ ------ ------------------
<S> <C> <C> <C> <C>
Deferred tax liabilities -- depreciation ......... $-- $-- $-- $27,000
=== === === =======
</TABLE>
The effective tax rates differed from the federal statutory rates as
follows:
<TABLE>
<CAPTION>
Year Ended June 30, Nine Months Ended
1995 1996 1997 March 31, 1998
------------ ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Tax expense at federal statutory rate .............. (34.0%) 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit ..... (35.7) 10.4 6.3 5.2
Federal income tax refund .......................... -- -- -- (35.4)
Other .............................................. -- .4 1.2 8.0
----- ----- ----- -----
Effective tax rate .............................. (69.7%) 44.8% 41.5% 11.8%
===== ===== ===== =====
</TABLE>
NOTE 9 -- Proposed Initial Public Offering
The Company has filed a Registration Statement relating to the initial
public offering of its common shares and Warrants (the "Offering"). The Company
intends to offer to the public 5,625,000 shares of its Common Stock at $8.00
per share and 3,125,000 Warrants to purchase Common Stock at $.10 per Warrant
for gross proceeds to the Company of $45,312,500 before underwriting costs and
expenses of the Offering. In addition, the Company may sell an additional
468,750 shares at $8.00 per share and 468,750 Warrants at $.10 per Warrant
pursuant to an over-allotment option exercisable by the Underwriters.
Additional terms of the Offering include: the sale of 625,000 shares of Common
Stock at $8.00 per share to be offered by Selling Shareholders, an Over-
Allotment Option of 468,750 shares at $8.00 per share to be offered by Selling
Shareholders exercisable by the Underwriters and at the closing of the proposed
Offering a grant to the Underwriter of five year warrants.
NOTE 10 -- Related Party Transactions
The Company has an agreement with All-Tech Training Group, Inc. ("ATTG"),
an affiliate and wholly-owned subsidiary of the Company's Parent, whereby the
Company offers ATTG students a discounted commission equal, in the aggregate,
up to the amount of their tuition.
The Company subleases on a month to month basis three branch office
facilities from Double H Management, Inc. ("Double H"), an affiliate and wholly
owned subsidiary of the Company's Parent at an aggregate annual rental of
approximately $80,000.
The Company leases its executive offices from Summit Plaza Associates,
Inc. ("Summit"), an affiliate and wholly-owned subsidiary of the Company's
Parent at an aggregate annual rental of approximately $265,000 (See Notes 5 and
11).
NOTE 11 -- Subsequent Events
Recapitalization and Reincorporation
In May, 1998 the Company re-incorporated in the State of Delaware with
authorized capital stock consisting of 55,000,000 shares of Common Stock, par
value $.001 per share and 5,000,000 shares of undesignated Preferred Stock,
$.01 par value per share. Concurrently, the Company effected a 68.75 for 1
forward split on the new Delaware common shares. All share and per share data
have been restated to give retroactive effect to this recapitalization.
F-12
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
Notes to Financial Statements -- (Continued)
(Information at March 31, 1998 and for the nine months ended March 31, 1997 and
1998 is unaudited)
NOTE 11 -- Subsequent Events -- (Continued)
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time, direct the issuance of any
authorized but unissued or unreserved shares of Preferred Stock in series and
may, at the time of issuance, determine the rights preferences and limitations
of each series. The holders of Preferred Stock may be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up
of the Company before any payment is made to the holders of the Common Stock.
The Board of Directors could issue Preferred Stock with voting and other rights
that could adversely affect the voting power of the holders of Common Stock and
could have certain anti-takeover effects.
Lease Agreement
The Company has entered in a lease modification whereby the term has been
extended effective April 1, 1998 to March 31, 2003. The lease modification
calls for annual rents of approximately $263,000 (see Note 5).
Employment Agreements
The Company has employment agreements with two senior executives and
shareholders of the Company. The employment agreements were made on April 30,
1998 and commence on the effective date of the Company's proposed initial
public offering of its Common Stock. The agreements have a term of three years
from the effective date and provide for annual aggregate compensation of
$1,000,000, aggregate additional salaries of 10% of net earnings before taxes
to a maximum of an additional $1,000,000 in the first two years and $3,000,000
in the third year, and payment of certain employment related expenses.
Stock Option Plan
The Company's 1998 Stock Option Plan (the "Plan") was adopted by the Board
of Directors of the Company on May 11, 1998. A total of 2,250,000 shares of
Common Stock are reserved for issuance upon exercise of options to be granted
under the Plan, of which the Company intends to grant 1,500,000 stock options
as of the effective date of the Company's proposed initial public offering of
its Common Stock and Warrants. The options granted will be exercisable at a
price equal to the initial public offering price per share, have an expiration
date of May 10, 2008, and vest at a rate of twenty percent per year from the
date of grant.
Litigation
In June 1998, the Company instituted an arbitration against a broker/dealer
("B/D") by filing a Statement of Claim with the National Association of
Securities Dealers, Inc. The arbitration seeks compensatory damages in the
amount of $97,538, punitive damages in the amount of $500,000, as well as
interest, costs, and disbursements and attorneys fees. The arbitration was
commenced as a result of the B/D's refusal to pay the Company's ECN fees arising
from the B/D's entering trades involving OTC securities with the ATTAIN ECN. The
allegations set forth in the Statement of Claim include claims based upon breach
of contract, quantum meruit and fraud. The Company is also currently denying
access to the B/D, as well as approximately 25 other ATTAIN ECN users, because
they have stated to the Company that they will not pay their ATTAIN ECN bills.
The Company intends to vigorously pursue its legal remedies to recover unpaid
accounts receivable. However, there can be no assurance that such efforts will
be successful.
Related Party Transaction
In April 1998 the Company borrowed $611,000 from its Parent. The loan is
non-interest bearing and payable on demand.
F-13
<PAGE>
================================================================================
No Underwriter, dealer, sales representative or any other person has
been authorized to give any information or to make any representations in
connection with this Offering other than those contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company, by any Selling Shareholder or by
any Underwriter. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the registered
securities to which it relates or an offer to, or a solicitation of, any person
in any jurisdiction where such an offer or solicitation is unauthorized 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. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to the date hereof.
-----------------------------------
TABLE OF CONTENTS
Page
---------
Prospectus Summary .......................... 3
Risk Factors ................................ 6
Use of Proceeds ............................. 22
Dividend Policy ............................. 22
Dilution .................................... 23
Capitalization .............................. 24
Selected Financial Data ..................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 26
Business .................................... 33
Management .................................. 45
Certain Transactions ........................ 49
Principal and Selling Shareholders .......... 50
Description of Capital Stock ................ 51
Shares Eligible for Future Sale ............. 55
Underwriting ................................ 56
Legal Matters ............................... 57
Experts ..................................... 57
Additional Information ...................... 58
Index to Financial Statements ............... F-1
-----------------------------------
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
================================================================================
================================================================================
[GRAPHIC OMITTED]
All-Tech
Investment Group, Inc.
6,250,000 Shares of Common Stock
and
3,125,000 Redeemable
Common Stock Purchase Warrants
(as units, each consisting of two shares of
Common Stock and one Redeemable
Common Stock Purchase Warrant)
----------------------------------------
PROSPECTUS
----------------------------------------
Security Capital Trading, Inc.
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of Common Stock being registered,
excluding underwriting discounts and commissions and the Representative's
non-accountable expense allowance. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the AMEX listing fee.
Amount to
be Paid
---------------
SEC registration fee ................. $ 32,677.71
NASD filing fee ...................... 11,577.19
AMEX listing fee ..................... 50,000.00
Printing and engraving ............... 110,000.00
Legal fees and expenses .............. 60,000.00
Accounting fees and expenses ......... 75,000.00
Blue sky fees and expenses ........... 20,000.00
Transfer agent fees .................. 5,000.00
Miscellaneous ........................ 10,745.10
------------
Total ............................... $ 375,000.00
============
ITEM 14. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
("Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, provided that such
officer or director acted in good faith and in a manner s/he reasonably
believed to be in or not opposed to the corporation's best interests, and, for
criminal proceedings, had no reasonable cause to believe his or her conduct was
illegal. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation in the performance of
his or her duty. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director actually and
reasonably incurred.
In accordance with Delaware Law, the Certificate of Incorporation of the
Company contains a provision to limit the personal liability of the directors
of the Registrant for violations of their fiduciary duty. This provision
eliminates each director's liability to the Registrant or its stockholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
the Registrant or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware Law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
Article 13 of the By-Laws of the Registrant provides for indemnification
of the officers and directors of the Registrant to the fullest extent permitted
by applicable law.
II-1
<PAGE>
In connection with the reincorporation of the Registrant in the State of
Delaware, the Registrant entered into indemnification agreements with each
director and officer, a form of which is attached as Exhibit 10.1 hereto. The
indemnification agreements provide indemnification to such directors and
officers under certain circumstances for acts or omissions which may not be
covered by directors' and officers' liability insurance. Reference is also made
to Section 8 of the Underwriting Agreement contained in Exhibit 1.1 hereto,
indemnifying officers and directors of the Registrant against certain
liabilities.
ITEM 15. Recent Sales of Unregistered Securities
None.
ITEM 16. Exhibits and Financial Statement Schedules
(1) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Document Description
- ------------------ ------------------------------------------------------------------------------------------------
<S> <C>
*1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation.
3.2 By-Laws of the Registrant.
4.1 Specimen of Common Stock Certificate.
*4.2 Form of Warrant Agreement, including Form of Warrant Certificate.
*4.3 Form of Representative's Warrant Agreement, including Form of Representative's Warrant
Certificate.
**5.1 Opinion of Sichenzia, Ross & Friedman LLP.
10.1 1998 Stock Option Plan.
10.2 401(k) Plan.
10.3 Lease of premises at 160 Summit Avenue, Montvale, New Jersey.
10.4 Employment Agreement dated April 30, 1998, by and between Harvey I. Houtkin and the
Registrant.
10.5 Employment Agreement dated April 30, 1998, by and between Mark D. Shefts and the Registrant.
+10.6 Clearing Agreement between Registrant and Southwest Securities Corp. dated July 15, 1997, as
amended August 4, 1997.
10.7 License Agreement dated January 31, 1995 by and between the Registrant and PC Quote.
10.8 Dow Jones Financial News Services 2 Year Plan Subscription Agreement.
10.9 S & P Comstock Subscriber Agreement.
**10.10 Form of Branch Office Management Agreement.
23.1 Consent of Independent Auditors.
**23.2 Consent of Counsel (included in Exhibit 5.1).
*24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule as of and for the year ended June 30, 1997 and as of and for the nine
months ended March 31, 1998.
*99.1 Consent of Josef A. Ross.
*99.2 Consent of Robert D. Kashan.
</TABLE>
- ------------
* Previously filed
** To be filed by amendment
+ Confidential treatment has been requested with respect to certain portions
of this exhibit
(2) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the Financial
Statements or Notes thereto.
ITEM 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
II-2
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the Delaware General Corporation Law,
the Certificate of Incorporation or the Restated By-Laws of Registrant,
Indemnification Agreements entered into between the Registrant and its
directors and officers, Underwriting Agreement or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Securities 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
hereunder, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-1 AND HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF MONTVALE, STATE OF NEW JERSEY ON THIS 10th DAY
OF JULY, 1998.
ALL-TECH INVESTMENT GROUP, INC.
By /s/ Harvey I. Houtkin
------------------------------
Harvey I. Houtkin
Chairman and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Harvey
Houtkin and Mark Shefts, and each of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement and a new Registration Statement filed pursuant
to Rule 462(b) of the Securities Act of 1933 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURES
<TABLE>
<S> <C>
/s/ Harvey I. Houtkin Chief Executive Officer, Secretary and Director
- ----------------------------- July 10. 1998
Harvey I. Houtkin
/s/ Mark D. Shefts President, Treasurer and Director
- ----------------------------- July 10, 1998
Mark D. Shefts
/s/ Harry M. Lefkowitz Senior Vice President and Director
- ----------------------------- July 10, 1998
Harry M. Lefkowitz
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document Description
- ------------------ ------------------------------------------------------------------------------------------------
<S> <C>
*1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation.
3.2 By-Laws of the Registrant.
4.1 Specimen of Common Stock Certificate.
*4.2 Form of Warrant Agreement, including Form of Warrant Certificate.
*4.3 Form of Representative's Warrant Agreement, including Form of Representative's Warrant
Certificate.
**5.1 Opinion of Sichenzia, Ross & Friedman LLP.
10.1 1998 Stock Option Plan.
10.2 401(k) Plan.
10.3 Lease of premises at 160 Summit Avenue, Montvale, New Jersey.
10.4 Employment Agreement dated April 30, 1998, by and between Harvey I. Houtkin and the
Registrant.
10.5 Employment Agreement dated April 30, 1998, by and between Mark D. Shefts and the Registrant.
+10.6 Clearing Agreement between Registrant and Southwest Securities Corp. dated July 15, 1997, as
amended August 4, 1997.
10.7 License Agreement dated January 31, 1995 by and between the Registrant and PC Quote.
10.8 Dow Jones Financial News Services 2 Year Plan Subscription Agreement.
10.9 S & P Comstock Subscriber Agreement.
**10.10 Form of Branch Office Management Agreement.
23.1 Consent of Independent Auditors.
**23.2 Consent of Counsel (included in Exhibit 5.1).
*24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule as of and for the year ended June 30, 1997 and as of and for the nine
months ended March 31, 1998.
*99.1 Consent of Josef A. Ross.
*99.2 Consent of Robert D. Kashan.
</TABLE>
- ------------
* Previously filed
** To be filed by amendment
+ Confidential treatment has been requested with respect to certain portions
of this exhibit
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ALL-TECH INVESTMENT GROUP, INC.
Under Section 102 of the Delaware General Corporation Law
I, Thomas M. Curtin, being a natural person of the age of eighteen
years or over, for the purpose of forming a corporation under Section 102 of the
Delaware General Corporation Law, hereby certify:
FIRST: The name of the corporation (the "Corporation") is ALL-TECH
INVESTMENT GROUP, INC.
SECOND: The address of the Corporation's registered office is 1209
Orange Street, City of Wilmington, County of New Castle, State of Delaware
19801; and its registered agent at such address is Corporation Trust Center.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: 1. The aggregate number of shares of stock which the
Corporation shall have authority to issue is Sixty Million (60,000,000),
consisting of:
(A) Fifty-five Million (55,000,000) shares of Common
Stock of the par value of $.001 per share ("Common
Stock"); and
(B) Five Million (5,000,000) shares of Preferred Stock of
the par value of one cent ($.01) per share
("Preferred Stock").
2. (A) The Corporation shall have authority to issue its
Preferred Stock in one or more series. The Board of
Directors is vested with authority to establish and
designate each series of Preferred Stock and to fix
the number of shares to be included in such series
and the voting powers, the relative rights,
preferences and special rights, and the
qualifications, limitations or restrictions, of such
series, subject to the provisions of this paragraph
2. The authority of the Board of Directors with
respect to each series of Preferred Stock shall
include, but not be limited to, determination of the
following:
(i) The number of shares constituting that series
and the distinctive designation of that
series;
<PAGE>
(ii) Whether that series shall be entitled to any
dividends, and, if so, the dividend rate on
the shares of that series, whether dividends
shall be cumulative, and, if so, from which
date or dates;
(iii) Whether that series shall have voting rights,
in addition to the voting rights required by
law, and, if so, the terms of such voting
rights;
(iv) Whether that series shall have conversion
privileges, and, if so, the terms and
conditions of such conversion, including
provision for adjustment of the conversion
rate in such events as the Board of Directors
shall determine;
(v) Whether or not the shares of that series shall
be redeemable, and, if so, the terms and
conditions of such redemption, including the
date or dates upon or after which they shall
be redeemable, and the amount per share
payable in case of redemption, which amount
may vary under different conditions and at
different redemption dates;
(vi) Whether that series shall have a sinking fund
for the redemption or purchase of shares of
that series, and, if so, the terms and amount
of such sinking fund.
(vii) The amounts payable on the shares of that
series in the event of voluntary or
involuntary liquidation, dissolution or
winding up of the Corporation;
(viii) Any other voting powers, relative rights,
preferences and special rights and
qualifications, limitations or restrictions of
that series.
(B) Dividends on outstanding shares of Preferred Stock of
each series entitled to dividends shall be declared
and paid, or set apart for payment, before any
dividends shall be declared and paid, or set apart
for payment, on any shares of Common Stock with
respect to the same dividend period.
(C) Upon any dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary,
the holders of each series of the Preferred Stock
shall be entitled to receive out of the assets of the
Corporation, before any distribution shall be made to
the holders of the Common Stock, the amount
determined to be payable to the holders of such
series of Preferred Stock on voluntary or involuntary
liquidation.
2
<PAGE>
FIFTH: Each issued and outstanding share of Common Stock shall be
entitled to one vote.
SIXTH: 1. The number of Directors of this Corporation shall be
determined from time to time by the affirmative vote of a majority of the Board
of Directors. The Directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of Directors constituting the entire
Board of Directors. At the 1999 annual meeting of stockholders, Class I
Directors shall be elected for a one-year term, Class II Directors for a
two-year term and Class III Directors for a three-year term. At each succeeding
annual meeting of stockholders beginning in 2000, successors to the class of
Directors whose term expires at that annual meeting shall be elected for a
three-year term. A Director shall hold office until the annual meeting for the
year in which his term expires and until his or her successor shall be elected
and shall qualify, or until his or her earlier death, resignation, retirement,
disqualification or removal from office.
2. If the number of Directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of Directors
in each class as nearly equal as possible, and any additional Director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of Directors shorten the
term of any incumbent Director. Any Director elected to fill a vacancy not
resulting from an increase in the number of Directors shall have the same
remaining term as that of his or her predecessor. Any vacancy on the Board of
Directors (whether or not resulting from an increase in the number of Directors)
may be filled by the affirmative vote of a majority of the Directors then in
office, although less than a quorum, or by a sole remaining Director.
3. Any Director or the entire Board of Directors may be removed only
for cause by the affirmative vote of three-quarters of the entire Board of
Directors or by the affirmative vote of two-thirds of the votes represented of
the issued and outstanding shares of the Common Stock of the Corporation
entitled to vote at a meeting called for such purpose.
4. Notwithstanding the foregoing, whenever the holders of any one or
more series of Preferred Stock issued by the Corporation shall have the right,
voting separately by series, to elect Directors at an annual or special meeting
of stockholders, the election, term of office, removal, filling of vacancies and
other features of such directorships shall be governed by the terms of this
Certificate of Incorporation applicable to such series, and such Directors so
elected shall not be divided into classes pursuant to this Article SIXTH unless
expressly provided by such terms.
SEVENTH: 1. The Board of Directors of the Corporation shall have the
power to alter, amend or repeal the By-laws of the Corruption or to adopt new
By-laws, but any By-laws adopted by the Board of Directors may be altered,
amended or repealed, and new By-Laws adopted, by the stockholders.
3
<PAGE>
2. Any action taken by the stockholders with respect to altering,
amending or repealing the By-laws of the Corporation or adopting new By-Laws
shall be taken by the affirmative vote of the holders of at lease a majority of
the voting power of the Corporation.
3. Except as limited by applicable law and this Certificate of
Incorporation, the Board of Directors shall have the right (which, to the extent
exercised, shall be exclusive) to manage or direct the management of the
business and affairs of the Corporation and to establish the rights, powers,
duties, rules and procedures that from time to time shall govern the Board of
Directors and each of its members, including without limitation the vote
required for any action by the Board of Directors, the election of officers and
the indemnification by the Corporation of its officers and directors; and no
By-Law shall be adopted by stockholders which shall impair or impede the
implementation of the foregoing.
EIGHTH: Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation to the contrary, no action
required to be taken or which may be taken at any annual or special meeting of
stockholders of the Corporation may be taken by written consent without a
meeting, except any action taken upon the signing by all the stockholders of the
Corporation entitled to vote thereon of a consent in writing, setting forth the
action so taken and except in the case of a merger wherein the Corporation is
the surviving corporation.
NINTH: 1. Nominations for the election of Directors may be made by the
Board of Directors or by any stockholder entitled to vote for the election of
Directors. Such nominations by any stockholder shall be made only by notice in
writing, delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than thirty (30) days nor more than
fifty (50) days prior to any meeting of the stockholders called for the election
of Directors or at which such nominations are made. Notice of nominations which
are proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
2. Each notice under paragraph 1 of this Article NINTH shall set forth
(i) the name, age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or employment of
each such nominee and (iii) the number, class and series of shares of stock of
the Corporation which are beneficially owned by each such nominee.
3. A proxy or information statement with respect to nominations of
Directors by any stockholder complying with the requirements of the Act shall be
prepared and mailed by such nominating stockholder to all stockholders of the
Corporation at lease thirty (30) days prior to any meeting of stockholders
called for the election of Directors or at which such nominations are made
(whether or not such proxy or information statement is required to be mailed
pursuant to the Act).
4
<PAGE>
4. The Chairman of any annual or special meeting of stockholders may,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
TENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholder of class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this Corporation.
ELEVENTH: The invalidity or unenforceability of any provisions of this
Certificate of Incorporation shall not affect any other provision hereof, and
the remainder of this Certificate of Incorporation shall be construed as if such
invalid or unenforceable provision were omitted.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
THIRTEENTH: (a) A Director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived any
improper personal benefit.
(b) The Directors, officers, employees and agents of the Corporation
and any such person serving at the request of the Corporation as a director,
trustee, officer, employee or agent of another corporation or a partnership,
joint venture, trust, employee benefit plan or other kind of enterprise shall be
indemnified and held harmless by the Corporation against all liability, loss,
expense or cost (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such person in connection therewith.
5
<PAGE>
FOURTEENTH: The name and mailing address of the incorporator is: Thomas
M. Curtin, Esq., McCarthy, Fingar, Donovan, Drazen and Smith, L.L.P., 11 Martine
Avenue, 12th Floor, White Plains, NY 10606-1934.
FIFTEENTH: The name and mailing address of each person, who is to serve
as a director until the first annual meeting of the stockholders or until a
successor is elected and qualified or until the Board is enlarged and any
vacancy is filled are as follows:
Harvey I. Houtkin 160 Summit Ave., Montvale, NJ 07645
Mark D. Shefts 160 Summit Ave., Montvale, NJ 07645
Harry M. Lefkowitz 160 Summit Ave., Montvale, NJ 07645
IN WITNESS WHEREOF, this Certificate of Incorporation has been signed
by the subscriber this 28th day of May, 1998.
/s/ Thomas M. Curtin
----------------------------------------
Thomas M. Curtin
6
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
BY-LAWS
ARTICLE I
OFFICES
Section l. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section l. All meetings of the stockholders for the election of
Directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
l999, shall be held on such date and time as shall be designated from time to
time by the
<PAGE>
Board of Directors and stated in the notice of the meeting, at which the
stockholders shall elect by a plurality vote a Board of Directors, and transact
such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of such
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
2
<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called only by the Chairman of the Board or shall be
called by the President or Secretary at the request in writing of three-fourths
of the Board of Directors.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. Stockholders holding one third of the shares of stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the
3
<PAGE>
adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section l0. Unless otherwise provided in the Certificate of
Incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Except as otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
4
<PAGE>
ARTICLE III
DIRECTORS
Section l. The number of Directors which shall constitute the whole
Board shall be not less than two nor more than twelve. The first Board shall
consist of five Directors. Thereafter, within the limits above specified, the
number of Directors shall be determined by resolution of the Board of Directors.
The Board of Directors shall be divided into three classes in respect to term of
office, each class to contain as near as may be one-third of the whole number of
the Board of Directors. Of the Board of Directors as elected at the first annual
meeting of the stockholders of the Corporation, the members of the first class
shall serve until the second annual meeting of stockholders of the Corporation,
the members of the second class shall serve until the third annual meeting of
the stockholders of the Corporation, and the members of the third class shall
serve until the fourth annual meeting of stockholders of the Corporation,
provided however that in each case, Directors shall continue to serve until
their successor shall be elected and shall qualify. At each annual meeting of
stockholders of the Corporation, one class of Directors shall be elected to
serve until the annual meeting of stockholders held three years next following.
Directors need not be stockholders.
Section 2. Vacancies and newly created Directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director, and the Directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no
5
<PAGE>
Directors in office, then an election of Directors may be held in the manner
provided by statute.
Section 3. The business of the Corporation shall be managed by or under
the direction of its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation or by these By-Laws directed or required to
be exercised or done by the stockholders.
Section 4. No decrease in the number of Directors shall have the effect
of shortening the term of any incumbent Director. Any one or more of the
Directors of the Corporation may be removed from office only for cause and only
by the affirmative vote of three-fourths of the entire Board of Director or by
the affirmative vote of two-thirds of the votes of the issued and outstanding
shares of the Corporation entitled to vote at a meeting called for such purpose.
Removal for cause shall include removal only because of a Director's personal
dishonesty, incompetence, willful or grossly negligent misconduct, breach of
fiduciary duty involving personal profit, or willful violation of any law, rule
or regulation (other than traffic or similar minor offenses) or breach of
fiduciary duty causing material damage to the Corporation.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. The Board of Directors shall hold a meeting reasonably
promptly after the annual meeting.
6
<PAGE>
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 8. Special meetings of the Board may be called by the Chairman
of the Board on at least two days' notice to each director, either personally or
by mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of three
Directors unless the Board consists of only one Director; in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole Director.
Section 9. At all meetings of the Board, a majority of the Directors
shall constitute a quorum for the transaction of business and the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided in these By-Laws, by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
7
<PAGE>
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these by-laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to (i) amending the Certificate of Incorporation (except
that a committee may, to the extent authorized in
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the resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors as provided in Section l5l(a) of the General
Corporation Law of Delaware fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), (ii) adopting an agreement
of merger or consolidation, (iii) recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, (iv) recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or (v) amending the By-Laws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.
Section l3. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section l4. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of Directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall
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preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section l. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any Director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to Directors may also be given by telegram or telefax.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section l. The officers of the Corporation shall be chosen by the Board
of Directors and shall be a Chairman of the Board, a President, one or more
Vice-Presidents, a Secretary and a Treasurer or Controller. The Board of
Directors
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may also choose additional Vice-Presidents, including Executive or Senior
Vice-Presidents, and one or more assistant Secretaries and assistant Treasurers.
Any number of officers may be held by the same persons, unless the Certificate
of Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board, a
President, one or more Vice-Presidents, a Secretary and a Treasurer or
Controller.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board shall be the chief executive
officer of the Corporation, shall preside at all meetings of the stockholders
and the Board of Directors, shall have general and active management of the
business of the
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Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
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THE PRESIDENT
Section 8. The President shall be the Chief Operating Officer of the
Corporation. The President shall preside, in the absence of the Chairman of the
Board, at all meetings of the Directors and stockholders and shall have such
other duties as may be prescribed from time to time by the Board of Directors.
THE VICE-PRESIDENTS
Section 9. In the absence of the President, the Vice-Presidents in the
order designated by the Directors (or in the absence of any designation, then in
the order of their election) shall perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the President. The Vice-Presidents shall perform such other duties and have
such other powers as the Board of Directors, the Chairman of the Board or
President may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors,
the Chairman of the Board, or President. The Secretary shall have custody of the
corporate seal of the Corporation, and the
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Secretary or an Assistant Secretary shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the
Secretary's signature or by the signature of an Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by signature.
Section 11. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, the
Chairman of the Board or the President, shall, in the absence of the Secretary
or in the event of the Secretary's inability or refusal to act, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
THE TREASURER OR CONTROLLER AND ASSISTANTS
Section 12. The Treasurer or Controller shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors.
Section 13. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer or Controller and of the
financial condition of the Corporation.
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Section l4. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurers control
belonging to the Corporation.
Section l5. The Assistant Treasurer or Assistant Controller, or if
there shall be more than one, the Assistant Treasurers or Controllers in the
order determined by the Board of Directors shall, in the absence of the
Treasurer or Controller or in the event of inability or refusal to act, perform
the duties and exercise the powers of the Treasurer or Controller and shall
perform such other duties and have such other powers as the Board of Directors,
the Chairman of the Board or the President may from time to time prescribe.
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ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by
certificates. Certificates shall be signed by, or in the name of the Corporation
by, the Chairman of the Board of Directors, or the President or a Vice-President
and the Treasurer, the Controller or an Assistant Controller, or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares shall be set forth the total amount of the consideration to
be paid therefor and the amount paid thereon shall be stated.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special
16
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rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the
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Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall cause to be presented at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
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CHECKS
Section 4. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 1. (a) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and
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reasonably incurred by him or her in connection with such action, suit or
proceeding 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 the Corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person seeking indemnification did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or 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 the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall
21
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determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b) of this
Section 1 or in defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this
Section 1 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in such paragraphs
(a) and (b) of this Section 1. Such determination shall be made (i) by the Board
of Directors of the Corporation by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders of the Corporation.
(e) Expenses incurred by a director or officer of the
Corporation in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall
22
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ultimately be determined that he or she is not entitled to be indemnified by the
Corporation authorized in this Article VIII--such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article VIII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation may be purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of Section 145
of General Corporation Law.
(h) For purposes of this Article VIII, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officer, employees or
agents so that any person who is or was a director,
23
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officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this Article VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VIII shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
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ARTICLE IX
AMENDMENTS OR REPEAL
Section 1. These By-Laws may be amended or repealed, in whole or in
part, by a majority of vote of the Board of Directors, at any regular or special
meeting of the Board duly convened. Notice need not be given of the purpose of
the meeting of the Board of Directors at which the amendment or repeal is to be
considered. Notwithstanding the foregoing provision, the Stockholders shall have
the power to adopt, amend or repeal By-Laws.
* * * * *
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ATC ALL-TECH INVESTMENT GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
CUSIP 016681 10 8
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
All-Tech Investment Group, Inc.
(hereinafter called the "Corporation"). The shares evidenced by this certificate
are transferable only on the stock transfer books of the Corporation by the
holder hereof, in person or by attorney, upon surrender of this certificate
properly endorsed. This Certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF the Corporation has caused this certificate to be executed by
the signatures of its duly authorized officers and has caused its facsimile seal
to be hereunto affixed.
Dated:
Secretary Chairman of the Board
Countersigned and Registered:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, N.J.) Transfer Agent
and Registrar
By
Authorized Officer
All-Tech Investment Group, Inc.
Delaware
[Seal]
Corporation
*
<PAGE>
All-Tech Investment Group, Inc.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-D____________Custodian________________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with the right of under Uniform Gifts to Minors
survivorship and not as tenants Act__________________________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received,_______________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
------------------------------------------------------------------------
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated:
-----------------------
In the presence of
--------------------------------------------------------
Signature
--------------------------------------------------------
Signature
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
- -------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
ALL-TECH INVESTMENT GROUP, INC
1998 STOCK OPTION PLAN
1. Purpose. The ALL-TECH INVESTMENT GROUP, INC 1998 Stock Option Plan
(the "Plan") is intended to increase incentive and encourage the continued
employment of key employees and the continued services of key non-employees by
facilitating their purchase of stock in ALL-TECH INVESTMENT GROUP, INC (the
"Corporation"). It is intended that options issued pursuant to this Plan may
constitute (a) incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or (b) non-qualified stock options.
2. Definitions. As used herein:
(a) "Corporation" means ALL-TECH INVESTMENT GROUP, INC, a Colorado
limited liability company.
(b) "Board" means the Board of Managers of the Corporation.
(c) "Common Stock" means the $0.001 par value Common Stock of the
Corporation.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee appointed by the
Board in accordance with paragraph 4 of this Plan.
(f) "Continuous Employment" or "Continuous Status as an Employee"
means the absence of any interruption or termination of employment by the
Corporation or any Parent or Subsidiary of the Corporation. Employment shall not
be considered interrupted in the case of maternity leave, sick leave, military
leave or any other leave of absence approved by the Corporation or any Parent or
Subsidiary of the Corporation, or in the case of transfers between the
Corporation and a corporation issuing or assuming a stock option in a
transaction to which Section 424(a) of the Code applies, or any Parent or
Subsidiary of either.
<PAGE>
(g) "Employee" means any person employed on a full-time basis by the
Corporation or any Parent or Subsidiary of the Corporation.
(h) "Incentive Option" means a stock option designated as, and
qualified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(i) "Independent member of the Board" means a Manager who is not an
officer or employee of the Corporation.
(j) "Non-Qualified Stock Option" means any stock option which is not
an Incentive Option.
(k) "Option" means an option granted pursuant to this Plan.
(l) "Option Agreement" means an agreement between the Corporation and
an employee setting forth the Option grant and its terms and conditions.
(m) "Optioned Stock" means stock subject to an Option granted
pursuant to this Plan.
(n) "Optionee" means an Employee who receives an Option.
(o) "Parent" means any present or future corporation which would be a
"parent corporation" as defined in Subsections 424(e) of the Code.
(p) "Plan" means the ALL-TECH INVESTMENT GROUP, INC 1998 Stock Option
Plan.
(q) "Subsidiary" means any present or future corporation which would
be a "subsidiary corporation" as defined in Subsection 424(f) of the Code.
3. Shares Subject to the Plan. Except as otherwise permitted by the
provisions of paragraph 14 hereof, the aggregate number of shares of Common
Stock which may be issued upon the exercise of Options granted under this Plan
shall be 2,250,000 shares of Common Stock of the Corporation. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased shares which were subject thereto shall,
unless the term of the Plan under
2
<PAGE>
paragraph 16 shall have expired or the Plan shall have been terminated pursuant
to paragraph 18, be available for the grant of other Options under this Plan.
4. Administration of the Plan. The Plan shall be administered by the
Compensation Committee composed of not less than three persons each of whom may
be an independent member of the Board or a non member of the Board, in each case
to be appointed from time to time by such Board. The Corporation shall grant
Options under the Plan only to key persons in accordance with the determination
of the Committee as to:
(a) which key persons shall be granted Options.
(b) whether options to be granted hereunder shall be Incentive
Options, Non-Qualified Options or a combination thereof.
(c) the number of shares of Optioned Stock.
(d) the term of each Option.
(e) the number of shares of Optioned Stock which may be acquired each
year of the Option term by the Optionee. If Options are granted
pursuant to a vesting schedule, the Committee may provide for
acceleration of vesting upon a change of control, which
provisions shall be set forth in the Option Agreement.
The Committee will make its determination under the preceding provisions
based upon such factors as a grantee's length of services to the Corporation,
the capacity in which such services were rendered, the amount of his
compensation, and his responsibilities, duties and functions. Subject to the
provisions of this Plan, the Committee may from time to time adopt rules and
regulations necessary or advisable for the Plan's administration, and shall have
and may exercise such other power and authority as may be delegated to it by the
Board from time to time. The determination or the interpretation and
construction of any provision of the Plan (and any provision of any Option
granted hereunder) by the Committee shall, unless otherwise determined by
3
<PAGE>
the Board, be final and conclusive.
5. Eligibility. All Employees are eligible for Options under the Plan.
Options shall be granted to Employees who are deemed by the Committee to be key
Employees on the basis of the value to the Corporation of their continued
employment or the advisability of increasing incentive. A key Employee who has
been granted an Option may, if otherwise eligible, be granted an additional
Option or Options. No member of the Committee is eligible to receive an Option
under the Plan. Non Employees, e.g., consultants, independent contractors and
Managers who are not Employees, may be granted Non-Qualified Stock Options if,
in the judgment of the Committee, such non-Employees are deemed to have made
and/or have the capacity to make significant contributions to the Corporation.
6. Annual Limit on Incentive Options. The aggregate fair market value
(determined as of the date the Incentive Option is granted) of the shares for
which any Employee may be granted Incentive Options and which becomes
exercisable for the first time in any calendar year (under all Incentive Stock
Option Plans, as defined in Section 422(b) of the Code, of the Corporation or
any Parent or Subsidiary of the Corporation) shall not exceed $100,000 (or such
larger amount as may be authorized by amendment to Section 422(d) of the Code).
7. Term of Option. The term of each Option granted under this Plan shall
be established by the Committee, provided that in no event shall any such Option
be exercisable after the expiration of 10 years from the date such Option is
granted, or 5 years in the case of an Incentive Option granted to an Employee
who owns or is deemed to own under Section 424(d) of the Code, at the time the
Option is granted, more than 10% of the voting power or value of all classes of
stock in the Corporation (or a Parent or Subsidiary of the Corporation).
8. Option Price. The price per share at which each Option granted under
the Plan may be exercised shall, as to any particular Option, be not less than
the fair
4
<PAGE>
market value of the Optioned Stock at the time such Option is granted. If an
Incentive Option is granted to an Employee who owns or is deemed to own under
Section 424(d) of the Code, at the time the Incentive Option is granted, more
than 10% of the voting power or value of all classes of stock in the Corporation
(or a Parent or Subsidiary of the Corporation), the Option price as to that
Incentive Option shall not be less than 110% of the fair market value of the
Optioned Stock at the time such Incentive Option is granted. If the Common Stock
is traded otherwise than on a national securities exchange at the time of
granting an Option, then the fair market value per share shall be the mean
between the bid and asked price on the date the Option is granted or, if there
is no bid and asked price on said date, then on the next prior business day on
which there was a bid and asked price. If the Common Stock is listed on a
national securities exchange at the time of granting an Option, then the fair
market value per share shall be the average of the highest and lowest selling
price on such exchange on the date such Option is granted or, if there were no
sales on said date, then the fair market value per share shall be the mean
between the bid and asked price on such date.
9. Procedure for Exercise of Option. Any Option granted hereunder shall
be exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Option granted to the Optionee. Subject
to provisions relative to its termination and limitations on its exercise, an
Option granted under the Plan may be exercised at one time with respect to all
of the Optioned Stock, or from time to time with respect to a whole number of
shares less than the total number of shares of Optioned Stock until such total
number of shares has been purchased. Such Option shall be exercised by written
notice of intent to exercise the Option with respect to a specified number of
shares. Payment shall be made in United States dollars to the Corporation
(contemporaneously with delivery of each such notice), in cash, or by certified
check, bank draft, or money order, of the amount of the Option price for the
5
<PAGE>
number of shares with respect to which the Option is then being exercised.
Unless the Committee in issuing the Option has provided otherwise, payment may
also be made (i) in the form of Common Stock already owned by the Optionee based
on the fair market value of the Common Stock on the date of exercise, (ii) by
requesting the Corporation to withhold from the number of shares otherwise
issuable upon exercise of the Option that number of shares having an aggregate
fair market value on the date of exercise equal to the exercise price for all
the shares of Common Stock subject to such exercise, or (iii) by a combination
thereof; provided, however, that any payment made in the manner set forth in
(i), (ii), (iii) above shall, at all times, be subject to the approval of the
Committee. Each such notice and payment shall be delivered, or mailed by
registered or certified mail, addressed to the Secretary of the Corporation at
the Corporation's executive offices.
10. Further Conditions of Exercise of an Option.
(a) Unless otherwise provided in the terms of an Option, an Option
granted to an Employee may be exercised by an Optionee only if the Optionee has
maintained Continuous Status as an Employee from the date of the grant of the
Option to the date three months before the exercise of the Option (one year
before the exercise of the Option in the case of an Optionee who is disabled
within the meaning of Section 105(d)(4) of the Code). The Committee's
determination whether an Optionee's employment has ceased, and the effective
date thereof, shall, unless otherwise determined by the Board, be final and
conclusive on all persons affected thereby. In the event of the death of an
Optionee prior to the exercise of any Option granted to such Optionee pursuant
to the Plan, such Option shall be exercisable only prior to the expiration of
the term of the Option or within the period of two years next succeeding his
death, whichever shall first occur, and then (a) only by his estate or by or on
behalf of such person or persons to whom the Optionee's right under the Option
shall have passed by the Optionee's Will or by the laws of descent and
distribution and (b) if and
6
<PAGE>
only to the extent that such Optionee was entitled to exercise the Option at the
date of his death.
(b) The terms and conditions of options granted under the Plan shall
be set forth or incorporated by reference in the instruments evidencing such
options.
(c) Notwithstanding the provisions of paragraph (a) above, the
Committee may vary the periods of time within which a Non-Qualified Option is
exercisable, and may elect to permit Incentive Options to be exercised after a
paragraph (a) period has elapsed, in which case, the Option will be treated as a
Non-Qualified Option.
11. Interest Prior to Issuance of Shares. Upon exercise of an Option in
the manner provided in paragraph 9, the Optionee (or other person entitled to
exercise the Option pursuant to a transfer of the Option by will or by the laws
of descent and distribution) shall be deemed a shareholder for all purposes, and
ownership of the shares of Optioned Stock in the name of the Optionee (or such
other person) shall be recorded in the stock transfer books of the Corporation,
unless such stock transfer books are closed, in which case ownership of the
shares of Optioned Stock in the name of the Optionee (or such other person)
shall be recorded in the stock transfer books of the Corporation as soon as they
are again open.
12. Non-Transferability of Options. Incentive Options granted under the
Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution.
An Option may be exercised, during the lifetime of the Optionee, only by the
Optionee.
13. Sale of Incentive Option Shares by Optionee. Shares purchased
pursuant to an Incentive Option granted under the Plan shall not be sold by the
Optionee within one year of the date of purchase or within two years of the
grant of the Option. If, however, any sale is made contrary to such provisions,
the Option shall be then treated for tax purposes as a Non-Qualified Option.
7
<PAGE>
14. Adjustments. In the event that there is any change in the Common
Stock as to Options granted hereunder, through merger, consolidation,
recapitalization, reclassification, reorganization, stock split, stock dividend,
split-up, combination of shares or otherwise, the Board shall make such
adjustments with respect to Options or any provisions of this Plan as it deems
equitable to prevent dilution or enlargement of Option rights.
15. Time of Granting Options. The date of grant of an Option under this
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the determination shall be
given to each Employee to whom an Option is so granted within a reasonable time
after the date of such grant. No option shall be granted after the term of the
Plan under paragraph 16 has expired or after the Plan has been terminated
pursuant to paragraph 18.
16. Effective Date. The Plan shall become effective upon its adoption by
the Board, but the Plan and any Options granted under the Plan shall be
cancelled and become null and void if the Plan is not approved by an affirmative
vote of the holders of a majority of all outstanding shares of the Corporation
entitled to vote thereon at a legal meeting held within twelve (12) months
before or after the date it is adopted. If the Plan is not cancelled pursuant to
the preceding sentence, the Plan shall continue in effect for a term of ten (10)
years from the earlier of the date the Plan is adopted by the Board or approved
by the shareholders, unless sooner terminated under paragraph 18.
17. Modification of Options. At any time and from time to time the Board
may authorize the Committee to direct execution of an instrument providing for
the modification of any outstanding Option, provided no such modification shall
confer on the holder of said Option any right or benefit which could not be
conferred on him by the grant of a new Option at such time, or impair any right
or benefit under the Option without the consent of the holder of the Option.
8
<PAGE>
18. Amendment and Termination of the Plan. The Board may alter, suspend
or discontinue the Plan except that no action of the Board may increase (other
than as provided in Section 14) the maximum number of shares permitted to be
optioned under the Plan, reduce the Option price, extend the period within which
Options may be exercised, vary the class of Employees eligible to receive
Options, or, without the consent of the holder of any Option, impair such
Option.
19. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
20. Reservation of Shares. The Corporation, during the term of this
Plan, will reserve and keep available a number of Shares of Common Stock
sufficient to satisfy the requirements of the Plan.
21. Application of Funds. The proceeds received by the Corporation from
the sale of its Common Stock pursuant to Options granted under the Plan shall be
used in the discretion of the Board for the Corporation's general corporate
purposes.
22. Instruments Evidencing Options. The terms and conditions of Options
granted under this Plan shall be set forth or incorporated by reference in the
instruments evidencing such options.
9
<PAGE>
401(k) Standardized Profit Sharing Plan
ADOPTION AGREEMENT (0021 -1745)
================================================================================
Section 1 Employer Information
Name of Employer: ALL-TECH INVESTMENT GROUP INC
Address: 160 SUMMIT AVE
City: MONTVALE State: NJ Zip: 07645 - 1721
Telephone: (201 ) 782 - 0200
Federal Tax Identification Number: 13-2581640
Income Tax Year - End: 06/31
Plan Year End: 12/31
Type of Business: (Check only one)
[ ] Sole Proprietorship
[ ] Partnership
[X] Corporation
[ ] Other (Specify):
Nature of Business (Describe): 7398 - OTHER BUSINESS SERVICES.
Plan Sequence No. 001 (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002
if it is the second, etc.)
Plan Name: ALL-TECH INVESTMENT GROUP INC 401(k) Profit
Sharing Plan and Trust
Section 2 Effective Dates
Part A Initial Adoption or Amendment of Plan: Check and complete Option 1 or 2
[X] Option 1: This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this plan is
January 01, 1998.
NOTE: The Effective Date is usually the first day of the
Plan Year in which the Adoption Agreement is signed.
[ ] Option 2: This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was
initially effective on______________________, 19__. The
Effective Date of this amendment and restatement
is __________________, 19__.
NOTE: The Effective Date is usually the first day of the
Plan Year in which the Adoption Agreement is signed.
Part B Commencement of Elective Deferrals
Elective Deferrals may commence on January 01, 1998.
NOTE: This date may be no earlier than the date this Adoption
Agreement is signed because Elective Deferrals cannot be made
retroactively.
Section 3 Eligibility Requirements Complete Parts A, B, C, and D
401(k) Standardized Profit Sharing Plan Adoption Agreement
Page 1
<PAGE>
Part A Years of Eligibility Service Requirement:
With the exception of the Initial Plan Year Effective Date, an employee
will be eligible to become a participant after completing 1 Year(s) of
Eligibility Service.
NOTE: If left blank, the Years of Eligibility Service required will be
deemed to be 0.
Part B Age Requirement :
An Employee will be eligible to become a Participant in the Plan after
attaining age 21.
NOTE: If left blank, it will be deemed there is no age requirement for
eligibility.
Part C Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except those checked below:
[X] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
Representatives (the term 'Employee Representatives' does not
include any organization more than half of whose members are
Employees who are owners, officers, or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan.
[X] Those Employees who are non-resident aliens pursuant to Section
410(b)(3)(C) of the Code and who received no earned income from
the Employer which constitutes income from sources within the
United States.
Part D Entry Date:
The Entry Dates for Participation shall be (Choose only one option):
Option 1: [X] The first day of the Plan Year and first day of the
seventh month of the Plan Year.
Option 2: [ ] Other (Specify):_________________________________________
NOTE: If Option 2 is selected, the Entry Dates specified
must be more frequent than those described in Option 1.
Section 4 Elective Deferrals
Part A Will Elective Deferrals be permitted under this Plan? (Choose one)
Option 1: [X] Yes.
Option 2: [ ] No.
NOTE: If no option is selected, Option 2 will automatically apply.
Complete the remainder of Section 4 only if Option 1 is selected.
Part B If Elective Deferrals are permitted under the plan,
A Contributing Participant may elect under a salary reduction
agreement to have his Compensation reduced by an amount each pay
period as described below (Choose one):
Option 1: [X] An amount equal to a percentage of the Contributing
Participants Compensation from 1% to 12% in increments
of 1%.
Option 2: [ ] An amount of the Contributing Participant's
Compensation not less than $______ and not more than
$______. The amount of such reduction shall be
contributed to the Plan by the Employer on behalf of
the Contributing Participant. For any taxable year, a
Contributing Participant's Elective Deferrals shall not
exceed the limit contained in Section 402(g) of the
Code in effect at the beginning of such taxable year.
Part C Participants who claim Excess Elective Deferrals for the Preceding
calendar year must submit their claims in writing to the Plan
Administrator by FEBRUARY 1.
NOTE: This date should be a date prior to the Participant's tax return
due date. If no date is selected, March 1 will be deemed to be
selected.
401(k) Standardized Profit Sharing Plan / Adoption Agreement
Page 2
<PAGE>
Section 5 Matching Contributions
Part A Will the Employer make Matching Contributions to the Plan on behalf of
Contributing Participants? (Choose one)
Option 1: [X] Yes.
Option 2: [ ] No.
NOTE: If no option is selected, Option 2 will automatically apply.
Complete the remainder of Section 5 only if Option 1 is selected.
Part B Matching Contribution Formula
If the Employer will make Matching Contributions, then the amount of
such Matching Contributions made on behalf of a Contributing
Participant each Plan Year shall be (Choose one):
Option 1: [X] An Amount equal to 50% of such Contributing
Participant's Elective Deferral.
Option 2: [ ] An amount equal to the sum of __% of the portion of such
Contributing Participant's Elective Deferral which does
not exceed __% of the Contributing Participant's
Compensation plus __% of the portion of such
Contributing Participant's Elective Deferral which
exceeds __ % of the Contributing Participant's
Compensation.
Option 3: [ ] Other Formula (Specify ):_____________________________
NOTE. If Option 3 is selected, the formula specified can
only allow Matching Contributions to be made with
respect to a Contributing Participant's Elective
Deferrals.
Part C Limit on Matching Contributions
Notwithstanding the matching contribution formula specified above, the
Employer will not match a contributing participant's Elective
Deferrals in excess of 6% of such Contributing Participant's
Compensation.
Part D Forfeitures of Excess Aggregate Contributions
Complete Part D only if Matching Contributions are not 100% Vested.
Forfeitures of Excess Aggregate Contributions shall be (Choose one):
Option 1: [ ] Allocated after all other Forfeitures under the Plan, to
each Contributing Participant's Matching Contribution
account in the ratio which each Contributing
Participant's Compensation for the Plan Year bears to
the total Compensation of all Contributing Participants
for such Plan Year. Such Forfeitures will not be
allocated to the account of any Highly Compensated
Employee.
Option 2: [X] Applied to reduce Employer Contributions.
NOTE: If no option is selected, Option 2 will be deemed
to be selected.
Section 6 Qualified Nonelective Contributions
Part A Will the Employer make Qualified Nonelective Contributions to the
Plan? (Choose one)
Option l: [X] Yes.
Option 2: [ ] No.
If the Employer will make Qualified Nonelective Contributions, then
the amount of such contribution to the Plan for each Plan Year shall
be an amount determined by the Employer.
NOTE: If no option is selected, Option 2 will automatically apply.
Complete the remainder of Section 6 only if Option 1 is selected.
401(k) Standardized Profit Sharing Plan / Adoption Agreement
Page 3
<PAGE>
Part B Participants Entitled to Qualified Nonelective Contributions.
Allocation of Qualified Nonelective Contributions shall be made to the
Individual Accounts of (choose one):
Option 1: [ ] All Participants.
Option 2: [X] Only Participants who are not Highly Compensated
Employees.
Part C Allocation of Qualified Nonelective Contributions.
Allocation of Qualified Nonelective Contributions to Participants
entitled thereto shall be made (choose one):
Option 1: [X] In the ratio which each Participant's Compensation for
the Plan Year bears to the total Compensation of all
Participants for such Plan Year.
Option 2: [ ] In the ratio which each Participant's Compensation not
in excess of $______ for the Plan Year bears to the
total Compensation of all Participants not in excess of
$______ for such Plan Year.
Section 7 Employer Profit Sharing Contribution and Allocation Formula
Part A Contribution Formula.
For each Plan Year the Employer may, in its sole discretion,
contribute to the Plan an amount to be determined from year to year.
Part B Allocation Formula (Check Option 1 or 2):
Option 1: [X] Pro Rata Formula.
Employer Contributions made pursuant to this Section
and Forfeitures shall be allocated to the Individual
Accounts of qualifying Participants in the ratio that
each qualifying Participant's Compensation for the
Plan Year bears to the total Compensation of all
qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula.
Employer Contributions made pursuant to this Section
and Forfeitures shall be allocated as follows (Start
with Step 3 if this Plan is not a Top-Heavy Plan):
Step 1: Employer Contributions and Forfeitures shall
first be allocated pro rata to qualifying
Participants in the manner described in
Section 7, Part B, Option 1. The percent so
allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2: Any Employer Contributions and Forfeitures
remaining after the allocation in Step 1 shall
be allocated to each qualifying Participant's
Individual Account in the ratio that each
qualifying Participant's Compensation for the
Plan Year excess of the integration level
bears to all qualifying Participant's
Compensation in excess of the integration
level, but not in excess of 3%.
Step 3: Any Employer Contributions and Forfeitures
remaining after the allocation in Step 2 shall
be allocated to each qualifying Participant's
Individual Account in the ratio that the sum
of each qualifying Participant's total
Compensation and Compensation in excess of the
integration level bears to the sum of all
qualifying Participant's total Compensation
and Compensation in excess of the integration
level, but not in excess of the profit sharing
maximum disparity rate as described in Section
3.01(B)(3) of the Plan.
Step 4: Any Employer Contributions and Forfeitures
remaining after the allocation in Step 3 shall
be allocated pro rata to qualifying
Participant's in the manner described in
Section 7. Part B, Option 1.
401(k) Standardized Profit Sharing Plan Adoption Agreement
Page 4
<PAGE>
The integration level shall be: (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $____ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ___% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the
Taxable Wage Base.
Section 8 Vesting (Complete Parts A and B):
Part A Vesting Schedules
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions made pursuant to Section 7 of
the Adoption Agreement (and Forfeitures thereof) as follows
(Choose one):
<TABLE>
<CAPTION>
=========================================================================================================
YEARS OF VESTED PERCENTAGE
VESTING SERVICE Option 1: [x] Option 2: [ ] Option 3: [ ] Option 4: [ ] (Complete if Chosen)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
1 0% 0% 100% 20%
2 20% 0% 100% 40%
3 40% 100% 100% 60% (not less than 20%)
4 60% 100% 100% 80% (not less than 40%)
5 80% 100% 100% 100% (not less than 60%)
6 100% 100% 100% (not less than 80%)
7 100% 100% 100% (not less than 100%)
=========================================================================================================
NOTE: If left blank, Option 3, 100% Vesting, will be deemed to be selected.
</TABLE>
Part B Vesting of Matching Contributions
A Participant's Individual Account derived from Matching
Contributions made pursuant to Section 5 of this Adoption Agreement
shall be (Choose one if Matching Contributions will be made):
Option 1: [ ] 100% Vested at all times.
Option 2: [X] Vested in accordance with the vesting schedule
selected in Section 8, Part A above.
NOTE: If no selection is made, the selection will be deemed to be
Option 1.
Section 9 Normal Retirement Age
The Normal Retirement Age under the Plan is age 65.
NOTE: If left blank, the Normal Retirement Age will be deemed to be
59(1/2).
Section 10 Hours Required (Complete Parts A and B and Part C, if applicable):
Part A 1,000 Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B 500 Hours of Service (no more than 500 but less than the number
specified in Section 10, Part A) must be exceeded to avoid a Break in
Vesting Service or a Break in Eligibility Service.
401(k) Standardized Proflt Sharing Plan Adoption Agreement
Page 5
<PAGE>
Part C For purposes of determining Years of Eligibility Service and Years of
Vesting Service, Employees shall be given credit for Hours of Service
with the following predecessor employer(s) (Complete if applicable):
N/A__________________________________________________________________
Section 11 Other Options
Answer "Yes" or "No" to each of the following questions by checking
the appropriate box. If a box is not checked for a question, the
answer will be deemed to be "No".
A. Loans:
Will loans to Participants pursuant to Section 6.08 of the plan be
permitted?
[X] Yes [ ] No
B. Participant Direction of Investments:
Will Participants be permitted to direct the investment of their
Individual Accounts pursuant to Section 5.14 of the plan?
[X] Yes [ ] No
C. In-Service Withdrawals:
Will Participants be permitted to make withdrawals during service
pursuant to Section 6.01 (A)(3) of the Plan?
[ ] Check here if such withdrawals will be permitted only on account
of hardship.
[ ] Yes [X] No
NOTE: If the Plan is being adopted to amend and replace a prior plan
which permitted in-service withdrawls, you must answer "Yes".
D. Nondeductible Employee Contributions
Will Participants be permitted to make Nondeductible Employee
Contributions pursuant to Section 11.304 of the Plan?
[ ] Yes [X] No
F. Hardship Withdrawals
Will Participants be permitted to withdraw Elective Deferrals on
account of hardship pursuant to Section 11.503 of the Plan?
[ I Yes [X] No
Section 12 Joint and Survivor Annuity
Part A Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the plan apply
(Choose one)?
Option 1: [X] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
Part B Survivor Annuity Percentage:
Complete only if your answer in Section 12, Part A is 'No'. The
survivor annuity portion of the Joint and Survivor Annuity shall be a
percentage equal to ___% of the amount paid to the Participant prior
to his or her death.
401(k) Standardized Proflt Sharing Plan Adoption Agreement
Page 6
<PAGE>
Section 13 Additional Plans
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of
the Code, which provides post-retirement medical benefits allocated
to separate accounts for key employees as defined in Section
419(d)(3) of the Code or an individual medical account, as defined
in Section 415(l)(2) of the Code) in addition to this Plan (other
than a paired standardized regional prototype plan) may not rely on
the notification letter issued by the National or District Office of
the Internal Revenue Service as evidence that this Plan is qualified
under Section 401 of the Code. If the Employer who adopts or
maintains multiple plans or who may not rely on this notification
letter pursuant to the preceding sentence wishes to obtain reliance
that the Employees plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District
Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 01.
Section 14 Employer Signature Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Regional Prototype Sponsor will inform me of
any amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer: _____________________________ Date Signed:______________
Type Name: / ALL-TECH INVESTMENT GROUP INC
Section 15 Trustee or Custodian Check and complete only one option
Option A. [X] Individual Trustee(s)
Signature:____________________________ Signature:_________________
MARK SHEFTS
Type Name: ___________________________ Type Name:_________________
Option B. [ ]Financial Organization as Trustee or Custodian
Check One: [ ] Custodian,
[ ] Trustee without full trust powers, or
[ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is
checked.
Financial Organization:________________________________________________________
Signature:_____________________________________________________________________
401(k) Standardized Profit Sharing Plan Adoption Agreement
Page 7
<PAGE>
Type Name:_____________________________________________________________________
Section 16 Regional Prototype Sponsor
Name of Regional Prototype Sponsor: PAYCHEX RETIREMENT SERVICES
Address: 72 PERINTON PARKWAY
FAIRPORT, NY 14450
Telephone Number: (800) 472-0072
Section 17 Limitation on Allocations - More than one plan
If you maintain or ever maintained another qualified plan (other
than a paired standardized regional prototype plan) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete
this section if you maintain a welfare benefit fund, as defined in
Section 419(e) of the Code, or an individual medical account, as
defined in Section 415(l)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in this
Plan.
Part A If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a regional
prototype plan:
1. [X] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a regional
prototype plan.
2. [ ] Other Method: (Provide the method under which the plans will
limit total annual additions to the maximum permissible amount,
and will properly reduce any excess amounts, in a manner that
precludes Employer discretion.)
Part B If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code. Such language must preclude Employer discretion.
(Complete):
Part C The limitation year is the following 12-consecutive month period:
Section 18 Elective Deferrals Based Exclusively on Bonuses
May a Contributing Participant base Elective Deferrals on cash
bonuses that, at the Contributing Participant's election, may be
contributed to the Plan or received by the Contributing Participant
in cash (Choose One)?
Option 1. [ ] Yes.
Option 2. [X] No.
NOTE: Answer "yes" only if Elective Deferrals will be based
exclusively on cash bonuses rather than payroll deductions. If no
option is selected, Option 2 will automatically apply.
401(k) Standardized Profit Sharing Plan Adoption Agreement
Page 8
<PAGE>
General Information Sheet
Summary Plan Description / Qualified Retirement Plans
================================================================================
This "General Information Sheet" highlights the specific plan
features for the Sponsoring Employer's plan. As a participant, you
should use this sheet in conjunction with the "Summary Plan
Description for Qualified Retirement Plans" which is attached. If
you did not receive the Summary Plan Description, please contact the
sponsoring employer for a copy,
Plan Information
<TABLE>
<CAPTION>
<S> <C> <C>
Sponsoring Employer: ALL-TECH INVESTMENT GROUP INC 0021 - 1745
EIN: 13-2581640
Address: 160 SUMMIT AVE
City, State, Zip: MONTVALE, NJ 07645 - 1721
Plan Administrator: Sponsoring Employer
Trustees: MARK SHEFTS
Address: 160 SUMMIT AVE
City, State, Zip: MONTVALE, NJ 07645 - 1721
Plan Number: 001
Type of Plan: Standardized 401(k) Profit Sharing Plan
Section 1: Definitions
Plan Year: Plan Year begins each January 1 and ends each December 31.
Section 2: Administration of the Plan
Plan Effective Date: January 1, 1998
Salary Deferral Start Date: January 1, 1998
Entry Date: Semi-Annually
Section 3: Eligibility and Participation
Eligible Employees: Generally, all employees, including employees who own part of
the business, will be eligible to participate in the Plan.
However, the Plan excludes those employees included in a
collective bargaining agreement and those employees who are
non-resident aliens from participation in the Plan.
Age and Service Requirements: With the exception of the initial plan year effective date,
you must be 21 years of age and have completed 1000 hours
of service which is credited on your hire anniversary date.
Section 4: Contributions to the Plan
Employee Contributions: Employees may defer salary in the amount of 1 % to 12% of
eligible compensation.
</TABLE>
General Information Sheet: Summary Plan Description Qualified Retirement Plans
(7/95)
Page 1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Employer Matching The Employer shall make a contribution in an amount equal to:
Contributions:
(401(k) Plans Only) 50% of your contribution percent not to exceed 6%;
Section 5: Distribution of Benefits and Vesting
Plan Normal retirement age, which is defined as age 65; Disability;
Withdrawls/Distributions: You terminate employment; Your employer terminates this plan;
Death.
Employee contributions to a 401 (k) profit sharing plan may be
withdrawn when the employee reaches the age of 59(1/2).
Restrictions and Penalties If a distribution from the plan is received prior to the age
Applied to Distributions: of 59(1/2), a 20% withholding will apply to the distribution.
In addition, if you terminate your employment with the
Sponsoring Employer prior to the age of 59(1/2), and you
receive a distribution, you will have to pay an additional 10%
penalty tax.
How Benefits are Paid to You: If your vested balance is less than $3,500, your benefits will
be paid in a single lump sum payment within 90 days after the
end of the Plan Year in which you become eligible to receive
them.
If your vested balance is more then $3,500, your benefits will
not be paid until you submit a written request to the Plan
Administrator for payment. Your benefit may be left in the
plan. Payment will be made no later than 90 days after the
close of the Plan Year in which the written request is
received. You must begin taking required minimum distributions
at age 70(1/2).
Minimum Distribution You will receive a 100% distribution from the Plan by April 1
Requirement: of the year following the calendar year in which you:
A. turn 70(1/2) years old and are a 5% owner or
B. turn 70(1/2) years old and retire
Are In-Service or Hardship No.
Withdrawls Allowed?
Vesting Schedule: You are always 100% vested in your contributions to the plan.
You shall become vested in the employers matching contribution
based on the vesting schedule described below.
-----------------------------------------------------------------
Years of Employment Vested Percentage
Service
-----------------------------------------------------------------
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
-----------------------------------------------------------------
In addition, an employee is automatically 100% vested in the
employer matching contributions under the following
circumstances:
o The participant reaches normal retirement age which is
defined as age 65;
</TABLE>
General Information Sheet: Summary Plan Description Qualified Retirement Plans
(7/95)
Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
o The participant incurs a disability;
o The participant dies;
o Upon the complete or partial termination of the profit
sharing plan.
Section 6: Claims Procedure
Refer to Section 6 of the Summary Plan Description for a
review of the claims procedure.
Section 7: Miscellaneous
Participant Directed The employee is responsible for directing the investments of
Investments: all assets in his or her individual account.
Loans (General guidelines Loans are permitted to all plan participants (except sole
only): proprietors, 10% partners and 5% shareholders,) with a vested
balance of at least $2,000. Loan fees and interest due shall
be paid by the participant. The maximum repayment period is
4(1/2) years. The minimum total loan amount is $1,000. A
participant may have only one loan outstanding at any given
time. The minimum loan fee is $150* and shall be charged at
the time that the loan is issued. Interest rates are
determined at the time that the loan is requested to be
processed. (*If the loan is for the purchase of a primary
residence, the maximum repayment period is 10 years and the
loan fee shall be $300.)
Section 8: ERISA Rights
Refer to Section 8 of the Summary Plan Description for your
rights and protections under the Employee Retirement Income
Security Act (ERISA).
</TABLE>
General Information Sheet: Summary Plan Description Qualified Retirement Plans
(7/95)
Page 3
<PAGE>
LEASE AGREEMENT
Between
Summit Plaza, Inc.
"Landlord"
-and-
ALL-TECH INVESTMENT GROUP, INC.
"Tenant"
160 Summit Avenue
Montvale, New Jersey 07645
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
Basic Lease Provisions 1
I Demised Premises 4
II Term 4
III Rent 5
IV Use and Occupancy 6
V Alterations or Improvements
by Tenant 7
VI Maintenance 8
VII Compliance with Laws, Indemnity
and Insurance 9
VIII Subordination and Estoppel 10
IX Destruction - Fire or other
Casualty 10
X Mutual Waiver of Subrogation 11
XI Condemnation and Other Proceedings 12
XII Assignment and Subletting 12
XIII Surrender 14
XIV Holding Over 15
XV Landlord's Right of Entry 15
XVI Default 16
XVII Landlord's Rights Upon Tenant's
Default 16
XVIII Landlord's Remedies Cumulative:
Expenses 18
XIX No Waiver 19
XX Landlord's Reserved Rights 19
XXI Landlord's Liability 20
XXII Tenant's Liability 21
XXIII Tenant's Insurance 21
XXIV Mechanics' Liens 22
XXV Quiet Enjoyment 22
XXVI Air and Light 23
XXVII Landlord's Services 23
XXVIII Additional Rent 25
XXIX Personal Property Taxes 29
XXX Security Deposit 29
XXXII Definition of Landlord 30
XXXIII Notice 30
XXXIV Signs 30
XXXV Notice of Defects and Accidents 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
XXXVI Rules and Regulations 31
XXXVII Directory 31
XXXVIII Hazardous Materials and Compliance
with Environmental Laws 31
XXXIX Miscellaneous 33
EXHIBITS EXHIBIT A: The Premises
EXHIBIT B: Landlord's Work in
the Premises
EXHIBIT C: Rules and Regulations
</TABLE>
<PAGE>
BASIC LEASE PROVISIONS
of the
LEASE AGREEMENT FOR 160 SUMMIT AVENUE, MONTVALE
between
160 SUMMIT AVENUE, MONTVALE, as Landlord,
and All-Tech Investment Group, Inc., as Tenant.
The following basic terms of the Lease (hereinafter referred to as the
"Basic Lease Provisions") between Landlord and Tenant are an integral part of
and are incorporated by reference into within Lease:
A. The "Building": 160 Summit Avenue, Montvale, New
Jersey 07645, containing
approximately 32,371 square feet.
B. The "Premises": The space within the Premises is
described in the Lease, including
the floor plan attached hereto as
Exhibit A, and consisting of the
following approximate number of the
rentable square feet: 12,395.
C. The "Term": The Term of this Lease shall be four
(4) years and ten (10) months,
beginning on June 1, 1998 (the
"Commencement Date") and ending on
March 31, 2003 (the "Expiration
Date").
D. The "Basic Rent": (1) Annual Base Rent:
$247,900
(2) Monthly Installments of Base
Rent:
$20,658.33
In additional to the above
to the above base rent, the
Tenant will be liable for
Tenant Electric as
hereinafter set forth and
any other additional rent
items.
E. Tenant's
Proportionate
Share: 38.29%
F. The Security
Deposit: None
G. Broker(s): None
<PAGE>
H. Addresses for
Notice and
Payments: (1) Landlord:
Summit Plaza, Inc.
160 Summit Avenue
Montvale, New Jersey 07645
ATTN: Mark Shefts
(2) Tenant:
All-Tech Investment Group, Inc.
160 Summit Avenue
Montvale, New Jersey 07645
(3) Checks Payable to:
Summit Plaza, Inc.
Mail Payment to:
Summit Plaza, Inc.
160 Summit Avenue
Montvale, New Jersey 07645
ATTN: Mark Shefts
I. Base Tax Year: 1998
J. Base Operating
Year: 1998
K. Tenant Liability
Insurance: The Tenant Liability Insurance
required pursuant to Section 23.1 of
this Lease shall be in the sum of
$1,000,000.00 single limit.
Approved by Landlord: Approved by Tenant:
SUMMIT PLAZA, INC. s/ All-Tech Investment Group, Inc.
----------------------------------
By: s/Mark Shefts By: s/Mark Shefts
---------------- ----------------
2
<PAGE>
AGREEMENT OF LEASE (this "Lease") dated as of the 1st day of June, 1998, between
SUMMIT PLAZA, INC, a New Jersey Corporation, (hereinafter referred to as the
"Landlord"), and All-Tech Investment Group, Inc. (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE I
Demised Premises
1.1 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord for the term and upon the terms, conditions, covenants and agreements
hereinafter provided, the Premises. The Premises consist of space which: (i) is
located as is specified in Item B of the Basic Lease Provisions, and (ii) is
bounded by the proposed or existing demising walls therefor, the approximate
locations of such demising walls and space being marked in color or crosshatched
and shown on the diagram(s) of the floor plan for such floor, such diagram(s)
being attached to this Lease as Exhibit A and made a part hereof. The
appropriate number of rentable square feet contained in the Premises, as
determined by Landlord, for identification purposes only, is specified in Item B
of the Basic Lease provisions (the "Rentable Area"). The lease of the Premises
includes the right, together with other tenants of the Building and members of
the public, to use the common public areas of the Building, but includes no
other rights not specifically set forth herein. Landlord shall finish the
Premises as set forth in Exhibit B attached hereto and made a part hereof. It is
understood and agreed that Landlord will not make and is under no obligation to
make any alterations, decorations, additions or improvements in or to the
Premises, structural or otherwise, except as set forth in Exhibit B. Landlord
agrees to deliver possession of the Premises to Tenant and Tenant agrees to
accept the same from Landlord, upon written notice from Landlord to Tenant that
Landlord's work in the Premises described in Exhibit B has been substantially
completed.
ARTICLE II
Term
2.1 The Premises are leased for the period of years and months as
specified in Item C of the basic Lease Provisions, to commence at 12:01 A.M. on
the Commencement Date and to end at 11:59 p.m. on the Expiration Date unless the
Term shall sooner terminate
3
<PAGE>
pursuant to any of the terms, covenants or conditions of this Lease or pursuant
to law.
2.2 Notwithstanding anything in Paragraph 2.1 to the contrary, if, on
or prior to the Commencement Date of the Term, the Premises are not ready for
occupancy, this Lease shall nevertheless continue in full force and effect and
Tenant shall have no right to rescind, cancel or terminate same nor shall
Landlord be liable for damages, if any, sustained by Tenant by reason of
inability to obtain possession thereof on such date. In such event, Landlord
shall give to Tenant written notice at least fifteen (15) days in advance of the
date when Landlord expects Premises to be ready for occupancy by Tenant, which
date shall then become the revised Commencement Date. The Term shall end on the
revised Expiration Date, which date shall be the same number of days after the
revised Commencement Date as it was after the original Commencement Date, unless
sooner terminated pursuant to any of the terms, covenants or conditions of this
Lease or pursuant to law.
2.3 When Tenant takes possession of the Premises, Tenant shall be
deemed to have accepted the Premises as being satisfactory and in good condition
as of the date of such possession.
ARTICLE III
Rent
3.1 Tenant covenants and agrees to pay to the Landlord, as rent for and
during the Term hereof, the annual sum as specified in Item D(1) of the Basic
Lease Provisions as Basic Rent.
3.2 Basic Rent and any Additional Rent payable pursuant to the
provisions of this Lease shall be payable by Tenant to Landlord at the address
specified in Item H(3) of the basic Lease Provisions (or at such other place as
Landlord may designate in a notice to Tenant) in lawful money of the United
States without prior demand therefor and without any offset or deduction
whatsoever except as otherwise specifically provided in this Lease for the
convenience of Tenant. Basic Rent shall be payable in equal monthly installments
as specified in Item D(2) of the Basic Lease Provisions, in advance, on the
first (1st) day of each month during the Term. The installment of Basic Rent for
the first (1st) full calendar month of the Term is due and payable by Tenant to
Landlord at the time of the execution and delivery of this Lease. In the event
that the Commencement Date shall occur on a date other than the first (1st) day
of any calendar month Tenant shall pay to Landlord on the first (1st) day of any
calendar month next succeeding the month during which the Commencement Date
shall occur, a sum equal to that specified in Item D(2) of the Basic Lease
Provision divided by 30 (thirty) then multiplied by the number of calendar days
in the period from the Commencement Date to the last day of the month in which
the Commencement Date shall occur, both inclusive. Such payment, together with
the sum paid by
4
<PAGE>
the Tenant upon execution of this Lease, shall constitute payment of the Basic
Rent for the period from the Commencement Date to and including the last day of
the next succeeding calendar month.
3.3 Tenant covenants to pay Basic Rent and any Additional Rent payable
pursuant to the provisions of this Lease and to observe and perform and to
permit no violation of the terms, covenants and conditions of this Lease on
Tenant's part.
ARTICLE IV
Use and Occupancy
4.1 Tenant shall use and occupy the Premises solely for general office
purposes and only in accordance with the uses permitted under applicable zoning
and other municipal regulations. Without the prior written consent of Landlord,
the premises shall not be used for any other purpose, or for any purpose that
will constitute a nuisance or unreasonable annoyance to Landlord or other
tenants of the Building and shall comply with all present and future laws,
ordinances, regulations and orders of the United States of America, the
jurisdiction in which the Building is located, and any other public or
quasi-public authority having jurisdiction over the Premises (collectively
hereinafter referred to as "Governmental Authorities"), it is expressly
understood that if any law, ordinance, regulation or order requires an occupancy
permit for the Premises, Tenant shall obtain such permit at Tenant's own
expense.
4.2 Tenant acknowledges that the Building is a non-smoking building
and, as such, smoking within the building is absolutely prohibited. Landlord has
placed ashtrays at the western entrance to the Building for the convenience of
persons who smoke.
4.3 Tenant shall have the right to the non-exclusive use of the parking
lot on the Real Property (as defined in Paragraph 5.1) for all employees and
visitors. The same right has been or will be given to all other tenants in the
Building, and to their respective employees, agents, customers and invitees and
to other persons, and it does not entitle Tenant to any particular assigned
spaces in the parking lot, except for five (5) spaces which shall be designated
for Tenant's use only. Tenant covenants and agrees to comply with all reasonable
rules and regulations which Landlord may hereafter from time to time or at any
time make pursuant to the terms of Article XXXVI hereof to assure exclusive use
of designated parking spaces on the Real Property by permitted users. Landlord's
remedies under such rules and regulations may include, but shall not be limited
to, the right to tow away, at the owner's expense, any vehicles not parked in
compliance with these rules and regulations. Landlord shall not be responsible
to Tenant for the non-compliance or breach by any other tenant of said rules and
regulations; provided, however, Landlord agrees to use reasonable efforts to
enforce such rules and regulations uniformly.
5
<PAGE>
ARTICLE V
Alterations or Improvements by Tenant
5.1 Tenant shall make no changes in or to the Premises of any nature
without Landlord's prior written consent. Subject to the prior written consent
of the Landlord, Tenant, at Tenant's sole expense, may hire contractors approved
by Landlord to make alterations, installations, additions or improvements in or
to the Premises (collectively hereinafter referred to as the "Alterations")
which are non-structural and which do not affect utility services, plumbing or
electrical lines in or to the Premises or the Building. The Alterations shall,
upon installation, become the property of Landlord and shall remain upon and be
surrendered with the Premises, unless Tenant, by written notice to Landlord no
later than thirty (30) days prior to the notice to the Expiration Date, requests
Landlord's consent to remove same. If Landlord so consents, the Alterations
shall be removed from the Premises by Tenant prior to the Expiration Date at
Tenant's sole expense. Nothing in this Article V shall be construed to give
Landlord title to or to prevent Tenant's removal of trade fixtures, moveable
office furniture and equipment, but upon removal of any other installation as
may be permitted by Landlord, Tenant shall immediately and at its expense,
repair and restore the Premises to the condition existing prior to Alterations.
Tenant shall repair any damage to the Premises, the Building, or the real
property on which the Building is located (hereinafter collectively referred to
as the "Real Property") incurred during such removal. All property permitted or
required to be removed by Tenant at the Expiration Date or sooner termination of
the Term which remains on the Premises after the Expiration Date or sooner
termination of the Term shall be deemed abandoned and may, at the election of
Landlord, either be retained as Landlord property or may be removed from the
Premises by Landlord at Tenant's expense. If Tenant does not repair or restore
said damage, Landlord is entitled to deduct said cost and expense from Tenant's
security deposit.
5.2 Prior to the commencement of the Alterations, Tenant shall, at its
sole expense, obtain all required permits, approvals and certificates required
by all Governmental Authorities and upon completion of the Alterations,
certificates of final approval thereof. Tenant shall deliver duplicates of same
to Landlord promptly upon their receipt. Tenant shall carry and shall cause
Tenant's contractors and subcontractors to carry such workers' compensation,
general liability, personal and property damage insurance as required by law and
in amounts no less than the amounts set forth in Article XXIII hereof.
5.3 As a condition precedent to the written consent of Landlord, Tenant
agrees to obtain and deliver to Landlord written and unconditional waivers of
mechanics' and materialmen's liens upon Real Property or a part for all work,
labor and services to be
6
<PAGE>
performed, and materials to be furnished, by them in connection with such work,
signed by all contractors, subcontractors, materialmen and laborers to be
involved in such work. If, not withstanding the foregoing, any mechanic's or
materialmen's lien is filed against the Real Property for work claimed to have
been done for, or materials claimed to have been furnished to, Tenant, such lien
shall be discharged by Tenant within ten (10) days thereafter, at Tenant's sole
cost and expense, by the payment thereof or by filing any bond required by law.
If Tenant shall fail to discharge any such mechanic's or materialmen's lien,
Landlord may, at its option, discharge the same and treat the cost thereof as
Additional Rent payable with the monthly installment of rent next becoming due;
it being hereby expressly covenanted and agreed that such discharge by Landlord
shall not be deemed to waive or release the default of Tenant in not discharging
the same. It is understood and agreed by Landlord and Tenant that any
alterations, decorations, additions or improvements shall be constructed on
behalf of Tenant and that in the event Landlord gives its written consent to
Tenant's making any such alterations, decorations, additions or improvements,
such written consent shall not be deemed to be an agreement or consent by
Landlord to subject Landlord's interest in the Premises, the Building or the
Real Property to any mechanic's or materialmen's liens which may be filed in
respect to any such work done by or on behalf of Tenant.
5.4 Tenant shall indemnify and hold Landlord harmless from and against
any and all expenses, liens, claims or damages to person or property which arise
directly or indirectly by reason of the Alterations, structural or otherwise,
made by Tenant without the prior written consent of Landlord. Landlord shall
have the right to remove same and Tenant shall be liable for any and all
expenses incurred by Landlord in said removal and subsequent restoration of the
Premises to the original condition.
ARTICLE VI
Maintenance
6.1 Tenant shall take good care of the Premises throughout the Term and
preserve the same in the condition delivered to Tenant on the Commencement Date,
normal wear and tear and damage by fire or other casualty not caused by Tenant
excepted. Tenant further agrees not to injure, overload, deface or commit waste
of the Premises. Tenant shall be responsible for all injury or damage of any
kind or character to the Real Property, including the windows, floors, walls,
ceilings, lights, electrical equipment and HVAC equipment caused by Tenant or by
anyone using or occupying the Premises by, through or under Tenant. Landlord
shall repair the same and Tenant shall pay the costs incurred therefor to
Landlord immediately upon demand, plus a ten percent (10%) management fee. If
the Premises become infested with vermin, Tenant shall, at Tenant's expense,
cause the same to exterminated from time to time
7
<PAGE>
to the satisfaction of Landlord and shall employ such exterminators as shall be
approved by Landlord.
6.2 Landlord shall be responsible for all repairs to the roof,
foundation and permanent exterior walls and support columns of Building
(hereinafter referred to as "Structural Repairs") and shall maintain, repair and
replace all plumbing, heating, air conditioning, electrical and mechanical
fixtures (exclusive of (a) starters, ballasts, incandescent and fluorescent
lamps and (b) electrical and mechanical fixtures installed by Tenant) which
shall be standard for the building, when required, and maintain and make repairs
to the parking area and the exterior of the Building, except for those repairs
or replacements arising from the negligence of Tenant, its agents, servants,
employees, licensees, or invitees, which shall be the sole responsibility of
Tenant.
ARTICLE VII
Compliance with Laws, Indemnity and Insurance
7.1 Tenant shall not do, or permit anything to be done in or to the
Premises, or bring or keep anything therein which will, in any way, increase the
cost of fire or public liability insurance on the Real Property, or invalidate
or conflict with the fire insurance or public liability insurance policies
covering the Real Property, the Building, fixtures or any personal property kept
therein, or obstruct or interfere with the rights of Landlord or of other
tenants, or in any other way injure or annoy Landlord or other tenants, or
subject Landlord to any liability for injury to persons or damage to property,
or interfere with the good order of the Building, or conflict with the present
or future laws, rules or regulations of any Governmental Authority. Tenant
hereby indemnifies and shall hold Landlord harmless from and against all
liability for injury to persons or damage occurring on the Premises or in the
building or on the Real Property whether occasioned by any act or omission of
Tenant, or Tenant's agents, servants employees, invites or licensees. Tenant
agrees that any increase in fire and casualty insurance premiums on the Building
or contents caused by the occupancy of Tenant and any expense or cost incurred
in consequence of negligence, carelessness or willful action of Tenant, Tenant's
agents, servants, employees, invitees or licensees, shall be reimbursed to
Landlord with ten (10) days of demand therefor. Landlord shall have all the
rights and remedies for the collection of Basic Rent provided to paid pursuant
to terms hereof.
ARTICLE VIII
Subordination and Estoppel
8.1 Tenant agrees that this Lease is subject and subordinate to all
ground or underlying leases and to the lien of any mortgages or deeds of trust
now on or which at any time in the future may be made a lien upon the Real
Property, and to all advances made or
8
<PAGE>
hereafter to be made upon the security thereof. This subordination provision
shall be self-operative and no further instrument of subordination shall
required; provided, however, that Tenant agrees to execute and deliver within
two (2) business days, upon request, such further instrument or instruments
confirming this subordination as shall be desired by Landlord or by any
mortgagee or proposed mortgagee of the Real Property; and Tenant hereby
constitutes and appoints Landlord as Tenant's attorney-in-fact to execute any
such instrument or instruments. Tenant further agrees that at the option of the
holder of any mortgage or of the trustee under any deed of trust securing the
Real Property, this Lease may be made superior to said mortgage or deed of trust
by the insertion therein of a declaration that this Lease is superior.
8.2 Tenant agrees, at any time and from time to time upon not less than
five (5) days' prior written request by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, it there have been modifications,
that the same are in full force and effect as modified) and stating the
modifications, that there are no offsets, defenses, defaults or counterclaims
under this Lease or against Landlord, the dates to which the Basic Rent and
Additional Rent have been paid in advance, if any, it being intended that any
such statement delivered pursuant to this Paragraph 8.2 may be relied upon by a
prospective purchaser of Landlord's interest or a mortgagee of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the Real
Property.
ARTICLE IX
Destruction - Fire or Other Casualty
9.1 If the Premises or the Building shall be damaged by fire or other
casualty not arising from the fault or negligence of Tenant or its servants,
agents, employees, invitees or licensees: (i) except as otherwise provided in
subsection (ii) hereof, the damage shall be repaired by and at the expense of
Landlord and until such repairs shall be made the Basic Rent and Additional Rent
shall be equitably abated according to the part of the Premises which is usable
by Tenant. Landlord agrees, at its expense, to repair promptly any damage to the
Premises, except that Tenant agrees to repair or replace its own furniture,
furnishings and equipment. No penalty shall accrue due to a delay caused by
strike, lockout, act of God, inability to obtain labor or materials,
governmental restrictions, enemy actions, civil commotion, fire, unawardable
casualty or any other cause similar or dissimilar beyond the reasonable control
of either Landlord or Tenant or due to the passing of time while waiting for an
adjustment of insurance proceeds (hereinafter referred to as an "Excusable
Delay"); (ii) if the Premises are totally damaged or are rendered wholly
untenantable by fire or other casualty, or if Landlord's architect certifies
that it cannot be repaired within
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ninety (90) days of the casualty or if Landlord shall decide not to resolve or
repair the same or shall decide to demolish the Building or the Premises, or not
to rebuild the Building or the Premises, then Landlord shall, within ninety (90)
days after such fire or other casualty, give Tenant notice of such decision, and
thereupon the Term shall expire ten (10) days after such notice is given, and
Tenant shall vacate the Premises and surrender the same to Landlord; (iii) If
Landlord fails to complete the repair and restoration of the Premises within six
(6) months from the date of the casualty (subject to Excusable Delays) then
Tenant shall have the right to cancel and terminate this Lease upon the delivery
of a notice to Landlord delivered within fifteen (15) days after the expiration
of the aforesaid six (6) month period; (iv) Landlord agrees that it shall
diligently pursue all repair and restoration work required on its part to be
completed hereunder.
ARTICLE X
Mutual Waiver of Subrogation
10.1 Landlord hereby waives any and all rights of recovery against the
Tenant for or arising out of damage to or destruction of the Premises, the
Building or the Real Property and any other property of the Landlord from causes
then insured under standard fire and extended coverage insurance policies or
endorsements to the extent that its insurance policies then in effect permit
such waiver, and Tenant hereby waives any and all rights of recovery against
Landlord for or arising out of damage to or destruction of the Premises, the
Building or the Real Property and any property of Tenant from causes then
insured under standard fire and extended coverage insurance policies to the
extended coverage insurance policies to the extent that its insurance policies
then in effect permit such a waiver. If at any time during the Term any
insurance carrier which shall have issued a policy to either of the parties
covering the Real Property, the Premises, the Building or any of the property of
Tenant, shall have issued a policy to either of the parties covering the Real
Property, the Premises, the Building or any of the Property of the Tenant, shall
refuse to consent to the waiver of the right of recovery with respect to any
loss payable under such a policy, or if such a carrier shall consent to such
waiver only upon the payment of an additional premium (unless such additional
premium is voluntarily paid by one of the parties hereto) or shall cancel a
consent previously given, or shall cancel or threaten to cancel any policy
previously issued and then in full force and effect, then in any such event, the
waiver in this Paragraph 10.1 shall thereupon be of no further force and effect
as to the loss, damage or destruction covered by such policy except as
hereinafter provided. If, however, at any time thereafter such consent shall be
obtained therefor from any existing or any substitute insurance carrier, the
waiver hereinabove provided for shall again become effective.
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ARTICLE XI
Condemnation and Other Proceedings
11.1 If the Premises shall be acquired or condemned by eminent domain
proceedings, or by giving of a deed in lieu thereof, or shall be ordered
demolished or unfit for present use by any governmental body, then and in that
event, the Term shall cease and terminate from the date of title-vesting or
final order pursuant to such proceeding or agreement. If a non-substantial
portion of the Premises or the Building shall be so ordered, acquired or
condemned, this Lease shall cease and terminate at Landlord's option, and if
such option is not exercised by Landlord, an equitable adjustment of the Basic
Rent and Additional Rent payable by Tenant for the remaining useable portion of
the Premises shall be made. In the event of a termination under this Article XI,
Tenant shall have no claim against the Landlord for the value of any unexpired
Term and Tenant should have no claim against Landlord, other than for the
adjustment of the Basic Rent and Additional Rent as hereinbefore mentioned, or
be entitled to any portion of any amount that may be awarded as damages or paid
as a result of such proceedings or as the result of any agreement made by any
governmental authority with Landlord.
11.2 Tenant may, if allowed by statue, seek such awards or damages for
moving expenses, loss of profits and fixtures and other equipment installed by
it (if any) which do not, under the terms of this Lease, become the property of
Landlord at the termination hereof. Such awards or damages must be made by a
condemnation court or other authority and must be separate and distinct from any
award to Landlord for the Real Property and Building and shall not diminish any
award of Landlord. For purposes of this Paragraph 11.2, a substantial part of
the Premises shall be considered to have been taken if more than fifty percent
(50%) of the Premises are unusable by Tenant as a direct result of such taking.
ARTICLE XII
Assignment and Subletting
12.1 Tenant, for itself, its heirs, distributees, successors and
assigns, expressly covenants that it shall not, by operation of law or
otherwise, assign, mortgage or encumber this Lease, or any part thereof, or
permit the Premises to be used by others without the prior written consent of
Landlord in each instance. Any attempt to do so by Tenant shall be void. The
consent by Landlord to any assignment, mortgage, encumbrance, subletting or use
of the Premises by others shall not constitute a waiver of Landlord's right to
withhold its consent to any other assignment, mortgage, encumbrance or use of
the Premises by others. Without the prior written consent of Landlord, this
Lease and the interest of Tenant therein or any assignee of Tenant therein,
shall not pass by operation of law, and shall not be subject to garnishment or
sale under execution in any suit or proceeding which may be brought against or
by Tenant or any assignee of Tenant.
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12.2 Landlord covenants and agrees that it will not unreasonably
withhold its consent to Tenant's assigning or subletting all or a part of the
Premises; provided, however, that Tenant shall not be in default under any of
the terms, covenants, conditions, provisions and agreements of this Lease at the
time of any notice or request for consent under the terms of this Article XII or
at the effective date of such subletting or assigning.
12.3 (a) If Tenant requests Landlord's consent to an assignment of this
Lease or a subletting of all or any part of the Premises, Tenant shall submit to
Landlord:
(1) the sum of three hundred dollars ($300.00) as
a non-refundable fee to process each such
request;
(2) the name of the proposed assignee or
subtenant;
(3) the terms of the proposed assignment or
subletting;
(4) the nature of the proposed subtenant's or
assignee's business; and
(5) such information as to the proposed
subtenant's or assignee's financial
responsibility and general reputation as
Landlord may reasonably require.
(b) Upon the receipt of such request and information from
Tenant, Landlord shall have the option, to be exercised in writing within thirty
(30) days after such receipt, to either (1) cancel and terminate this Lease if
the request is to assign this Lease or to sublet all of the Premises or, if the
request is to sublet a portion of the Premises only, to cancel and terminate
this Lease with respect to such portion, in each case as of the date set forth
in Landlord's notice of exercise of such option; or (2) to grant said request.
(c) In the event Landlord shall cancel this Lease, Tenant
shall surrender possession of the Premises, or the portion of the Premises which
is the subject of the request, as the case may be, on the date set forth in such
notice in accordance with the provisions of this Lease relating to surrender of
the Premises. If the Lease shall be cancelled as to a portion of the Premises
only, the Basic Rent and Additional Rent payable by the Tenant hereunder shall
be reduced proportionately according to the ratio that the number of rentable
square feet in the portion of the space surrendered bears to the rentable square
feet in the Premises.
(d) In the event that Landlord shall consent to a sublease or
assignment pursuant to the request from Tenant, Tenant shall cause to be
executed by its assignee or subtenant an agreement to perform faithfully and to
assume and be bound by all of the terms, covenants, conditions, provisions and
agreements of
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this Lease for the period covered by the assignment or sublease and to the
extent of the space sublet or assigned. An executed copy of each sublease or
assignment and assumption of performance by the sublessee or assignee, on
Landlord's standard form, shall be delivered to Landlord within five (5) days
prior to the commencement of occupancy set forth in such assignment or sublease.
No such assignment or sublease shall be binding on Landlord until Landlord has
received such copies as required herein.
(e) In the event that Landlord shall consent to a sublease or
assignment pursuant to the request from Tenant, and such agreement shall be
executed and go into effect, and Tenant realizes a profit from such agreement,
Tenant agrees to pay to Landlord 100% of said profit. Profit is defined as any
amount in excess of the amount that Tenant pays to Landlord and defined in
Article III and Article XXVIII of this Lease.
12.4 In no event shall any assignment or subletting to which Landlord
may consent release or relieve Tenant from its obligations to fully perform all
of the terms, covenants and conditions of the Lease on its part to be performed.
ARTICLE XIII
Surrender
13.1 Upon the Expiration Date or sooner termination of the Term, Tenant
shall peaceably and quietly quit and surrender to Landlord the Premises, broom
clean, in as good condition as they were on the Commencement Date, ordinary wear
and tear, repairs and replacements by Landlord, loss by fire, casualty and other
causes beyond Tenant's control, and alterations, additions and improvements
permitted hereunder, excepted. Tenant's obligation to observe or perform this
covenant shall survive the Expiration Date or prior expiration of the Term. If
the Expiration Date falls on a Sunday or a legal holiday, this Lease shall
expire at 12 noon on the business day first preceding said date.
ARTICLE XIV
Holding Over
14.1 If Tenant holds possession of the Premises beyond the Expiration
Date or prior expiration of the Term, Tenant shall become a tenant from
month-to-month at DOUBLE the Basic Rent and Additional Rent payable hereunder
and upon all other terms and conditions to this Lease, and shall continue to be
such month-to-month tenant until such tenancy shall be terminated by Landlord or
Tenant and such possession shall cease. Nothing contained in this Lease shall be
construed as a consent by Landlord to the occupancy or possession by Tenant of
the Premises beyond the Expiration Date or prior expiration of the Term, and
Landlord, upon said Expiration Date or prior expiration of the Term, Landlord
shall be entitled to the benefit of all legal remedies that now may be in force
or may
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be hereafter enacted relating to the speedy repossession of the Premises and to
all damages to which Landlord is entitled.
ARTICLE XV
Landlord's Right of Entry
15.1 Landlord and Landlord's agents and representatives shall have the
right to enter into or upon the Premises, or any part thereof, at all reasonable
hours for the following purposes:
(1) examining the Premises;
(2) making such repairs or alterations therein as may be
necessary in Landlord's sole judgment for the safety
and preservation thereof;
(3) erecting, maintaining, repairing or replacing wires,
cables, conduits, vents or plumbing equipment running
in, to or through the Premises; or
(4) showing the Premises to prospective new tenants,
purchasers or mortgagees.
15.2 Landlord may enter upon the Premises at any time in case of
emergency without prior notice to Tenant.
15.3 Landlord, in exercising any of its rights under this Article XV,
shall not be deemed guilty of eviction, partial eviction or disturbance of
Tenant's use or possession of the Premises and shall not be liable to Tenant for
same.
15.4 All work performed by or on behalf of Landlord in or on the
Premises pursuant to this Article XV shall be performed with as little
inconvenience to the Tenant's business as possible, and in such a manner as not
unreasonably to interfere therewith.
ARTICLE XVI
Default
16.1 Each of the following, whether occurring before or after the
Commencement Date, shall be deemed a Default by Tenant and a breach of this
Lease:
(a) the filing of a petition by or against Tenant for
adjudication as a bankrupt, or for reorganization, or for arrangement under any
bankruptcy act;
(b) the commencement of any action or proceeding for the
dissolution or liquidation of Tenant, whether instituted by or against Tenant,
or for the appointment of a receiver or trustee of the property of Tenant under
any state or federal statute for relief of debtors;
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(c) the making by Tenant of an assignment for the benefit
of creditors;
(d) the suspension of business by Tenant or any act by
Tenant amounting to a business failure;
(e) the filing of a tax lien or a mechanics' lien against
any property of Tenant;
(f) Tenant's causing or permitting the Premises to be vacant,
or abandonment of the Premises by Tenant for a period in excess of ten (10)
days;
(g) failure by Tenant to pay Landlord when due Basic Rent,
Additional Rent herein reserved, or any other sum by the time required by the
terms of this Lease;
(h) a failure by Tenant in the performance of any other term,
covenant, agreement or condition of this Lease on the part of Tenant to be
performed;
(i) a default by Tenant under any other lease or sublease with
Landlord.
ARTICLE XVII
Landlord's Rights Upon Tenant's Default
17.1 (a) Upon a Default by Tenant or any subtenant or assignee,
Landlord, upon failure of Tenant to cure a default in the payment of Basic Rent,
Additional Rent or any other sum of money due to Landlord hereunder within five
(5) days after the same was due (without notice thereof from Landlord) or to
cure or diligently commence to cure any other Default within fifteen (15) days
after notice thereof from Landlord (provided same is cured with a reasonable
time thereafter, and without any delay), may immediately or at anytime
thereafter, without further notice to Tenant (i) enter upon the Premises as
agent for Tenant, by legal entry, without terminating this Lease and do any and
all acts as Landlord may deem necessary, proper or convenient to cure such
Default, for the account of and at the expense of Tenant, and Tenant agrees to
pay Landlord, upon demand, all damages and/or expenses incurred by Landlord in
so doing; or (ii) terminate this Lease and Tenant's right to possession of the
Premises and, with or without legal process, take possession of the Premises and
remove Tenant, any occupant and any property therefrom, using such legal means,
without being guilty of trespass and without relinquishing any rights of
Landlord against Tenant.
(b) Landlord shall be entitled to recover damages from Tenant
in an amount equal to the amount herein covenanted to be paid as Basic Rent and
Additional Rent, together with: (i) all expenses of any proceedings (including
but not limited to, legal
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expenses and attorneys' fees) which may be necessary in order for Landlord to
recover possession of the Premises; and (ii) the expenses of re-renting the
Premises, including but not limited to, any commissions paid to any real estate
broker, advertising expenses and the costs of such alterations, repairs,
replacements and decoration or re-decoration as Landlord in its sole judgment
considers advisable or necessary for the purpose of re-renting the Premises;
provided, however, there shall be credited against the amount of such damages
all amounts received by Landlord from such re-renting of the Premises. Landlord
shall in no event be liable in any way whatsoever from failure to collect rent
under such re- renting; and further provided, however, Landlord shall be under
no obligation to re-rent the Premises.
17.2 No act or thing done by Landlord shall be deemed to be an
acceptance of Tenant's surrender of the Premises, unless Landlord should execute
a written agreement of surrender with Tenant. Tenant's liability hereunder shall
not be terminated by the execution of a new lease of the Premises by Landlord.
Tenant agrees to pay to Landlord, upon demand, the amount of damages herein
provided after the amount of such damages for any month shall have been
ascertained; provided however, any expenses incurred by Landlord shall be deemed
to be a part of the damages for the month in which they were incurred. Separate
actions may be maintained each month by Landlord against Tenant to recover the
damages when due, without waiting until the end of the Term to determine the
aggregate amount of such damages or Landlord, at its option, if the Premises
have been re-let for a term extending at least as long as the remainder of the
Term thereof, may hold Tenant in advance for the entire deficiency to be
realized during the term of re-letting. Tenant hereby expressly waives any and
all rights of redemption granted by or under any present or future laws in the
event of the eviction of Tenant or Tenant being dispossessed for any cause, or
in the event of Landlord obtaining possession of the Premises by reason of the
violation by Tenant of any of the covenants or conditions of this Lease.
17.3 Landlord may retain, as partial liquidated damages, any Basic
Rent, Additional Rent, Security Deposit or monies received
from Tenant or others on behalf of the Tenant.
17.4 Landlord shall have the right, as agent for Tenant, to take
possession of any furniture or fixtures of Tenant found upon the Premises after
taking possession of same pursuant to this Article XVII and sell the same at any
private or public sale and apply the proceeds to any amount due Landlord. Tenant
waives any notice of execution or levy in connection therewith.
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ARTICLE XVIII
Landlord's Remedies Cumulative; Expenses
18.1 All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other right or remedy allowed by law. For
the purpose of any suit brought or based hereon, this Lease shall be construed
to be a divisible contract, to the end that successive actions may be maintained
on this Lease as successive periodic sums mature hereunder.
18.2 Tenant shall pay, upon demand, all of Landlord's costs, charges
and expenses, including the fees of counsel, agents and others retained by
Landlord, incurred in enforcing Tenant's obligations hereunder.
18.3 If Tenant fails to pay an installment of Basic Rent, Additional
Rent or any other sum due and payable to Landlord on or before the first day of
the calendar month when such installment becomes due and payable, Tenant shall
pay to Landlord a late charge (to cover Landlord's administrative and overhead
expenses of processing late payments) equal to the greater of one hundred
dollars ($100) or five percent (5%) of the amount of such installment and, in
addition, such unpaid installment shall bear interest at the rate per annum
which is two percent (2%) greater than the "prime rate" then in effect (or if
such prime rate is not available, a replacement rate designated by Landlord)
from the date such installment became due and payable to the date of payment
thereof by Tenant; provided, however, nothing herein contained shall be
construed or implemented in such a manner as to allow Landlord to charge or
receive interest in excess of the maximum legal rate then allowed by law. Such
late charge and interest shall constitute Additional Rent hereunder due and
payable with the next monthly installment of Basic Rent.
ARTICLE XIX
No Waiver
19.1 No waiver by Landlord of any breach by Tenant of any of the terms,
covenants, agreements or conditions of this Lease shall be deemed to constitute
a waiver of any succeeding breach thereof, or a waiver of any breach of any of
the terms, covenants, agreements and conditions herein contained.
19.2 No employee of Landlord or of Landlord's representatives or agents
shall have the authority to accept the keys of the Premises prior to the
Expiration Date and the delivery of keys to any employees of Landlord or
Landlord's representatives or agents shall not operate as an acceptance of a
termination of this Lease or an acceptance of a surrender of the Premises.
19.3 The receipt by Landlord of the Basic Rent and Additional Rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such a breach. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly Basic Rent or a lesser amount of the Additional Rent
then due shall
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be deemed to be other than on account of the earliest stipulated amount then
due, nor shall any endorsement or any statement on any check or any letter or
other instrument accompanying any check or payment as Basic Rent or Additional
Rent be deemed an accord and satisfaction and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Basic Rent or Additional Rent or pursue any other remedy provided in this Lease.
19.4 The failure of Landlord to enforce any of the Rules or Regulations
as may be set by Landlord form time to time against Tenant or against any other
tenant in the Building shall not be deemed a waiver of any such Rule or
Regulation.
ARTICLE XX
Landlord's Reserved Rights
20.1 (a) Landlord reserves the following rights: (i) If during or prior
to the last ninety (90) days of the Term Tenant vacates the Premises, to
decorate, remodel, repair, alter to otherwise prepare the Premises for
reoccupancy and, (ii) to have pass keys to the Premises.
(b) Landlord may enter upon the Premises and may exercise
either of the foregoing rights hereby reserved without being deemed to have
caused an eviction or disturbance of Tenant's use and possession of the Premises
and without being liable in any manner to Tenant.
ARTICLE XXI
Landlord's Liability
21.1 Landlord or its agents or representatives shall not be liable for
any injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water, rain, snow or leaks from any
part of the Building or from the pipes, appliances, plumbing, on the roof,
street, subsurface or from any other place or by dampness or by any other cause
of nature whatsoever, or resulting from carelessness, negligence or improper
conduct on the part of any other tenant or of Landlord's contractors or its or
any other tenant's agents, employees, guests, licensees, invitees, subtenants,
assignees or successors.
21.2 Anything contained in this Lease to the contrary notwithstanding,
Tenant agrees that it shall look solely to the estate and property of Landlord
in the Real Property and the Building of which the Premises form a part for the
collection of any judgment (or other judicial process) requiring the payment of
money by Landlord for any default or breach by Landlord of any of its
obligations under this Lease, subject, however, to the prior rights of any
ground or underlying landlord or the holder of any mortgage covering the Real
Property or the Building or of
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Landlord's interest therein. No other assets of Landlord shall be subject to
levy, execution or other judicial process for the satisfaction of Tenant's
claim. This provision shall not be deemed, construed or interpreted to be or
constitute an agreement, express or implied, between Landlord and Tenant that
Landlord's interest hereunder and in the Real Property or the Building shall be
subject to impressment of an equitable lien otherwise. Nothing herein contained
shall be construed to limit any right of injunction against Landlord, where
appropriate.
21.3 Landlord shall not be deemed in default with respect to the
failure to perform any of the terms, covenants and conditions of this Lease on
Landlord's part to be performed, if such failure is due in whole or in part to
any strike, lockout, labor dispute (whether legal or illegal), civil disorder,
inability to procure materials, failure of power, restrictive governmental laws
and regulations, riots, insurrections, war, fuel shortages, accidents,
casualties, Acts of God, acts caused directly or indirectly by Tenant (or
Tenant's agents, employees, guests or invitees), acts of other tenants or
occupants of the Building or any other cause beyond reasonable control of
Landlord. In such event, the time for performance by Landlord shall be extended
by an amount of time equal to the period of delay so caused.
ARTICLE XXII
Tenant's Liability
22.1 Tenant shall reimburse Landlord for all expenses, damages or fines
incurred or suffered by Landlord by reason of any breach, violation or
non-performance by Tenant, its agents, servants, employees, invitees or
licensees of any covenant or provision of this Lease, or by reason of damage to
persons or property caused by moving property of or for Tenant in or out of the
Building, or by the installation or removal of furniture or other property of or
for Tenant or by reason of or arising out of the carelessness, negligence or
improper conduct of Tenant, or its agents, servants, employees, invitees and
licensees in the use or occupancy of the Premises. Any such expense shall be
deemed Additional Rent, due in the next calendar month after it is incurred.
ARTICLE XXIII
Tenant's Insurance
23.1 (a) Notwithstanding Article XXII, Tenant covenants to provide, on
or before the Commencement Date for the benefit of Landlord, Landlord's
mortgagee, Landlord's Managing Agent, if any, and Tenant a comprehensive policy
of liability insurance and/or Certificate of Insurance protecting Landlord,
Landlord's mortgagee, Landlord's Managing Agent and Tenant against any liability
whatsoever occasioned by accident on or about the Real Property, the Building or
the Premises or any appurtenances thereto. Such policy is to be written by
insurance companies qualified to do
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business in the State of New Jersey which shall be rated grade A or better in
Best's with a rating therein of 12 or better and the limits of liability
thereunder shall be in minimum amounts approved by Landlord from time to time
(as set forth in the Rules and Regulations) in respect of any one person, in
respect of any one accident, and in respect of any property damage. Such
insurance may be carried under a blanket of policy covering the Premises and
other locations of Tenant, if any.
(b) Fire and Extended Coverage, Vandalism, Malicious Mischief
and Special Extended Coverage Insurance in an amount adequate to cover the costs
of replacement of all personal property, decoration, trade fixtures, furnishings
and equipment in the Premises and all contents therein. Landlord shall not be
liable for any damage to such property of Tenant by fire or other peril
includable in the coverage afforded by the standard form of fire insurance
policy with extended coverage endorsement attached (whether or not such coverage
is in effect), no matter how caused, it being understood that Tenant will look
solely to its insurer for reimbursement.
23.2 Prior to the time such insurance is first required by this Article
XXIII to be carried by Tenant, and thereafter, at least thirty (30) days prior
to the expiration of any such policy, Tenant agrees to deliver to Landlord
either a duplicate original or the aforesaid policy or a certificate evidencing
such insurance, provided said certificate contains an endorsement that such
insurance may not be cancelled except upon thirty (30) days' notice to Landlord,
together with evidence of payment for the policy.
23.3 Upon failure at any time on the part of Tenant to procure and
deliver to Landlord the policy or certificate of insurance, as hereinabove
provided, stamped "Premium Paid" by the issuing company at least thirty (30)
days before the expiration of the prior insurance policy or certificate, if any,
or to pay the premiums therefor, Landlord shall be at liberty, from time to
time, as often as such failure shall occur, to procure such insurance and to pay
the premium therefor, and any sums paid for insurance by Landlord shall be and
become, and are hereby declared, to be Additional Rent hereunder due
immediately, for the collection of which Landlord shall have all remedies
provided for in this Lease or by law for the collection of rent. Payment by
Landlord of such premium or the carrying by Landlord or any such policy shall
not be deemed to waive or release the default of Tenant with respect thereto.
Tenant's failure to provide and keep in force the aforementioned insurance shall
be regarded as a Default hereunder entitling Landlord to exercise any or all of
the remedies as provided in this Lease in the event of a Default.
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ARTICLE XXIV
Mechanics' Liens
24.1 Any mechanic's lien filed against the Real Property for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be bonded by Tenant within five (5) days after notice of filing at
Tenant's expense.
ARTICLE XXV
Quiet Enjoyment
25.1 Landlord covenants and agrees that, upon the performance by Tenant
of all of the covenants, agreements and provisions hereof on Tenant's part to be
kept and performed, Tenant shall have, hold and enjoy the Premises, subject and
subordinate to the rights set forth in Article VIII, free from any interference
whatsoever by, from or through Landlord, provided, however, that no diminution
or abatement of Basic Rent, Additional Rent or other payment to Landlord shall
be claimed by or allowed to Tenant for inconvenience or discomfort arising from
the making of any repairs or improvements to the Premises or the Real Property,
or for any space taken to comply with any law, ordinance or order of any
Governmental Authority, except as provided herein.
ARTICLE XXVI
Air and Light
26.1 This Lease does not grant any rights to air and light.
ARTICLE XXVII
Landlord's Services
27.1 Landlord shall furnish to Tenant the services set forth in this
Lease and the Rules and Regulations as services which are covered by the Basic
Rent.
27.2 (a) Air heating and air cooling shall be furnished only between
the hours of 8:00 a.m. and 6:00 p. m., Mondays through Fridays, Saturdays,
Sundays and Building Holidays, excluded (hereinafter referred to as the
"Business Hours"), and then only when weather conditions, in the opinion of
Landlord, require. As used herein, the term "Building Holidays" shall mean all
holidays including, but not limited to: Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day, and
the day after Christmas Day and New Year's Day, as each of the said holidays are
celebrated in the State of New Jersey.
(b) If Tenant shall request the use of air cooling (during the
periods when such is available), ventilating and/or heat at any time other than
the Business Hours in this Lease provided for such service, Landlord shall
furnish such to Tenant provided (i) that Tenant pays to Landlord, as Additional
Rent, a special overtime charge therefor which shall be $40.00 per hour
initially (which Landlord may adjust from time to time) and (ii)
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that Tenant's request shall be received in writing by Landlord's property
manager by 12:00 noon at least one day before after-hours service is required
(and by 12:00 noon of the day preceding any requested before-hours service).
27.3 (a) Throughout the Term, Landlord agrees to redistribute
electrical energy to the Premises (not exceeding the present electrical capacity
at the Premises), upon the following terms and conditions: (i) Tenant shall pay
for such electrical energy as provided by this Paragraph 27.3; (ii) Landlord
shall not be liable in any way to Tenant for any loss, damage or expense which
Tenant may sustain or incur as a result of any failure, defect or change in the
quantity or character of electricity furnished to the Premises or if such
quantity or character of electricity furnished to the Premises is no longer
available or suitable for Tenant's requirements or due to any cessation,
diminution or interruption of supply thereof.
The parties agree that Tenant will pay for the electric during the term
of this Lease in such amounts as may be determined under one of the provisions
following, to wit, (a), (b), and (c). The parties agree that Landlord will be
entitled to elect which measurement method will be used, and further agree that
Landlord will be entitled to change the method during the Term of this Lease on
notice to the Tenant: (a) by determining a fixed amount at the outset, which is
$1.25 per square foot, or $15,493.75 per annum or $1,291.15 per month, and
agreeing to adjustments to same; (b) by submetering the demised premises at
Landlord's expense, in which case Landlord will be entitled to charge a pro rata
share of its utility charges, together with a charge incurred by Landlord for
the submetering service under this method, Landlord will charge Tenant at the
same rate as the utility is charging; therefore, Tenant will be liable for any
utility rate increases; or (c) by having an independent electrical engineering
consultant selected by Landlord and reasonably acceptable to Tenant make a
survey of the electrical power demand of the electric lighting fixtures and the
electrical equipment of Tenant used in the Premises to determine the average
monthly electric consumption thereof. Landlord shall have the right to resurvey
the electrical power demand at any time during the Term of this Lease or on a
regular basis, but not more often than quarterly. The findings of said
consultant as to the average monthly electric consumption of Tenant shall be
conclusive and binding on the parties hereto. After said consultant has
submitted its report, Tenant shall pay to Landlord within ten (10) days after
demand therefor by Landlord, the amount determined by said consultant as owing
from the Commencement Date and during the months in which said survey was being
conducted and, thereafter, on the first day of every month, in advance, the
amount set forth as the monthly consumption in said report. Said amounts shall
be treated as Additional Rent due hereunder. In the event that there shall be an
increase or decrease in the rate schedule of the public utility for the supply
of electric energy to the Building or the
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imposition of any tax or surcharge with respect to such electric energy or
increase in such tax or surcharge with respect to such electric energy or
increase in such tax or surcharge following the Commencement Date, the
Additional Rent payable hereunder shall be equitable adjusted to reflect the
resulting increase, decrease, tax or surcharge.
(b) Tenant covenants that its use of electricity in the
Premises shall be limited to and for the operation of (1) the Building standard
lighting, and (2) personal computers, electric typewriters, calculators, copying
machines and other small office machines.
(c) Tenant shall make no alteration to the existing electrical
equipment or connect any fixtures, appliances or equipment in addition to the
equipment permitted in Article 27.3(b) above without prior written consent of
Landlord in each instance. Should Landlord grant such consent, all additional
risers or other equipment required therefor shall be provided by Landlord and
the cost thereof shall be paid by Tenant upon Landlord's demand. As a condition
to granting such consent, Landlord shall require an increase in the monthly
electrical charge (as Additional Rent) by an amount which will reflect the cost
of electricity to operate the additional equipment and service to be furnished
by Landlord. This increase shall be determined by an independent electrical
engineer, to be selected by Landlord and whose service shall be paid for by
Tenant.
(d) Landlord reserves the right to discontinue furnishing
electrical energy to Tenant at any time upon to less than one hundred twenty
(120) days' written notice to Tenant. If Landlord exercises such right of
termination, this Lease shall continue in full force and effect and shall be
unaffected thereby, except only that, from and after the effective date of such
termination, Landlord shall not be obligated to furnish electric energy to
Tenant and the Additional Rent shall be reduced by a sum per month equal to that
amount previously agreed as Additional Rent for Tenant's use of electricity in
the Premises. If Landlord so discontinues furnishing electrical energy to
Tenant, Tenant shall arrange to obtain electrical energy directly from the
public utility company furnishing electric energy to the Building. Tenant may
obtain such electrical energy by means of the then-existing Building system
feeders, risers and wiring to the extent that the same are available, suitable
and safe for such purposes. All meters and additional panel boards, feeders,
risers, wiring and other conductors and equipment which may be required to
obtain electrical energy from the public utility company shall be installed and
maintained by Tenant in accordance with Article V hereof at its sole expense.
(e) Landlord shall not be liable in the event of any
interruption in the supply of electricity, and Tenant agrees that
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such supply may be interrupted for inspection, repairs, replacement and in
emergencies.
27.4 The failure of Landlord to furnish any service hereunder shall not
be construed as a constructive eviction of Tenant and shall not excuse Tenant
from performing any of its obligations hereunder and shall not give Tenant any
claim against Landlord for damages for failure to furnish such services.
ARTICLE XXVIII
Additional Rent
28.1 Tenant hereby covenants and agrees to pay as Additional Rent the
amounts as set forth below.
28.2 (a) For each year or part of a year occurring within the Term in
which the total annual real estate taxes, assessments (including special
assessments), personal property tax, sewer rents, rates and charges (hereinafter
referred to as the "Real Estate Taxes") which shall be levied, imposed or
assessed upon the Real Property shall exceed the Real Estate Taxes levied,
imposed or assessed for the Base Tax Year as is specified in Item I of the Basic
Lease Provisions, for each calendar year Landlord shall notify Tenant of
Landlord's best estimate of Tenant's Proportionate Share of Real Estate Taxes
for each calendar year above Base Tax Year Real Estate Taxes and Tenant shall be
obligated to pay Landlord, as Additional Rent along with each monthly
installment of Base Rent due during such calendar year, one twelfth (1/12th) of
such estimated amount. Tenant's payments of such estimated amount shall be
treated by Landlord as a credit against the actual amount of Tenant's
Proportionate Share required to be paid by Tenant pursuant to this Paragraph.
(b) Landlord covenants and agrees that for each year or part
of a year occurring within the Term in which the Real Estate Taxes shall be
decreased from the Real Estate Taxes levied, imposed or assessed for the Base
Tax Year, Landlord shall credit against any Additional Rent due from Tenant
hereunder within ninety (90) days after the end of such year, a sum equal to
Tenant's Proportionate Share of such decrease of Real Estate Taxes. Tenant's
Proportionate Share of said decrease of Real Estate Taxes for less than one year
shall be prorated and apportioned.
(c) Landlord may take the benefit of the provisions of any
statute or ordinance permitting any Real Estate Tax to be paid over a period of
time.
(d) Tenant's Proportionate Share of Real Estate Taxes in
excess of the Real Estate Taxes for the Base Tax Year shall be determined from
the amount finally determined to be legally due as a result of legal proceedings
or otherwise. In the event the Real Estate Taxes have not been finally
determined by legal proceedings
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or otherwise at the time of payment of Real Estate Taxes for any subsequent
year, the actual amount of Real Estate Taxes paid or accrued by Landlord or
billed by the taxing jurisdiction for the Base Tax Year shall be used to
calculate any excess thereof. Upon a final determination of the Real Estate
Taxes for the Base Year Tax by legal proceedings or otherwise, Landlord shall
deliver to Tenant a statement setting forth the amount of Real Estate Taxes for
the Base Tax Year as finally determined and showing the computation of any
adjustment due to Landlord or to Tenant by reason thereof. Any payment due to
Landlord or any credit due to Tenant by reason of such adjustment shall be made
as provided herein.
(e) If Landlord shall receive any tax refund in respect of any
tax year following the Base Tax Year, Landlord shall deduct from such tax refund
any expenses incurred in obtaining such tax refund, and out of the remaining
balance of such tax refund, Landlord shall credit to Tenant Tenant's
Proportionate Share of such refund. Any expenses incurred by Landlord in
contesting the validity or the amount of the assessed valuation of the Real
Property or of any Real Estate Taxes for any year after the Base Tax Year, to
the extent not offset by a tax refund, shall be included as an item of Real
Estate Taxes for the tax year in which such contest shall be finally determined
for the purposes of computing the Additional Rent due Landlord hereunder.
(f) If the tax year for Real Estate Taxes shall be changed,
then an appropriate adjustment shall be made in the computation of the
Additional Rent due to Landlord or any credit due to Tenant, in accordance with
sound accounting principles, to the changeover to any new tax year adopted by
any taxing authority. "Real Estate Taxes" as set forth in this Article XXVIII
shall mean those taxes attributable to the Real Property and/or the Building,
and/or contents, provided that, if because of any change in the method of
taxation of real estate any other tax or assessment is imposed upon Landlord or
the owner of the Real Property and/or the Building or upon or with respect to
the Real Property and/or the Building or the rents or income therefrom in
substitution for or in lieu of any tax or assessment which would otherwise be a
Real Estate Tax, such other tax or assessment shall be deemed Real Estate Taxes
for the purposes hereof.
(g) If the last year of the Term ends on any day other then
the last day of the tax year, any payment due to Landlord or credit due to
Tenant by reason of any increase in Real Estate Taxes shall be prorated, and
tenant covenants to pay any amount due to Landlord within thirty (30) days after
being billed therefor and Landlord covenants to credit any amount due to Tenant,
as the case may be. These covenants shall survive the Expiration Date or earlier
termination of this Lease.
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28.3 (a) As used herein, the term "Landlord's Operating Expenses" shall
mean those costs or expenses paid or incurred by Landlord for operating,
maintaining and repairing the Real Property, including, but not limited to, the
cost of electricity, water, fuel, window cleaning, janitorial service, insurance
of all kinds carried in good faith by Landlord and applicable to the Real
Property, snow removal, maintenance and cleaning of the parking lot, landscape
maintenance repairs of any kind for which Landlord is not reimbursed, painting,
replacement of worn out mechanical or damaged equipment, uniforms, management
fees, building supplies, sundries, sales or use tax on supplies or services,
wages and salaries of all persons engaged by Landlord for the operation,
maintenance and repair of the Real Property, legal and accounting expenses, and
any other expense for cost, which, in accordance with generally accepted
accounting principles and the standard management practices for the office
buildings comparable to the Building would be considered as an expense of
operating, maintaining or repairing the Real Property. Excluded from Landlord's
Operating Expenses are mortgage debt service, capital improvement costs, costs
reimbursed by insurance, the cost of work performed specifically for a tenant in
the Building for which such tenant reimburses Landlord, costs in connection with
preparing space for a new tenant and real estate broker's commissions.
(b) Tenant shall pay to Landlord as Additional Rent Tenant's
Proportionate Share of the amount by which Landlord's Operating Expenses for any
calendar year during the Term after the Base Operating Year as a specified in
Item J of the Basic Lease Provisions exceeds Landlord's Operating Expenses
during the Base Operating Year.
(c) Approximately during the second month of each calendar
year of the Term, or within a reasonable period of time thereafter, Landlord
shall submit to Tenant a statement (hereinafter referred to as "Landlord's
Statement") showing in reasonable detail Landlord's Operating Expenses during
the preceding calendar year. Within thirty (30) days next following the
submission of a Landlord's Statement, which also shows Landlord's Operating
Expenses for the Base Operating Year, Tenant shall pay to Landlord Tenant's
Proportionate Share of the amount by which Landlord's Operating Expenses for the
Base Operating Year were exceeded. Tenant or its representative shall have the
right to examine Landlord's books relating to the expenses of the Real Property
only, with respect to the items in the foregoing Landlord's Statement, during
normal business hours at any time within ten (10) days following the delivery by
Landlord to Tenant of such Landlord's Statement. Unless Tenant shall take
written exception to any item contained therein within twenty (20) days after
the delivery of same, Landlord's Statement shall be considered as final and
accepted by Tenant. Any controversy with respect to any written exception shall
be made by an independent certified public accountant mutually acceptable to
Landlord and
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Tenant, and if such accountant cannot be agreed upon, then by arbitration. Such
arbitration shall be conducted upon the request of Tenant provided that Tenant
shall be current in payments to be made pursuant to said Landlord's Statement.
Arbitration shall be before three arbitrators designated by the American
Arbitration Association and in accordance with the rules and regulations of such
Association. The expenses of arbitration proceedings shall be borne by the party
who shall not have prevailed in said proceedings. The fees of respective counsel
engaged by the parties and fees of experts and other witnesses called for by the
parties shall be paid by the respective parties engaging such counsel or calling
or engaging such witnesses.
(d) For each calendar year, Landlord shall notify Tenant of
Landlord's best estimate of Tenant's Proportionate Share of Operating Expenses
for such calendar year above Base Operating Year Operating Expenses and Tenant
shall be obligated to pay Landlord, as Additional Rent along with each monthly
installment of Basic Rent due during such calendar year, one twelfth (1/12th) of
such estimated amount. Tenant's payments of such estimated amount shall be
treated by Landlord as a credit against the actual amount of Tenant's
Proportionate Share required to be paid by Tenant pursuant to Paragraph 28.3(b)
hereof.
(e) Included in each Landlord's Statement, a reconciliation
thereof shall be made as follows: Tenant shall be debited with an increase in
the Additional Rent shown on such Landlord's Statement and credited with (1) the
aggregate amount, if any, paid by Tenant in accordance with the provisions of
Article XXVIII hereof on account of its potential obligation to pay such
decrease in the Additional Rent for the calendar year in question, and (2) and
decrease in the Additional Rent shown on such Landlord's Statement. Tenant shall
pay any net debit balance to Landlord within thirty (30) days as set forth in
Paragraph 28.3(c) above; any net credit balance shall be applied by Landlord
against the next accruing monthly installment of Additional Rent.
28.4 Any increase in Additional Rent under this Article XXVIII shall be
prorated for the final year of the Term if such year covers a period of less
that twelve (12) months. In no event shall any adjustment in Tenant's obligation
to pay Additional Rent under this Article XXVIII result in a decrease in the
Basic Rent payable hereunder. Tenant's obligation to pay Additional Rent and
Landlord's obligation to credit Tenant any amount referred to in this Article
XXVIII for the final year of the Term shall survive the Expiration Date.
28.5 With respect to Tenant's Proportionate Share of Operating Expenses
in excess of the Base Operating Year, if the Building is not at least ninety
percent (90%) occupied during the Base Operating Year or any calendar year
during the Term, then those items included within the Operating Expenses which
are affected by
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variations in occupancy of the Building shall be increased by Landlord for such
calendar year (or partial calendar year) to the amount that would have been
reasonably incurred had Landlord provided such item of work or service to ninety
percent (90%) of the rentable area of the Building.
ARTICLE XXIX
Personal Property Taxes
29.1 Tenant agrees to pay all taxes imposed on the personal property of
Tenant, the conduct of its business and its use and occupancy of the Premises.
ARTICLE XXX
Security Deposit
30.1 No security deposit is required to be deposited by Tenant.
ARTICLE XXXII
Definition of Landlord
31.1 The Term "Landlord" as used in this Lease means only the owner for
the time being of the Real Property and/or the Building or owner of a lease of
the Real Property. In the event of any transfer of title to or lease of the Real
Property, Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder and this Lease shall be deemed
and construed as a covenant running with the land without further agreement
between the parties or their successors in interest.
31.2 Landlord shall be under no personal liability with respect to any
of the provisions of this Lease, and if Landlord is in breach or default with
respect to its obligations or otherwise, Tenant shall look solely to the equity
of Landlord in the Real Property for the satisfaction of Tenant's remedies. It
is expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions and obligations of this Lease shall in no event exceed the
amount of Landlord's equity in the Real Property.
ARTICLE XXXII
Notices
32.1 Notices by either party to the other shall be in writing, sent via
registered or certified mail, return receipt requested, postage prepaid and
addressed to Landlord or Tenant at their respective addresses as specified in
Items H(1) and H(2) of the Basic Lease Provisions, or to such other addresses as
either party shall hereafter designate by notice as aforesaid. All notices
properly addressed shall be deemed served three (3) business days after the date
of mailing.
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ARTICLE XXXIII
Signs
33.1 No sign, advertisement or notice shall be affixed to or placed
upon any part of the Premises, the Building or the Real property by the Tenant,
except in such manner and of such size, design and color as shall be approved in
advance in writing by Landlord, in its sole discretion.
ARTICLE XXXIV
Notice of Defects and Accidents
34.1 Tenant shall give Landlord immediate notice in case of any
accident on the Premises involving Tenant, its servants, agents, employees,
invitees or licensees in the Building or on the Real Property or of any defects
in the Building.
ARTICLE XXXV
Rules and Regulations
35.1 Tenant, on behalf of itself and its employees, agents, servants,
invitees and licensees, agrees to comply with the Rules and Regulations with
respect to the Real Property attached hereto as Exhibit C and incorporated
herein by reference. Landlord shall have the right to make reasonable amendments
thereto from time to time for safety, care and cleanliness of the Real Property
and the Building, the preservation of good order therein and the general
convenience of all the tenants, and Tenant agrees to comply with such amended
Rules and Regulations after twenty (20) days' written notice thereof from
Landlord.
ARTICLE XXXVI
Directory
36.1 Landlord shall furnish and service in the lobby of the Building a
tenant directory. Tenant, at its expense, may request from Landlord and pay for
such reasonable and customary number of names that Tenant may from time to time
request to be listed in such directory.
ARTICLE XXXVII
Hazardous Materials and Compliance with Environmental Law.
37.1 Tenant shall not cause or permit any hazardous or toxic substance,
material or waste which is or becomes regulated by any local governmental
authority of the United States Government ("Hazardous Materials") to be brought
upon, kept or used in or about the Premises by Tenant, its agents, employees,
contractors or invitees, without the prior written consent of Landlord (which
shall not be granted unless Tenant demonstrates to Landlord's reasonable
satisfaction that such Hazardous Material is necessary or useful to Tenant's
business and will be used, kept and stored in
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a manner that complies with all laws regulating any such Hazardous Material so
brought upon or used or kept in or about the Premises). If Tenant breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Materials on the Premises, the Building or the Real Property caused or permitted
by Tenant results in contamination of the Premises, the Building, or the Real
Property by Hazardous Material or otherwise occurs for which Tenant is legally
liable to Landlord for damage resulting therefrom, Tenant shall indemnify,
defend and hold Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including, without limitation,
diminution in value of the Premises, the Building, or the Real Property, damages
for the loss of restriction on use of rentable or usable space or of any amenity
of the Premises, the Building or the Real Property, damages arising from any
adverse impact on marketing of space, and sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees) which arise during or after
the Term as a result of such contamination. This indemnification of Landlord by
Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present, including in the
soil or ground water on or under the Building. Without limiting the foregoing,
if the presence of any Hazardous Material present on the Premises, the Building,
or the Real Property caused or permitted by Tenant results in any contamination
of the Premises, the Building or the Real Property, Tenant shall promptly take
all actions at its sole expense as are necessary to return the Premises, and/or
the Building, and/or the Real Property to the condition existing prior to the
introduction of any such Hazardous Material to the Premises and/or the Building,
and/or the Real Property; provided that Landlord's approval of such actions
shall first be obtained, which approval shall not be unreasonably withheld so
long as such action would not potentially have any material adverse long-term or
short-term effect on the Premises, the Building or the Real Property.
37.2 Tenant shall, at Tenant's sole cost and expense, comply with the
requirements of any federal, state, county, municipal or other governmental law,
ordinance, rule, regulation, requirement and/or directive pertaining to the
environment (an "Environmental Law" or "Environmental Laws") including, but not
limited to, the New Jersey Spill Compensation and Control Act (N.J.S.A.
58:10-23.11 et seq.); the New Jersey Water Pollution Control Act (N.J.S.A.
58:10A-1 et seq.); the Worker and Community Right to Know Act (N.J.S.A. 34:5A-1
et seq.); the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.); the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.); and the Environmental
Cleanup Responsibility Act (N.J.S.A. 13:1K-6 et seq.) and the regulations
promulgated thereunder ("ECRA"). In this regard, Tenant shall, at
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Tenant's sole cost and expense, make all submissions to, provide all information
to and comply with all requirements of any governmental authority. Should said
governmental authority determine that action is necessary to clean up, remove
and/or eliminate any spills or discharges by Tenant or dangerous or hazardous
substances or wastes in and upon the Premises, the Building and/or the Real
Property and/or that a cleanup plan must be prepared and submitted, then and
that event, Tenant shall, at Tenant's sole cost and expense, take any and all
action required and carry out any and all approved plans. Tenant's obligations
pursuant to this Paragraph 38.2 shall arise whenever required by any appropriate
governmental agency, including, but not limited to, any closing, terminating or
transferring of operations at the Premises.
37.3 Tenant shall, at Tenant's sole cost and expense, comply with ECRA.
Tenant shall, at Tenant's sole cost and expense. make all submissions to,
provide all information to, and comply with all requirements of, the Bureau of
Industrial Site Evaluation (the "Bureau") of the New Jersey Department of
Industrial Site Evaluation (the "Bureau") of the New Jersey Department of
Environmental Protection ("NJDEP"). Should the Bureau or any other division of
NJDEP determine that a cleanup plan be prepared and that a cleanup be undertaken
because of any spills or discharges of hazardous substances or wastes at the
Premises which occur during the Term or any renewal thereof, as the case may be,
then Tenant shall, at Tenant's sole cost and expense, prepare and submit the
required plans and financial assurances, and carry out the approved plans.
Tenant's obligations under this Article XXXVIII shall arise if there is any
closing, terminating or transferring of operations by any person or entity of an
industrial establishment at the Premises pursuant to ECRA, including, without
limitation, a sale, transfer or conveyance of the Premises by Landlord, an
assignment or subletting by Tenant, or the vacation of the Premises by Tenant
for any reason whatsoever. At no expense to Landlord, Tenant shall promptly
provide all information within its personal knowledge requested by Landlord for
preparation of non-applicability affidavits and shall promptly sign such
affidavits when requested by Landlord. Tenant shall indemnify, defend and hold
harmless Landlord from all fines, suits, procedures, claims and actions of any
kind arising out of or in any way connected with any spills or discharges of
hazardous substances or wastes to the Premises which occur during the Term or
any renewal thereof, as the case may be, and from all fines, suits, proceedings,
claims and actions of any kind arising out of Tenant's failure to provide all
information, make all submissions and take all actions required by the ECRA
Bureau or any other division of NJDEP. Tenant's failure to abide by the terms of
this Article XXXVIII shall be enforceable in a court of law and subject to all
equitable remedies. Tenant's obligations hereunder shall survive the Expiration
Date of this Lease.
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37.4 Any references in this Lease to ECRA shall also include the
current New Jersey law commonly known as ISRA.
ARTICLE XXXVIII
Miscellaneous
38.1 This Lease contains the entire agreement between the parties, and
any attempt hereafter made to change, modify, discharge or effect an abandonment
of it in whole or in part shall be void and ineffective unless in writing and
signed by the party against whom the enforcement of the change, modification,
discharge or abandonment is sought.
38.2 Landlord and Tenant do hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other in any matter arising out of or in any connection with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
and/or any claim, injury or damage, or any emergency or statutory remedy.
38.3 If, by reason of strike, labor troubles or other cause beyond
Landlord's control, including, but not limited to, governmental preemption in
connection with a national emergency or any rule, order or regulation of any
Governmental Authority, or conditions of supply and demand which are affected by
war or other emergency, Landlord shall be unable to supply any service which
Landlord is obligated to supply, this Lease and Tenant's obligation to pay Basic
Rent and Additional Rent hereunder shall in no way be affected, impaired or
excused.
38.4 Tenant represents that it has not dealt with any real estate
broker in connection with this Lease, other than as specified in Item G of the
Basic Lease Provisions. Tenant indemnifies and holds Landlord harmless from and
against any and all claims, liabilities, costs or damages Landlord may incur as
a result of a breach of this representation.
38.5 If any term or provision of this Lease or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those to which it is held invalid or
unenforceable, shall not be affected thereby and all other terms and provisions
of this Lease shall be valid and enforced to the fullest extent permitted by
law.
38.6 (a) Whenever in this Lease any words of obligation or duty are
used, such words or expressions shall have the same force and effect as though
made in the form of covenants.
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(b) Words of a gender used in this Lease shall be held to
include any other gender and words in the singular number shall be held to
include the plural when the tense requires.
(c) All pronouns and any variations thereof shall be deemed to
refer to the neuter, masculine, feminine, singular or plural as the identity of
Tenant requires.
(d) This Lease shall be strictly construed neither against
Landlord nor Tenant. No remedy or elections given by any provision in this Lease
shall be deemed exclusive unless so indicated, but each shall, wherever
possible, be cumulative with all other remedies in law or equity as otherwise
specifically provided. Each provision hereof shall be deemed both a covenant and
a condition and shall run with the land.
(e) If, and to the extent that, any of the provisions of any
rider, addendum or amendment to this Lease conflict or are otherwise
inconsistent with any of the preceding provisions of this Lease, or of the Rules
and Regulations appended to this Lease, whether or not such inconsistency is
expressly noted in the rider, addendum or amendment, the provision of the rider,
addendum or amendment shall prevail, and in case of inconsistency with said
Rules and Regulations, shall be deemed a waiver of such rules and regulations
with respect to Tenant to the extent of such inconsistency.
(f) Tenant agrees that all of Tenant's covenants and
agreements herein contained providing for the payment of money and Tenant's
covenant to remove mechanics' liens shall be deemed conditions as well as
covenants, and that if default be made in any such covenants, Landlord shall
have all of the rights provided for herein.
(g) The parties mutually agree that the headings and captions
contained in this Lease are inserted for the convenience of reference only, and
are not to be deemed part of or to be used in construing this Lease.
(h) The covenants and agreements herein contained shall,
subject to the provisions of this Lease, bind and inure to the benefit of
Landlord, its successors and assigns, and Tenant, its successors and assigns
except as otherwise provided herein.
(i) This Lease shall be construed in accordance with the laws
of the State of New Jersey, and Landlord and Tenant acknowledge that all
applicable statutes of the State of New Jersey are superimposed on the rights,
duties and obligations of Landlord and Tenant hereunder and this Lease shall not
otherwise provide that which said statutes prohibit.
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(j) Landlord has made no representations or promises with
respect to the Premises or the Real Property except as expressly contained
herein. Tenant has inspected the Premises and agrees to take the same in an "as
is" condition, except as otherwise expressly set forth in Exhibit B attached
hereto and incorporated by reference herein. Landlord shall have no obligation,
except as set forth in Exhibit B, to do any work in and to the Premises to
render the Premises ready for occupancy and use by Tenant.
38.7 Tenant shall not record this Lease or a memorandum hereof.
38.8 Landlord shall have the right, upon giving to Tenant thirty (30)
days' prior written notice, to relocate Tenant by substituting for the Premises
described herein other space in the Building containing approximately as much
area as that contained in the Premises and by paying Tenant's reasonable moving
and relocation expenses. Such substituted space shall be improved by Landlord,
at its expense, with Tenant finished improvements comparable in quantity and
quality to those made in the Premises. Landlord shall pay all reasonable
expenses incurred by Tenant in connection with such relocation, including the
moving, door lettering and telephone relocation. In connection with such
relocation, Landlord and Tenant shall amend this Lease to change the description
of the Premises and any other matter which may pertain thereto.
38.9 Nothing contained in this Lease shall be deemed or construed to
create a partnership or joint venture of or between Landlord and Tenant, or to
create any other relationship between the parties hereto other than that of
landlord and tenant.
38.10 Landlord and Tenant hereby covenant each for itself, that each has
the full right, power and authority to enter into this Lease upon the terms and
conditions set forth. If Tenant signs as a corporation, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant that
Tenant is a duly authorized and existing corporation, qualified to do business
in the jurisdiction in which the Building is located, that the corporation has
full right and authority to enter to this Lease, and that each of the persons
signing on behalf of the corporation was authorized to do so.
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38.11 Submission of this Lease to Tenant for examination or signature
by Tenant shall not constitute reservation of or an option to lease, and the
same shall not be effective as a lease or otherwise until execution and delivery
by both Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease under seal on the day and year first hereinabove written.
WITNESS OR ATTEST: LANDLORD: SUMMIT PLAZA, INC.
s/Linda Lerner By: s/Mark Shefts
- -------------- -----------------
Name: Mark Shefts
Title: President
WITNESS OR ATTEST: TENANT: ALL-TECH INVESTMENT GROUP,
INC.
s/Linda Lerner By: s/Mark Shefts
- -------------- -----------------
Name: Mark Shefts
Title: President
35
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(Corporate Seal)
CORPORATE TENANT ACKNOWLEDGEMENT
STATE OF NEW YORK
ss.
COUNTY OF ROCKLAND
On this 30th day of April, 1998, before me personally came Mark Shefts,
to me known, who, being by me duly sworn, did depose and say that he resides in
the Village of Tuxedo Park, State of New York, that he is the President of the
corporation described in and which executed the foregoing Lease as Tenant; that
s/he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that she/he signed her/his name thereto by
like order.
S/Christine Ciiulla
-------------------
Notary Public
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EXHIBIT B
Landlord's Work in the Premises
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EXHIBIT C
Rules and Regulations
1. Tenant shall not (a) obstruct or permit its employees, agents,
servants, invitees or licensees to obstruct, in any way, the sidewalks, entry
passages, corridors, exit doorways, halls, stairways, or elevators of the
Building, or use the same in any way other than by means of passage to and from
the offices of Tenant; (b) bring in, store, test or use any materials in the
Building which could cause a fire or an explosion or produce any fumes or vapor;
(c) make or permit any improper noises in the Building; (d) smoke in any
elevator, throw substances of any kind out of windows or doors, or down the
passages of the Building, or in the halls or passageways, sit on or place
anything upon the window sills; or (e) clean the windows.
2. Waterclosets and urinals shall not be used for any purpose other
than those for which they were constructed, and no sweepings, rubbish, ashes,
newspaper or any other substances of any kind shall be thrown into them. Waste
and excessive or unusual use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit
light into the halls or other places of the Building shall not be obstructed. NO
SIGNS, ADVERTISEMENTS OR NOTICES SHALL BE INSCRIBED, PAINTED, AFFIXED OR
DISPLAYED IN, ON OR BEHIND ANY WINDOWS.
4. No contract of any kind with any supplier of towels, water, ice,
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning or repair of electrical fixtures, removal of
waste paper, rubbish or garbage, or other like service shall be entered into by
Tenant, nor shall any vending machine of any kind be installed in the Building
without the prior written consent of Landlord.
5. Tenant shall not employ any person or persons for the purpose of
cleaning the Premises without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed. Landlord shall not be
responsible to Tenant for any loss of property from the Premises however
occurring, or for any damage done to the effects of Tenant by janitors or any of
its employees, or by any other person or any other cause.
6. When electrical wiring of any kind is introduced, it must be
connected as directed by Landlord, and no stringing or cutting of wires will be
allowed, except with the prior written consent of Landlord, and shall be done
only be contractors approved by Landlord. The number and location of telephones,
telegraph instruments, electric appliances, call boxes, etc. shall be
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approved by Landlord. No tenant shall lay floor covering so that the same shall
be in direct contact with the floor of the Premises; and if the floor covering
is desired to be used, an interlining of builder's deadening felt shall be first
affixed to the floor by a paste or other material, the use of cement or other
similar adhesive material being expressly prohibited.
7. Tenant must submit to Landlord in writing a description of the
weight, size and positions of all safes and other bulky or heavy equipment and
all freight which Tenant proposes to bring into the Building; and including the
time of moving the same in and out of the Building. Tenant shall not bring such
items into the Building until receiving Landlord's written consent. Once such
Landlord consent is received, all such moving shall be done under the strict
supervision of Landlord or Landlord's property manager. Landlord will not be
responsible for loss or damage to any such equipment or freight from any cause;
but all damage done to the Building by moving or maintaining such equipment or
freight shall be repaired at the expense of the Tenant. All safes shall stand on
a base of such size as shall be designated by Landlord. 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 these Rules and Regulations or
the Lease of which these Rules and Regulation are a part.
8. No machinery of any kind or articles of unusual weight or size will
be allowed in the Building without the prior written consent of Landlord.
Business machines and mechanical equipment shall be placed and maintained by
Tenant at Tenant's expense, in settings sufficient (including proper floor
load), in Landlord's judgment, to absorb and prevent vibration, noise and
annoyance to other tenants.
9. No additional lock or locks shall be placed by Tenant on any door in
the Building without the prior written consent of Landlord. Two keys shall be
initially be furnished to Tenant by Landlord; two addition keys shall be
supplied to Tenant by Landlord upon request without charge; any additional keys
requested by Tenant shall be paid for by Tenant. Tenant, its agents and
employees shall not have any duplicate key made and shall not change any lock.
All keys to doors and washrooms shall be returned to Landlord on or before the
Expiration Date or earlier termination of this Lease, and, in the event of a
loss of any keys furnished, Tenant shall pay Landlord the cost thereof.
10. No bicycles, vehicles (except wheelchairs) or animals of any kind
shall be brought into or kept in or about the Premises.
11. The requirements of Tenant will be attended to only upon
application at the office of Landlord or Landlord's property manager. Employees
of Landlord or Landlord's property manager shall not perform any work for Tenant
or do anything outside of
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their regular duties unless under special instructions from Landlord.
12. The Premises shall not be used for lodging or sleeping purposes,
and cooking therein is prohibited.
13. Tenant shall not conduct, or permit any other person to conduct,
any auction upon the Premises; manufacture or store goods, wares or merchandise
upon the Premises without the prior written approval of Landlord, except the
storage of usual supplies and inventory to be used by Tenant in the conduct of
its business; permit the Premises to be used for gambling; make any unusual
noises in the Building; permit to be played any musical instrument in the
Premises; permit to be played any radio, television, recorded or wired music in
such a loud manner as to disturb or annoy other tenants; or permit any unusual
odors to be produced upon the Premises.
14. Tenant shall be entitled to access to the Building by master key
during non-business or overtime hours; it shall be Tenant's responsibility to
secure the Premises at the nonbusiness hours when Tenant enters or leaves the
Building.
15. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Premises without
the prior consent of Landlord. All blinds must be of a quality, type, design and
color, and attached in a manner, approved by Landlord.
16. Canvassing, soliciting and peddling on the Real Property or in the
Building are prohibited, and Tenant shall cooperate to prevent the same.
17. There shall not be used in the Premises or in the Building either
by Tenant or by others in the delivery or receipt of merchandise, supplies or
equipment, any handtrucks except those equipped with rubber tires and side
guards. If delivery or pickup is being made which requires the use of a
handtruck on the elevator, Tenant shall ensure that proper padding shall be
utilized in the elevator.
19. Landlord shall have the right to prohibit any advertising by Tenant
which in Landlord's opinion tends to impair the reputation of the Building or
its desirability for offices, and upon written notice from Landlord, Tenant
shall refrain from or discontinue such advertising.
20. Each tenant, before closing and leaving the Premises, shall ensure
that all windows are closed and all entrance doors are closed and locked.
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21. No animals of any kind shall be allowed in the Building except for
working dogs.
22. Landlord hereby reserves to itself any and all rights not granted
to Tenant hereunder, including, but not limited to, the following rights, which
are reserved for Landlord's purposes in operating the Building: (a) the
exclusive right to the use of the name of the Building for all purposes, for
Landlord or anyone Landlord might designate, except that Tenant may use the name
as its business address and for no other purpose; (b) the right to change the
name or address of the Building, without incurring any liability to Tenant for
so doing; (c) the right to install and maintain a sign or signs on the exterior
of the Building; (d) the exclusive right to use or dispose of the use of the
roof of the Building; (e) the right to limit the space on the directory of the
Building allotted to Tenant; (f) the right to grant to anyone the right to
conduct any particular business or undertaking in the Building.
23. Tenant shall list all articles to be taken from the Building (other
than those taken out in the usual course of business of Tenant) on Tenant's
letterhead, or a blank which will be furnished by Landlord. Such list shall be
presented at the office of the Building's property manager for approval before
such articles are taken from the Building.
24. Tenant shall have the non-exclusive right to use in common with
Landlord and other tenants of the Building and their employees and invitees the
unassigned parking area provided by Landlord for the parking of passenger
automobiles. Landlord may issue parking permits, install a gate system, and
impose any other system as Landlord deems necessary for the use of the parking
area. Tenant agrees that it and its employees and invitees shall not park their
automobiles in parking spaces allocated to others by Landlord and shall comply
with such rules and regulations for the use of the parking area as Landlord may
from time to time prescribe. Landlord shall not be responsible for any damage to
or theft of any vehicle in the parking area and shall not be required to keep
parking spaces clear of unauthorized vehicles or to otherwise supervise the use
of parking area. Landlord reserves the right to change any existing or future
parking area, roads, or driveways, and may make any repairs or alterations it
deems necessary to the parking area, roads and driveways and to temporarily
revoke or modify the parking rights granted to Tenant hereunder. The persistent
or frequent violation of this right by Tenant, its employees and invitees which
continues after written notice from Landlord shall be deemed a default by Tenant
under the terms of this Lease and shall also subject Tenant to a revocation by
Landlord of Tenant's right to use any parking spaces.
25. Tenant shall not use the Premises or permit the Premises to be used
for the sale of food and beverages.
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26. For the protection of Tenant and Landlord, as their interests may
appear, Tenant hereby agrees at its own expense to maintain in full force and
effect at all times during the Term of this Lease policies of insurance, issued
by a responsible carrier or carriers acceptable to Landlord, which afford the
following coverage:
A. Workmen's Compensation Statutory
B. Employers Liability Not less than $100,000
C. Broad Form Comprehensive Not less than $1,000,000
General Liability Insurance combined single limit for
including Contractual both bodily injury and
Liability, Broad Form property damage
Property Damage, Personal
Injury, Completed Operations,
Products Liability, Fire Damage
27. Tenant, its employees and agents hereby agree to abide by
reasonable rules and regulations of which Tenant shall be notified in writing
pertaining to the use of the Building as may be hereafter promulgated from time
to time by Landlord.
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EMPLOYMENT AGREEMENT made April 20, 1998 between All-Tech Investment
Group, Inc., a Delaware corporation ("the Corporation"), with principal offices
at 160 Summit Avenue, Montvale, New Jersey 07645 and HARVEY HOUTKIN, who resides
at 99 Oratam Road, Airmont, New York 10952 ("the Employee").
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment, Acceptance and Term.
The Corporation hereby employs the Employee and the Employee
hereby accepts employment from the Corporation for a term of three years,
commencing on the effective date of the initial public offering of Common Stock
by the Company. The term of employment hereunder may be extended from time to
time by such additional period or periods as shall be mutually agreed to in
writing by the Corporation and the Employee.
2. Duties and Authority.
2.1 During the term of his employment hereunder the Employee
shall devote substantially all of his time and energies to the business and
affairs of the Corporation. The Employee agrees to use his best efforts, skill
and abilities to promote the Corporation's interests; to serve as a director and
officer of the Corporation and any of its subsidiary corporations if elected by
the Board of Directors or stockholders of the Corporation and any such
subsidiary corporation; and to perform such duties (consistent with his status
as set forth below in this Paragraph 2 as may be assigned to him by the Board of
Directors of the Corporation.
2.2 Subject to the direction and control of the Corporation's
Board of Directors, the Employee shall be the Chairman, Chief Executive Officer
and Secretary of the Corporation. The Employee will perform his services subject
only to the direction and control of the Corporation's Board of Directors and
will report only to the Corporation's Board of Directors.
2.3 The Corporation's management will recommend to its Board
of Directors that so long as the Employee's employment by the Corporation
continues (i) the Employee be nominated for election as a director at each
meeting of stockholders held for an election of directors; (ii) the Employee be
elected as Chairman and Chief Executive Officer of the Corporation by the Board
of Directors at its first meeting following the execution of this Agreement, and
that the Employee be elected Chairman and Chief Executive Officer of the
Corporation at each meeting of directors thereafter called therefor; (iii) if
the Board of Directors of the Corporation shall appoint an Executive Committee,
the Employee be elected to serve as a member of such committee; and (iv) the
<PAGE>
Corporation shall not confer on any other officer or employee, except its
president, authority, responsibility or powers superior or equal to the
authority, responsibility or powers vested in the Employee.
3. Compensation.
3.1 As an inducement to the Employee to enter into this
Agreement, and in consideration of the services to be rendered by the Employee
under this Agreement, the Corporation shall pay to the Employee during the each
year he renders his services hereunder the amount of $500,000.
3.2 During the term of his employment hereunder the
Corporation shall pay to the Employee, in addition to the amount paid to the
Employee under the preceding Paragraph 3.1, the Employee shall be entitled to 5%
of the net earnings before taxes of the Corporation for each such year, payable
quarterly, to a maximum of $500,000 for each of the first two years of the term
hereof and to a maximum of $1,500,000 for the third year of the term hereof.
3.3 In addition to the foregoing, the employee may elect to
participate in the All-Tech Investment Group, Inc. 401(k) Plan in respect of any
year. The Corporation agrees to review the Employee's compensation hereunder not
less than annually and may make such increases therein as the Corporation shall,
in its discretion, deem appropriate taking into account all relevant factors.
4. Expenses.
4.1 Upon submission of proper vouchers, the Corporation will
pay or reimburse the Employee for all transportation (first-class), hotel and
living expenses incurred by the Employee on business trips outside Montvale, New
Jersey and for all other business and entertainment expenses reasonable incurred
by him in connection with the business of the Corporation and its subsidiaries
during the term of his employment hereunder.
4.2 In order to facilitate the performance of the Employee's
duties hereunder, and otherwise for the convenience and in the interests of the
Corporation, the Corporation will furnish to the Employee for his use seven days
a week a passenger automobile. All expenses of operating, repairing, insuring,
garaging and otherwise maintaining such automobile shall be borne and paid for
by the Corporation.
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5. Stock Options; Insurance.
5.1 The Employee shall be entitled to participate in the
Corporation's Qualified Stock Option Plan, a copy of which has heretofore been
furnished to the Employee.
5.2 If the life insurance coverage provided to the Employee
under the Corporation's general insurance plans shall be less than $1,000,000
the Corporation shall (subject to the Employee passing any required physical
examination) furnish to the Employee and pay all premiums computed at standard
premium rates on one or more additional policies of term life insurance having
an aggregate coverage equal to the difference between $1,000,000 and the
coverage available to the Employee under the said general insurance plans. The
Employee shall be insured under such additional policies (which shall have
benefits and other features no less favorable to the Employee than those
applicable under the Corporation's general insurance plans) and shall have the
right to designate all beneficiaries thereunder and to select any settlement
options available thereunder. The Employee will take all action reasonable
requested by the Corporation in connection with the procurement of such
additional policies of life insurance. All references in this Paragraph 5.2 to
life insurance provided under the Corporation's general insurance plans shall
include all death benefits payable under the All-Tech Investment Group, Inc.
401(k) Plan and any subsequently adopted pension plan.
6. Additional Benefits.
In addition to the compensation, expenses and other benefits
to be paid or provided under Paragraphs 4 and 5, the Employee will be entitled
to participate in any insurance, pension or other benefit plan of the
Corporation or any of its subsidiaries now existing or hereafter adopted for the
benefit of the executives or employees generally of the Corporation or any
subsidiary. No payment under this Agreement shall be deemed to constitute
payment to the Employee, his legal representatives or beneficiaries, in lieu of,
or pension or other benefit or payment under any such insurance, pension or
other benefit plan, and no payment under any such plan shall decrease any
payment or benefit under this Agreement, except that any amounts paid on account
to the Employee's contribution to any Benefit Plan shall be deemed part of
Employee's compensation as provided in Paragraph 3.2.
7. Termination of Employee at End of Term; Amount of Such Termination.
7.1 In the event of the Employee's death during his employment
by the Corporation, the Corporation shall pay to the Employee's estate the
compensation due Employee hereunder through the last day of the calendar month
in which death shall have occurred, or to such person or persons as Employee may
designate by a writing
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to the Corporation from time to time or, in if there is no such designation, to
his legal representatives. Such compensation shall be determined by multiplying
the Employee's salary by a fraction the numerator of which shall be the number
of months of the year that shall have elapsed through the last day of the
calendar month in which the Employee's death shall have occurred and the
denominator of which fraction shall be twelve; from the amount so determined
there shall be deducted all payments theretofore made to or for the benefit of
the Employee under Paragraph 3.2 here in respect of the year involved.
7.2 This Agreement may be terminated by the Corporation before
the expiration of the term of employment hereunder if the Employee becomes
disabled during his employment hereunder so that he is unable to substantially
perform his services hereunder for an aggregate of six months within any period
of twelve consecutive months. Such termination shall be determined by resolution
of the Corporation's Board of Directors after the expiration of said six months,
said termination to be effective thirty (30) days after written notice to the
Employee of the adoption of such resolution. The compensation due Employee
hereunder shall be paid through the last day of the calendar month in which such
termination shall have occurred. Such compensation shall be determined by
multiplying Employee's salary by a fraction, the numerator of which shall be the
number of months of the year that shall have elapsed through the last day of the
calendar month in which such termination shall have occurred and the denominator
of which fraction shall be twelve; from the amount so determined there shall be
deducted all payments theretofore made to or for the benefit of the Employee
under Paragraph 3.2 hereof in respect of the year involved.
7.3 If the Employee shall not be elected (and continued during
the term of his employment hereunder) as Chairman and Chief Executive Officer of
the Corporation and as a member of the Executive Committee (if any) appointed by
the Board of Directors of the Corporation, or if the Employee shall not be
afforded the authority, responsibilities and prerogatives contemplated in
Paragraph 2.2 hereof; the Employee shall have the right to terminate his
employment under this Agreement by sixty (60) days' prior written notice to the
Corporation given at any time within ninety (90) days after such event. If the
Employee elects to terminate his employment pursuant to this Paragraph 7.3, the
Employee shall nevertheless have the right to continue to receive from the
Corporation as severance payments and in consideration of the Employee's
continued compliance with the covenant not to compete contained in Paragraph 10
(in lieu of any other rights or claims the Employee may have in respect of this
Agreement) (i) payment of all amounts that would otherwise have been paid to the
Employee, at the time or times such amounts would otherwise have been paid to
the Employee, as compensation under Paragraph 3.2 during the entire balance of
the three year term of employment provided for in this Agreement and (ii) a
continuation
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for the entire balance of such three year term of the life insurance coverage to
be provided and paid for by the Corporation for the entire balance of such three
year term of the life insurance coverage to be provided and paid for by the
Corporation pursuant to Paragraph 5.2; provided, however, if the unexpired
portion of the term of employment hereunder shall be less than twenty-four
months at the time such termination becomes effective, the amounts payable by
the Corporation under the preceding clauses (i) and (ii), which amounts shall be
paid as severance payments and in consideration of the Employee's continued
compliance with the covenant not to compete contained in Paragraph 10, shall be
paid for a period of twenty-four months following the effective date of such
termination. If the Employee shall die or become disabled subsequent to the
termination of his employment under this Paragraph 7.3, such death or disability
shall not diminish or impair his (or his legal representative's or other
successor's) right to receive the payments and benefits provided for in this
Paragraph 7.3.
7.4. If the Employee shall be discharged without cause during
the term of his employment hereunder, he shall be entitled to receive from the
Corporation (in lieu of any rights or claims the Employee may have in respect of
this Agreement), as severance payments and in consideration of the Employee's
continued compliance with the covenant not to compete contained in Paragraph 10,
amounts and life insurance coverage determined in the same manner and for the
same period as provided in Paragraph 7.3.
7.5 If the Employee shall be discharged for cause during the
term of his employment hereunder, the Corporation's obligation to pay
compensation or other amounts payable hereunder to or for the benefit of the
Employee shall terminate on the date of such discharge. As used herein the term
"for cause" shall mean and include chronic alcoholism, drug addiction,
dishonesty, malfeasance and misfeasance.
8. Payments Upon Expiration of Initial or Additional
Employment Term.
8.1 If the Employee remains in the employ of the Corporation
during the entire initial three year term of employment provided herein and if
the Employee is willing to renew or extend the term of his employment for an
additional period of not less than three years beyond the initial three year
term of employment provided herein, on substantially the same terms and
conditions applicable during the third year of such employment term (including,
without limitation, the rate of compensation payable to the Employee under
Paragraph 3.2, and the other benefits available to the Employee hereunder,
during such third year), but the Corporation is unwilling to enter into a
renewal or extension of the Employee's employment on such terms and conditions,
then the Employee shall receive as severance compensation and in consideration
of the Employee's continued compliance with the covenant not to compete
contained in
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<PAGE>
Paragraph 10, for a period of twelve months following the expiration of the
three year term of employment hereunder, (i) payment of all amounts that would
otherwise have been paid to the Employee, at the time or times such amounts
would otherwise have been paid to the Employee, as compensation under Paragraph
3.2 as if the provisions of such Paragraph 3.2 were applicable during such
period of twelve months and (ii) a continuation during such period of
twelve months of the life insurance coverage to be provided and paid for by
the Corporation pursuant to Paragraph 5.2. The Employee acknowledges and agrees
that not other payments or benefits hereunder shall be paid to or available to
him in respect of such period of twelve months. If the Employee shall die or
become disabled subsequent to the termination of the three year term of
employment provided herein, such death or disability shall not diminish or
impair his (or his legal representative's or other successor's) right to receive
the payments and benefits provided for in this Paragraph 8.1.
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8.2 The terms and conditions applicable to the additional
term of employment hereunder shall not obligate the Corporation to issue to the
Employee any stock options.
9. Change of Control: Extension of Employment Term; Employee's
Status; Payments Upon Termination During Extended Terms
9.1 If at any time during the three year term of employment
hereunder control of the Corporation shall be obtained by any person or persons
not now in control acting in concert (including, without limitation, the
acquisition of control incident to the merger or consolidation of the
Corporation with or into any other corporation, or the acquisition by any other
corporation of all or substantially all of the assets and business of the
Corporation), the term of the Employee's employment hereunder shall, without any
further action by the Board of Directors of the Corporation or otherwise,
automatically be extended for a period of months equal to such number of months
as shall be necessary, when added to the number of months of the original three
year term of employment then remaining, to bring the then remaining term of
employment hereunder to three years, commencing on the effective date of such
transfer of control. As used in this paragraph the word "control" shall mean the
direct or indirect ownership of voting shares of stock of the Corporation (or
any successor pursuant to a merger, consolidation or sale of all or
substantially all of the assets and business of the Corporation) sufficient to
direct or cause the direction of the management and policies of the Corporation.
9.2 If the term of the Employee's employment hereunder shall
be automatically extended pursuant to Paragraph 9.1 in connection with the
merger or consolidation of the Corporation with or into any other corporation,
or the acquisition by any other corporation of all or substantially all of the
assets and business of the Corporation, and if the Employee's status as chief
operating officer or chief executive officer, as the case may be, of the
Corporation immediately prior to the transaction involved shall not continue
after such transaction with respect to the parent corporation of the combined or
successor enterprise, or if with respect thereto he shall not be afforded the
authority, responsibilities and prerogatives contemplated in
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<PAGE>
Paragraphs 2.2 and 2.3, the Employee shall have the right to terminate his
employment hereunder pursuant to Paragraph 7.3.
9.3 If the term of Employee's employment hereunder shall be
automatically extended pursuant to Paragraph 9.1 and thereafter during such
extended term the Employee's employment hereunder shall terminate pursuant to
Paragraph 7.3 or 7.4, the amounts payable pursuant to such applicable paragraph
to or for the benefit of the Employee following such termination of employment
shall, notwithstanding anything to the contrary contained in Paragraph 7.3 or
7.4, not be paid beyond the longer of (i) the period that would have been
applicable under Paragraph 7.3 or 7.4, as the case may be, if the term of
Employee's employment had not theretofore been extended pursuant to Paragraph
9.1 or (ii) twelve months.
10. Covenant Not to Compete.
The Employee recognizes that the services to be performed by
the Employee hereunder are special, unique and extraordinary and that by reason
of his employment hereunder, the Employee will acquire confidential information
and trade secrets concerning the Corporation's operation and the operations of
the Corporation's affiliates. Accordingly, for all purposes hereunder or in
respect hereof, the Employee agrees that during the longer of (i) any period or
periods in or in respect of which the Employee is receiving or has received the
compensation provided for in Paragraph 3.2 hereof whether or not the Employee is
employed by or rendering services to the Corporation during such period or
periods), or (ii) the period of the Employee's employment hereunder and a period
of two years after termination of such employment (whether voluntary on the
Employee's part or otherwise and for or without cause) (except that such period
of two years shall be (A) reduced to one year if the Employee shall have
remained in the employ of the Corporation hereunder for an aggregate period of
at least six years and (B) eliminated entirely if such aggregate period shall be
at least nine years), the Employee will not, directly or indirectly, as an
officer, director, stockholder, partner, associate, employee, consultant, owner,
agent, creditor, co-venturer or otherwise, become or be interested in or be
associated with any other corporation, firm or business engaged, in any
geographical area in which the Corporation or any of its affiliates are so
engaged, in the same or any similar or competitive business with that of the
Corporation or with that of the Corporation's affiliates. The Employee's
ownership, directly or indirectly, of not more than two percent of the issued
and outstanding stock (or debt obligations not aggregating more than $500,000)
of any corporation the shares of which are regularly traded on a national
securities exchange or in the over-the-counter market shall not in any event be
deemed to be a violation of the provisions of this Paragraph. The Corporation
shall be entitled, in addition to any other right and remedy it may have, at law
or in equity, to an injunction, without the posting of any bond or other
security, enjoining or
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restraining the Employee from any violation or threatened violation of this
Paragraph, and the Employee hereby consents to the issuance of such injunction;
provided, however, the foregoing shall not prevent the Employee from contesting
the issuance of any such injunction on the ground that no violation or
threatened violation of this Paragraph had occurred. If any of the restrictions
contained herein shall be deemed to be unenforceable by reason of the extent,
duration or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form this paragraph shall
then be enforceable in the manner contemplated hereby. A violation by the
Employee of the covenant not to compete contained in this Paragraph 10 shall not
give the Corporation a right to claim damages from the Employee based upon or
measured by, in whole or in part, the amount paid to the Employee pursuant to
Paragraph 3.1.
11. Confidentiality.
The Employee shall not divulge to anyone, either during or at
any time after the termination of his employment, any information constituting a
trade secret acquired by him concerning the Corporation and its affiliates'
trade secrets. The Employee acknowledges that any such information is of a
confidential and secret character and of great value to the Corporation and its
affiliates, and upon the termination of his employment the Employee shall
forthwith deliver up to the Corporation all notebooks and other data in his
possession relating thereto. The Corporation shall be entitled, in addition to
any other right and remedy it may have, at law or in equity, to an injunction,
without the posting of any bond or other security, enjoining or restraining the
Employee from any violation or threatened violation of this Paragraph, and the
Employee hereby consents to the issuance of such injunction; provided, however,
the foregoing shall not prevent the Employee from contesting the issuance of any
such injunction on the injunction on the ground that no violation or threatened
violation of this Paragraph had occurred.
12. Indemnification.
The Corporation will indemnify the Employee and his legal
representatives, to the fullest extent permitted by the laws of the State of
Delaware and the existing By-laws of the Corporation, and the Employee shall be
entitled to the protection of any insurance policies the Corporation may elect
to maintain generally for the benefit of its directors and officers, against all
costs, charges and expenses whatsoever incurred or sustained by him or his legal
representatives in connection with any action, suit or preceding to which he or
his legal representatives may be made a party by reason of his being or having
been a director or officer of the Corporation or any of its subsidiaries. This
Paragraph 12 will survive termination of Agreement.
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13. Notices.
Any notice or other communication required to or which may be
given to any party hereunder shall be in writing and shall be deemed given
effectively if delivered personally to such party (or, in the case of the
Corporation, to the General Counsel), if given by facsimile transmission,
receipt confirmed, or if mailed by registered or certified mail, postage
prepaid, addressed to such party as follows (the date of mailing of any such
notice is deemed the date of delivery thereof):
To Employee:
Harvey Houtkin
99 Oratam Road
Airmont, New York 10952
To the Corporation:
All-Tech Investment Group, Inc.
160 Summit Ave.
Montvale, NJ 07645
With a copy given in the aforesaid manner to:
Linda Lerner, Esq.
All-Tech Investment Group, Inc.
Montvale, New Jersey 07645
Any party may change the persons and addresses to which notices or
other communications are to be sent by giving notice of such change to the other
party in the manner provided herein for giving notice.
14. Employee's Representations and Warranties.
The Employee, in order to induce the Corporation to enter into
and perform this Agreement, represents and warrants to the Corporation that he
is not a party to any contract, agreement or understanding which prevents or
prohibits the Employee from entering into this Agreement or fully performing all
of his obligations hereunder. In the event of any material inaccuracy in or
material breach of the foregoing representations or warranties, the Corporation
shall have the right to terminate this Agreement forthwith without any
liability, hereunder or otherwise, to the Employee.
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15. Miscellaneous.
15.1 The Employee recognizes that this Agreement is personal
to him and none of the Employee's obligations under this Agreement may be
assigned or delegated by him. The Corporation may assign to any affiliate such
of the Corporation's rights and obligations hereunder as such assignee has the
power to perform and as may be enjoyed or discharged by such affiliate without
interfering with the rights or prerogatives of the Employee under this
Agreement, but the Corporation nevertheless shall remain liable for the full
performance of all of its obligations hereunder. This Agreement shall also be
assignable by the Corporation and be binding upon any corporate successor in
interest incident to any merger, consolidation or sale of all or substantially
all of the assets and business of the Corporation.
15.2 This Agreement is to be governed by and interpreted in
accordance with the laws of the State of New Jersey applicable to agreements
made and to be performed wholly within such State.
15.3 Notwithstanding anything to the contrary herein, nothing
herein is intended to or shall operate to restrict the right of the Corporation
and its subsidiaries to amend, terminate or modify, in accordance with the terms
thereof, any or all of the employee benefit programs or practices referred to in
this Agreement or otherwise heretofore or hereafter adopted by the Corporation
or any of its affiliates; provided, however, no such amendment, termination or
modification shall diminish or impair any rights specifically granted to the
Employee in this Agreement.
15.4 As used herein the term "affiliate" of any corporation
shall mean and include any other corporation, partnership or other entity or
enterprise which, directly or indirectly, is controlled by, controls or is under
common control with, such corporation. For the purposes of the preceding
sentence the word "control" (including the terms "controlling," "controlled by"
and "under common control with") shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract, or
otherwise.
15.5 If either party should waive any breach of any provision
of this Agreement, such party will not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provisions of this
Agreement.
15.6 This instrument is the entire agreement of the parties
with respect to the subject matter hereof and may not be amended, supplemented,
cancelled or discharged except by written instrument executed by both parties
hereto. The parties do not intend to confer any benefit hereunder on any third
person and, without limiting
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the generality of the foregoing, the parties may, in writing, without notice to
or consent of any third person, at any time waive any rights hereunder or amend
this Agreement in any respect or terminate this Agreement.
15.7 The termination of the Employee's employment hereunder
shall not affect those provisions of this Agreement that by their terms apply to
any period or periods subsequent to such termination.
15.9 In the event any amounts or other benefits are payable to
or for the Employee (or to his legal representatives or other successors)
pursuant to Paragraphs 7.3, 7.4 or 8 in respect of any period following the
termination of his employment hereunder, such amounts or other benefits shall
not be reduced in any manner by reason of (i) the amount paid to the Employee
pursuant to Paragraph 3.1 or (ii) any other earnings, income or benefits of or
to the Employee from any other source.
15.10 Paragraph headings are inserted herein for convenience
only and do not constitute a part and shall not affect the interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ALL-TECH INVESTMENT GROUP, INC.
By: s/Harvey Houtkin
---------------------------
Chairman of the Board
s/Harvey Houtkin
---------------------------
Harvey Houtkin
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EMPLOYMENT AGREEMENT made April 20, 1998 between All-Tech Investment
Group, Inc., a Delaware corporation ("the Corporation"), with principal offices
at 160 Summit Avenue, Montvale, New Jersey 07645 and MARK SHEFTS, who resides at
2 East Lake Road, Tuxedo Park, New York 10987 ("the Employee").
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment, Acceptance and Term.
The Corporation hereby employs the Employee and the Employee
hereby accepts employment from the Corporation for a term of three years,
commencing on the effective date of the initial public offering of Common Stock
by the Company. The term of employment hereunder may be extended from time to
time by such additional period or periods as shall be mutually agreed to in
writing by the Corporation and the Employee.
2. Duties and Authority.
2.1 During the term of his employment hereunder the Employee
shall devote substantially all of his time and energies to the business and
affairs of the Corporation. The Employee agrees to use his best efforts, skill
and abilities to promote the Corporation's interests; to serve as a director and
officer of the Corporation and any of its subsidiary corporations if elected by
the Board of Directors or stockholders of the Corporation and any such
subsidiary corporation; and to perform such duties (consistent with his status
as set forth below in this Paragraph 2 as may be assigned to him by the Board of
Directors of the Corporation.
2.2 Subject to the direction and control of the Corporation's
Board of Directors, the Employee shall be the President, Chief Operating
Officer, Chief Financial Officer and Treasurer of the Corporation. The Employee
will perform his services subject only to the direction and control of the
Corporation's Board of Directors and will report only to the Corporation's Board
of Directors.
2.3 The Corporation's management will recommend to its Board
of Directors that so long as the Employee's employment by the Corporation
continues (i) the Employee be nominated for election as a director at each
meeting of stockholders held for an election of directors; (ii) the Employee be
elected as President, Chief Operating Officer, Chief Financial Officer and
Treasurer of the Corporation by the Board of Directors at its first meeting
following the execution of this Agreement, and that the Employee be elected
President and Chief Operating Officer of the Corporation at each meeting of
directors thereafter called therefor; (iii) if the Board of Directors of
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the Corporation shall appoint an Executive Committee, the Employee be elected to
serve as a member of such committee; and (iv) the Corporation shall not confer
on any other officer or employee, except its Chairman, authority, responsibility
or powers superior or equal to the authority, responsibility or powers vested in
the Employee.
3. Compensation.
3.1 As an inducement to the Employee to enter into this
Agreement, and in consideration of the services to be rendered by the Employee
under this Agreement, the Corporation shall pay to the Employee during the each
year he renders his services hereunder the amount of $500,000.
3.2 During the term of his employment hereunder the
Corporation shall pay to the Employee, in addition to the amount paid to the
Employee under the preceding Paragraph 3.1, the Employee shall be entitled to 5%
of the net earnings before taxes of the Corporation for each such year, payable
quarterly, to a maximum of $500,000 for each of the first two years of the term
hereof and to a maximum of $1,500,000 for the third year of the term hereof.
3.3 In addition to the foregoing, the employee may elect to
participate in the All-Tech Investment Group, Inc. 401(k) Plan in respect of any
year. The Corporation agrees to review the Employee's compensation hereunder not
less than annually and may make such increases therein as the Corporation shall,
in its discretion, deem appropriate taking into account all relevant factors.
4. Expenses.
4.1 Upon submission of proper vouchers, the Corporation will
pay or reimburse the Employee for all transportation (first-class), hotel and
living expenses incurred by the Employee on business trips outside Montvale, New
Jersey and for all other business and entertainment expenses reasonable incurred
by him in connection with the business of the Corporation and its subsidiaries
during the term of his employment hereunder.
4.2 In order to facilitate the performance of the Employee's
duties hereunder, and otherwise for the convenience and in the interests of the
Corporation, the Corporation will furnish to the Employee for his use seven days
a week a passenger automobile. All expenses of operating, repairing, insuring,
garaging and otherwise maintaining such automobile shall be borne and paid for
by the Corporation.
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5. Stock Options; Insurance.
5.1 The Employee shall be entitled to participate in the
Corporation's Qualified Stock Option Plan, a copy of which has heretofore been
furnished to the Employee.
5.2 If the life insurance coverage provided to the Employee
under the Corporation's general insurance plans shall be less than $1,000,000
the Corporation shall (subject to the Employee passing any required physical
examination) furnish to the Employee and pay all premiums computed at standard
premium rates on one or more additional policies of term life insurance having
an aggregate coverage equal to the difference between $1,000,000 and the
coverage available to the Employee under the said general insurance plans. The
Employee shall be insured under such additional policies (which shall have
benefits and other features no less favorable to the Employee than those
applicable under the Corporation's general insurance plans) and shall have the
right to designate all beneficiaries thereunder and to select any settlement
options available thereunder. The Employee will take all action reasonable
requested by the Corporation in connection with the procurement of such
additional policies of life insurance. All references in this Paragraph 5.2 to
life insurance provided under the Corporation's general insurance plans shall
include all death benefits payable under the All-Tech Investment Group, Inc.
401(k) Plan and any subsequently adopted pension plan.
6. Additional Benefits.
In addition to the compensation, expenses and other benefits
to be paid or provided under Paragraphs 4 and 5, the Employee will be entitled
to participate in any insurance, pension or other benefit plan of the
Corporation or any of its subsidiaries now existing or hereafter adopted for the
benefit of the executives or employees generally of the Corporation or any
subsidiary. No payment under this Agreement shall be deemed to constitute
payment to the Employee, his legal representatives or beneficiaries, in lieu of,
or pension or other benefit or payment under any such insurance, pension or
other benefit plan, and no payment under any such plan shall decrease any
payment or benefit under this Agreement, except that any amounts paid on account
to the Employee's contribution to any Benefit Plan shall be deemed part of
Employee's compensation as provided in Paragraph 3.2.
7. Termination of Employee at End of Term; Amount of Such Termination.
7.1 In the event of the Employee's death during his employment
by the Corporation, the Corporation shall pay to the Employee's estate the
compensation due Employee hereunder through the last day of the calendar month
in which death shall have occurred, or to such person or persons as Employee may
designate by a writing
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to the Corporation from time to time or, in if there is no such designation, to
his legal representatives. Such compensation shall be determined by multiplying
the Employee's salary by a fraction the numerator of which shall be the number
of months of the year that shall have elapsed through the last day of the
calendar month in which the Employee's death shall have occurred and the
denominator of which fraction shall be twelve; from the amount so determined
there shall be deducted all payments theretofore made to or for the benefit of
the Employee under Paragraph 3.2 here in respect of the year involved.
7.2 This Agreement may be terminated by the Corporation before
the expiration of the term of employment hereunder if the Employee becomes
disabled during his employment hereunder so that he is unable to substantially
perform his services hereunder for an aggregate of six months within any period
of twelve consecutive months. Such termination shall be determined by resolution
of the Corporation's Board of Directors after the expiration of said six months,
said termination to be effective thirty (30) days after written notice to the
Employee of the adoption of such resolution. The compensation due Employee
hereunder shall be paid through the last day of the calendar month in which such
termination shall have occurred. Such compensation shall be determined by
multiplying Employee's salary by a fraction, the numerator of which shall be the
number of months of the year that shall have elapsed through the last day of the
calendar month in which such termination shall have occurred and the denominator
of which fraction shall be twelve; from the amount so determined there shall be
deducted all payments theretofore made to or for the benefit of the Employee
under Paragraph 3.2 hereof in respect of the year involved.
7.3 If the Employee shall not be elected (and continued during
the term of his employment hereunder) as President of the Corporation and as a
member of the Executive Committee (if any) appointed by the Board of Directors
of the Corporation, or if the Employee shall not be afforded the authority,
responsibilities and prerogatives contemplated in Paragraph 2.2 hereof; the
Employee shall have the right to terminate his employment under this Agreement
by sixty (60) days' prior written notice to the Corporation given at any time
within ninety (90) days after such event. If the Employee elects to terminate
his employment pursuant to this Paragraph 7.3, the Employee shall nevertheless
have the right to continue to receive from the Corporation as severance payments
and in consideration of the Employee's continued compliance with the covenant
not to compete contained in Paragraph 10 (in lieu of any other rights or claims
the Employee may have in respect of this Agreement) (i) payment of all amounts
that would otherwise have been paid to the Employee, at the time or times such
amounts would otherwise have been paid to the Employee, as compensation under
Paragraph 3.2 during the entire balance of the three year term of employment
provided for in this Agreement and (ii) a continuation
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for the entire balance of such three year term of the life insurance coverage to
be provided and paid for by the Corporation for the entire balance of such three
year term of the life insurance coverage to be provided and paid for by the
Corporation pursuant to Paragraph 5.2; provided, however, if the unexpired
portion of the term of employment hereunder shall be less than twenty-four
months at the time such termination becomes effective, the amounts payable by
the Corporation under the preceding clauses (i) and (ii), which amounts shall be
paid as severance payments and in consideration of the Employee's continued
compliance with the covenant not to compete contained in Paragraph 10, shall be
paid for a period of twenty-four months following the effective date of such
termination. If the Employee shall die or become disabled subsequent to the
termination of his employment under this Paragraph 7.3, such death or disability
shall not diminish or impair his (or his legal representative's or other
successor's) right to receive the payments and benefits provided for in this
Paragraph 7.3.
7.4. If the Employee shall be discharged without cause during
the term of his employment hereunder, he shall be entitled to receive from the
Corporation (in lieu of any rights or claims the Employee may have in respect of
this Agreement), as severance payments and in consideration of the Employee's
continued compliance with the covenant not to compete contained in Paragraph 10,
amounts and life insurance coverage determined in the same manner and for the
same period as provided in Paragraph 7.3.
7.5 If the Employee shall be discharged for cause during the
term of his employment hereunder, the Corporation's obligation to pay
compensation or other amounts payable hereunder to or for the benefit of the
Employee shall terminate on the date of such discharge. As used herein the term
"for cause" shall mean and include chronic alcoholism, drug addiction,
dishonesty, malfeasance and misfeasance.
8. Payments Upon Expiration of Initial or Additional Employment
Term.
8.1 If the Employee remains in the employ of the Corporation
during the entire initial three year term of employment provided herein and if
the Employee is willing to renew or extend the term of his employment for an
additional period of not less than three years beyond the initial three year
term of employment provided herein, on substantially the same terms and
conditions applicable during the third year of such employment term (including,
without limitation, the rate of compensation payable to the Employee under
Paragraph 3.2, and the other benefits available to the Employee hereunder,
during such third year), but the Corporation is unwilling to enter into a
renewal or extension of the Employee's employment on such terms and conditions,
then the Employee shall receive as severance compensation and in consideration
of the Employee's continued compliance with the covenant not to compete
contained in
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Paragraph 10, for a period of twelve months following the expiration of the
three year term of employment hereunder, (i) payment of all amounts that would
otherwise have been paid to the Employee, at the time or times such amounts
would otherwise have been paid to the Employee, as compensation under Paragraph
3.2 as if the provisions of such Paragraph 3.2 were applicable during such
period of twelve months and (ii) a continuation during such period of
twelve months of the life insurance coverage to be provided and paid for by
the Corporation pursuant to Paragraph 5.2. The Employee acknowledges and agrees
that not other payments or benefits hereunder shall be paid to or available to
him in respect of such period of twelve months. If the Employee shall die or
become disabled subsequent to the termination of the three year term of
employment provided herein, such death or disability shall not diminish or
impair his (or his legal representative's or other successor's) right to receive
the payments and benefits provided for in this Paragraph 8.1.
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8.2 The terms and conditions applicable to the additional term
of employment hereunder shall not obligate the Corporation to issue to the
Employee any stock options.
9. Change of Control: Extension of Employment Term; Employee's
Status; Payments Upon Termination During Extended Terms
9.1 If at any time during the three year term of employment
hereunder control of the Corporation shall be obtained by any person or persons
not now in control acting in concert (including, without limitation, the
acquisition of control incident to the merger or consolidation of the
Corporation with or into any other corporation, or the acquisition by any other
corporation of all or substantially all of the assets and business of the
Corporation), the term of the Employee's employment hereunder shall, without any
further action by the Board of Directors of the Corporation or otherwise,
automatically be extended for a period of months equal to such number of months
as shall be necessary, when added to the number of months of the original three
year term of employment then remaining, to bring the then remaining term of
employment hereunder to three years, commencing on the effective date of such
transfer of control. As used in this paragraph the word "control" shall mean the
direct or indirect ownership of voting shares of stock of the Corporation (or
any successor pursuant to a merger, consolidation or sale of all or
substantially all of the assets and business of the Corporation) sufficient to
direct or cause the direction of the management and policies of the Corporation.
9.2 If the term of the Employee's employment hereunder shall
be automatically extended pursuant to Paragraph 9.1 in connection with the
merger or consolidation of the Corporation with or into any other corporation,
or the acquisition by any other corporation of all or substantially all of the
assets and business of the Corporation, and if the Employee's status as chief
operating officer or chief executive officer, as the case may be, of the
Corporation immediately prior to the transaction involved shall not continue
after such transaction with respect to the parent corporation of the combined or
successor enterprise, or if with respect thereto he shall not be afforded the
authority, responsibilities and prerogatives contemplated in
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Paragraphs 2.2 and 2.3, the Employee shall have the right to terminate his
employment hereunder pursuant to Paragraph 7.3.
9.3 If the term of Employee's employment hereunder shall be
automatically extended pursuant to Paragraph 9.1 and thereafter during such
extended term the Employee's employment hereunder shall terminate pursuant to
Paragraph 7.3 or 7.4, the amounts payable pursuant to such applicable paragraph
to or for the benefit of the Employee following such termination of employment
shall, notwithstanding anything to the contrary contained in Paragraph 7.3 or
7.4, not be paid beyond the longer of (i) the period that would have been
applicable under Paragraph 7.3 or 7.4, as the case may be, if the term of
Employee's employment had not theretofore been extended pursuant to Paragraph
9.1 or (ii) twelve months.
10. Covenant Not to Compete.
The Employee recognizes that the services to be performed by
the Employee hereunder are special, unique and extraordinary and that by reason
of his employment hereunder, the Employee will acquire confidential information
and trade secrets concerning the Corporation's operation and the operations of
the Corporation's affiliates. Accordingly, for all purposes hereunder or in
respect hereof, the Employee agrees that during the longer of (i) any period or
periods in or in respect of which the Employee is receiving or has received the
compensation provided for in Paragraph 3.2 hereof whether or not the Employee is
employed by or rendering services to the Corporation during such period or
periods), or (ii) the period of the Employee's employment hereunder and a period
of two years after termination of such employment (whether voluntary on the
Employee's part or otherwise and for or without cause) (except that such period
of two years shall be (A) reduced to one year if the Employee shall have
remained in the employ of the Corporation hereunder for an aggregate period of
at least six years and (B) eliminated entirely if such aggregate period shall be
at least nine years), the Employee will not, directly or indirectly, as an
officer, director, stockholder, partner, associate, employee, consultant, owner,
agent, creditor, co-venturer or otherwise, become or be interested in or be
associated with any other corporation, firm or business engaged, in any
geographical area in which the Corporation or any of its affiliates are so
engaged, in the same or any similar or competitive business with that of the
Corporation or with that of the Corporation's affiliates. The Employee's
ownership, directly or indirectly, of not more than two percent of the issued
and outstanding stock (or debt obligations not aggregating more than $500,000)
of any corporation the shares of which are regularly traded on a national
securities exchange or in the over-the-counter market shall not in any event be
deemed to be a violation of the provisions of this Paragraph. The Corporation
shall be entitled, in addition to any other right and remedy it may have, at law
or in equity, to an injunction, without the posting of any bond or other
security, enjoining or
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restraining the Employee from any violation or threatened violation of this
Paragraph, and the Employee hereby consents to the issuance of such injunction;
provided, however, the foregoing shall not prevent the Employee from contesting
the issuance of any such injunction on the ground that no violation or
threatened violation of this Paragraph had occurred. If any of the restrictions
contained herein shall be deemed to be unenforceable by reason of the extent,
duration or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form this paragraph shall
then be enforceable in the manner contemplated hereby. A violation by the
Employee of the covenant not to compete contained in this Paragraph 10 shall not
give the Corporation a right to claim damages from the Employee based upon or
measured by, in whole or in part, the amount paid to the Employee pursuant to
Paragraph 3.1.
11. Confidentiality.
The Employee shall not divulge to anyone, either during or at
any time after the termination of his employment, any information constituting a
trade secret acquired by him concerning the Corporation and its affiliates'
trade secrets. The Employee acknowledges that any such information is of a
confidential and secret character and of great value to the Corporation and its
affiliates, and upon the termination of his employment the Employee shall
forthwith deliver up to the Corporation all notebooks and other data in his
possession relating thereto. The Corporation shall be entitled, in addition to
any other right and remedy it may have, at law or in equity, to an injunction,
without the posting of any bond or other security, enjoining or restraining the
Employee from any violation or threatened violation of this Paragraph, and the
Employee hereby consents to the issuance of such injunction; provided, however,
the foregoing shall not prevent the Employee from contesting the issuance of any
such injunction on the injunction on the ground that no violation or threatened
violation of this Paragraph had occurred.
12. Indemnification.
The Corporation will indemnify the Employee and his legal
representatives, to the fullest extent permitted by the laws of the State of
Delaware and the existing By-laws of the Corporation, and the Employee shall be
entitled to the protection of any insurance policies the Corporation may elect
to maintain generally for the benefit of its directors and officers, against all
costs, charges and expenses whatsoever incurred or sustained by him or his legal
representatives in connection with any action, suit or preceding to which he or
his legal representatives may be made a party by reason of his being or having
been a director or officer of the Corporation or any of its subsidiaries. This
Paragraph 12 will survive termination of Agreement.
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13. Notices.
Any notice or other communication required to or which may be
given to any party hereunder shall be in writing and shall be deemed given
effectively if delivered personally to such party (or, in the case of the
Corporation, to the General Counsel), if given by facsimile transmission,
receipt confirmed, or if mailed by registered or certified mail, postage
prepaid, addressed to such party as follows (the date of mailing of any such
notice is deemed the date of delivery thereof):
To Employee:
Mark Shefts
2 East Lake Road
Tuxedo Park, New York 10987
To the Corporation:
All-Tech Investment Group, Inc.
160 Summit Ave.
Montvale, NJ 07645
With a copy given in the aforesaid manner to:
Linda Lerner, Esq.
All-Tech Investment Group, Inc.
Montvale, New Jersey 07645
Any party may change the persons and addresses to which notices or
other communications are to be sent by giving notice of such change to the other
party in the manner provided herein for giving notice.
14. Employee's Representations and Warranties.
The Employee, in order to induce the Corporation to enter into
and perform this Agreement, represents and warrants to the Corporation that he
is not a party to any contract, agreement or understanding which prevents or
prohibits the Employee from entering into this Agreement or fully performing all
of his obligations hereunder. In the event of any material inaccuracy in or
material breach of the foregoing representations or warranties, the Corporation
shall have the right to terminate this Agreement forthwith without any
liability, hereunder or otherwise, to the Employee.
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15. Miscellaneous.
15.1 The Employee recognizes that this Agreement is personal
to him and none of the Employee's obligations under this Agreement may be
assigned or delegated by him. The Corporation may assign to any affiliate such
of the Corporation's rights and obligations hereunder as such assignee has the
power to perform and as may be enjoyed or discharged by such affiliate without
interfering with the rights or prerogatives of the Employee under this
Agreement, but the Corporation nevertheless shall remain liable for the full
performance of all of its obligations hereunder. This Agreement shall also be
assignable by the Corporation and be binding upon any corporate successor in
interest incident to any merger, consolidation or sale of all or substantially
all of the assets and business of the Corporation.
15.2 This Agreement is to be governed by and interpreted in
accordance with the laws of the State of New Jersey applicable to agreements
made and to be performed wholly within such State.
15.3 Notwithstanding anything to the contrary herein, nothing
herein is intended to or shall operate to restrict the right of the Corporation
and its subsidiaries to amend, terminate or modify, in accordance with the terms
thereof, any or all of the employee benefit programs or practices referred to in
this Agreement or otherwise heretofore or hereafter adopted by the Corporation
or any of its affiliates; provided, however, no such amendment, termination or
modification shall diminish or impair any rights specifically granted to the
Employee in this Agreement.
15.4 As used herein the term "affiliate" of any corporation
shall mean and include any other corporation, partnership or other entity or
enterprise which, directly or indirectly, is controlled by, controls or is under
common control with, such corporation. For the purposes of the preceding
sentence the word "control" (including the terms "controlling," "controlled by"
and "under common control with") shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract, or
otherwise.
15.5 If either party should waive any breach of any provision
of this Agreement, such party will not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provisions of this
Agreement.
15.6 This instrument is the entire agreement of the parties
with respect to the subject matter hereof and may not be amended, supplemented,
cancelled or discharged except by written instrument executed by both parties
hereto. The parties do not intend to confer any benefit hereunder on any third
person and, without limiting
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the generality of the foregoing, the parties may, in writing, without notice to
or consent of any third person, at any time waive any rights hereunder or amend
this Agreement in any respect or terminate this Agreement.
15.7 The termination of the Employee's employment hereunder
shall not affect those provisions of this Agreement that by their terms apply to
any period or periods subsequent to such termination.
15.9 In the event any amounts or other benefits are payable to
or for the Employee (or to his legal representatives or other successors)
pursuant to Paragraphs 7.3, 7.4 or 8 in respect of any period following the
termination of his employment hereunder, such amounts or other benefits shall
not be reduced in any manner by reason of (i) the amount paid to the Employee
pursuant to Paragraph 3.1 or (ii) any other earnings, income or benefits of or
to the Employee from any other source.
15.10 Paragraph headings are inserted herein for convenience
only and do not constitute a part and shall not affect the interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ALL-TECH INVESTMENT GROUP, INC.
By: s/Harvey Houtkin
------------------------
Chairman of the Board
s/Mark Shefts
------------------------
Mark Shefts
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FULLY DISCLOSED CLEARING AGREEMENT
This Fully Disclosed Clearing Agreement (the "Agreement") is executed
and entered into by and between Southwest Securities, Inc. ("Southwest"), a
Delaware corporation, and All-Tech Investment Group, Inc. ("Correspondent"), New
York corporation.
WHEREAS, Correspondent is in the process of registering or is registered
with the Securities Exchange Commission ("SEC") as a broker-dealer of securities
in accordance with Section 15(b) of the Securities and Exchange Act of 1934 (the
"Act") and is applying for membership or is a member of the National Association
of Securities Dealers, Inc. ("NASD"), and desires to enter into an agreement
with Southwest for Southwest to clear and maintain customer accounts on behalf
of Correspondent; and
WHEREAS, Southwest meets all requirements of the SEC to function as a
clearing broker or dealer, and desires to enter into an agreement to clear and
maintain cash, margin or other accounts ("Accounts") for Correspondent or
customers of Correspondent ("Customers"), (such Accounts of Correspondent and
Customers being hereinafter referred to as "Correspondent Accounts" and
"Customer Accounts," respectively).
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of guarantee of this Agreement by any guarantor(s), and for other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES; AGENCY RELATIONSHIP
(a) Representations and Warranties of Correspondent. Correspondent
represents and warrants to Southwest that:
(i) Correspondent is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation, and authorized to conduct business in each state
where such authorization is required.
(ii) Correspondent has all the requisite authority in conformity with
all applicable laws and regulations to enter into this Agreement
and to retain the services of Southwest in accordance with the
terms hereof.
(iii) Correspondent shall not conduct any securities business in
accordance with the terms of this Agreement unless or until it
is accepted as a member in good standing of the NASD, its
registration with the SEC is effective, and it is duly licensed
in accordance with the provisions of any applicable state
securities laws.
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(iv) Correspondent shall not conduct any business in securities
unless it has all requisite authority, whether arising under
applicable federal or state laws, rules and regulations, or
under the bylaws and rules of any securities exchange or
securities association to which Correspondent is subject.
(v) Correspondent has no arrangement with any other firm for the
provision by such other firm of clearing services for any
Customer Accounts or Correspondent Accounts, or if any such
arrangement exists Correspondent has fully disclosed the nature
of such arrangement to Southwest in writing.
(b) Representations and Warranties of Southwest. Southwest represents and
warrants to Correspondent that:
(i) Southwest is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware and
authorized to do business in each state where such authorization
is required.
(ii) Southwest is registered as a broker-dealer with the SEC and is
in compliance with the rules and regulations thereof.
(iii) Southwest is a member corporation in good standing of the NASD
and is in compliance with the rules and regulations thereof.
(iv) Southwest is in compliance with the rules and regulations of
each national securities exchange of which it is a member.
2. CUSTOMER AND CORRESPONDENT ACCOUNTS
Responsibility for compliance with the provisions of the NASD Rules of Fair
Practice regarding opening, approving and monitoring Customer Accounts shall be
allocated between Southwest and Correspondent as set forth in this Section 2.
(a) Account Documentation. Correspondent will be responsible for obtaining
and verifying all required information and the identity of each
potential Customer. Correspondent will be responsible for obtaining and
furnishing to Southwest all customary and necessary documents related to
Customer Accounts and Correspondent Accounts, and such other
documentation as Southwest may reasonably require from time to time, all
in such form as shall be reasonably acceptable to Southwest.
Correspondent also will be responsible for the transmissions of all
required documents to Southwest on a timely basis, but in any event
within seven (7) days after a request to open an account is made to
Southwest. Correspondent acknowledges its obligations to retain all
documents in an easily accessible place in accordance with any
applicable rules and regulations of regulatory or self-regulatory
agencies or bodies, and Correspondent agrees to provide original
documents by overnight delivery or a legible copy by facsimile
transmission of such documents within twenty-four (24) hours of a
request from Southwest. Correspondent will be responsible for complying
with the requirement of SEC Rule 15c2-5, if applicable.
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(b) Knowledge of Customer and Customer's Investment Objectives.
Correspondent will be responsible for learning and documenting all the
facts relative to every Customer necessary to insure compliance by
Correspondent with applicable rules and regulations, including the
information and instructions submitted to Southwest pursuant to Section
2(a), any additional facts relative to the Customer's investment
objectives, and to the nature of every Customer Account, every order and
every person holding power of attorney over any Customer Account.
Correspondent shall be solely responsible for any issues regarding the
suitability of any investments for its Customers.
(c) Acceptance of Accounts. An authorized officer of Correspondent shall
accept and approve each Customer and Customer Account. Each Customer and
Customer Account approved by Correspondent and opened with Southwest
shall be subject to Southwest's acceptance. Southwest reserves the right
to withhold acceptance of, or to reject, for any reason, any Customer,
Customer Account, Correspondent Account or any transaction for any
Account and to terminate any Account previously accepted by Southwest.
Acceptance of each Account shall be conditioned upon Southwest's receipt
of all required completed forms as required by Section 2(a).
Correspondent shall not submit such forms with respect to any Customer
Account unless Correspondent has in its possession the documentation of
all information required pursuant to Section 2(b). Southwest shall be
under, no obligation to accept any Account as to which any documentation
required to be submitted to Southwest or maintained by Correspondent
pursuant to Sections 2(a) and (b) is incomplete. Prior to acceptance of
any Account, no action taken by Southwest or any of its employees,
including, without being limited to, clearing a trade in any Account,
shall be deemed to be or shall constitute acceptance of such Account.
(d) Supervision of Transactions and Accounts. Correspondent will be
responsible for the review and supervision of, and the suitability of,
investments made by each and every one of its Customers and for the
supervision and monitoring of all discretionary Accounts maintained by
Correspondent, and Southwest shall have no responsibility for such. An
authorized officer of Correspondent shall approve each transaction in
each Customer Account accepted by Southwest. Correspondent shall be
responsible for insuring that all transactions in and activities related
to all Accounts opened by it with Southwest, including discretionary
Accounts, will be in compliance with all applicable laws, rules and
regulations of the United States, the states thereof, and regulatory and
self-regulatory agencies and bodies, including any laws relating to
Correspondent's fiduciary responsibilities to Customers, either under
the Employee Retirement Income Security Act of 1974 or otherwise; and in
this connection, Correspondent shall diligently supervise the activities
of its officers, employees and representatives with respect to such
Accounts. Southwest will perform clearing services provided for in this
Agreement for Accounts accepted by it in accordance with the terms of
this Agreement, as it may be amended from time to time, and otherwise in
accordance with its reasonable business judgment. To the extent, if any,
that Southwest accepts from Correspondent orders for execution in
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<PAGE>
accordance with Section 7(a). Correspondent shall be responsible for
informing Southwest of the location of the securities that are the
subject of the order so that Southwest may comply with the provisions
of 3110 of the NASD Conduct Rules.
(e) Accounts of Associated Persons. In each case in which a Customer is an
employee or otherwise associated with an NASD member, Correspondent
shall be responsible for notifying such member in accordance with the
provisions of Article III, Section 28 of the NASD Rules of Fair
Practice.
(f) Account Responsibility for Certain Purposes. Notwithstanding anything
herein to the contrary, for purposes of the Securities Investment
Protection Act of 1970 and the financial responsibility rules of the
Securities and Exchange Commission only, the Customer Accounts are the
responsibility of Southwest. Nothing in this Section 2(f) will otherwise
change or affect the provisions of this Agreement or any information
provided to Customers (including the Customer Information Brochure
provided to Correspondent by Southwest), which provide that each
Customer remains a Customer of Correspondent for all other purposes,
including but not limited to sales practices, supervision, suitability,
etc, Further, it is understood that Correspondent is not Southwest's
agent for sales purposes and neither Correspondent nor any of its
employees or agents can bind Southwest or make representations on
Southwest's behalf to any Customers regarding any transaction cleared by
Southwest on Correspondent's behalf.
3. EXTENSION OF CREDIT
Responsibility for compliance with the provisions of Regulation T
issued by the Board of Governors of the Federal Reserve System pursuant to the
Securities Exchange Act of 1934 ("Regulation T") and all other applicable rules,
regulations and requirements of any exchange or regulatory agency affecting the
extension of credit shall be allocated between Southwest and Correspondent as
set forth in this Section 3.
(a) Margin Agreements. At the time of opening of each margin account,
Correspondent will furnish Southwest with a Southwest Margin and Short
Account Customer Agreement, executed by Customer, on the form furnished
to Correspondent by Southwest.
(b) Margin and Margin Maintenance. Correspondent is responsible for assuring
Customer's payment of Customer's initial margin requirements and of all
amounts necessary to meet subsequent maintenance calls in each Customer
Account, to insure compliance with Regulation T and the house rules of
Southwest. Correspondent is responsible for the payment of initial
margin requirements and of all amounts necessary to meet subsequent
margin calls in each Correspondent Account.
Southwest shall have the unlimited right to buy in or sell out
positions in Accounts whenever Southwest in its sole discretion deems
such action appropriate, and without regard to whether, if the Account
is a Margin Account, any such Account is then in
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<PAGE>
compliance with applicable margin maintenance requirement or has
requested an extension of time for any Account to make any payment
required by Regulation T. Correspondent acknowledges that Southwest
has the right to demand payment on any debit balance and that
Correspondent is responsible to Southwest for any unsecured debit
balance resulting from any failure of a Customer to make any such
payments upon demand.
(c) Margin Requirements. Southwest will be responsible for setting minimum
margin requirements and advising Correspondent when calls are issued.
Southwest may change the margin requirements applicable to any Account
or class of accounts, as described in its house rules; Correspondent
shall be responsible for advising its Customer of the changed
requirements and for the payment by Customer of any additional margin
necessary to insure compliance with such increased requirements.
Correspondent may establish for any of its Customer Accounts higher
minimum margin requirements than those requirements established by
Southwest; however Southwest will not be responsible for monitoring the
higher minimum on behalf of Correspondent, unless the higher standard is
one that can be accommodated by the Southwest computer system.
(d) Extensions. Correspondent will be responsible for advising Southwest to
obtain extensions under appropriate federal regulations. Only Southwest
shall perform the clerical function of obtaining requested extensions
from the applicable regulatory authorities.
(e) Losses. In addition to, and not in limitation of, Correspondent's
agreement to indemnify Southwest pursuant to the provisions of Section
10, Correspondent indemnifies and holds harmless Southwest from and
against any and all loss, cost, expense and liability (including legal
and accounting fees and expenses) sustained by Southwest arising out of
any of the following events:
any failure by any Customer to comply with the terms of its Customer
Margin and Short Account Agreement with Southwest;
Southwest's re-booking of margin transactions as cash transactions;
Southwest's broker's execution of a transaction for the account of a
Customer;
the failure of Correspondent or any Customer, in a margin transaction,
to comply with Regulation T;
the failure of Correspondent to satisfy its obligations under this
Section 3; or
in a cash transaction, the failure of delivery of securities sold or
failure of payment for securities purchased in accordance with the
provisions of Regulation T; the return to Southwest unpaid of any
check given to Southwest by Correspondent or any Customer; or the
payment for and/or delivery of all "when issued" transactions which
Southwest may accept or execute for the Accounts.
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<PAGE>
4. MAINTENANCE OF BOOKS AND RECORDS
(a) Southwest's Books and Records. Southwest will maintain stock records and
other records on a basis consistent with generally accepted practices in
the securities industry and will maintain copies of such records as are
produced by Southwest, in accordance with all applicable rules and
regulations of regulatory and self-regulatory agencies and bodies,
including the NASD and SEC guidelines for record retention in effect
from time to time. In connection with Customer Accounts, Southwest will
maintain and preserve such books and records pertaining thereto,
pursuant to the requirements of SEC Rule 17a-3, as are customarily made
and kept by Southwest.
(b) Correspondent's Books and Records. Notwithstanding the provisions of
Section 4(a), Correspondent shall maintain ledgers (or other records)
reflecting all assets and liabilities, income and expenses and capital
accounts; monies borrowed and monies loaned (together with a record of
the collateral therefor and any substitution in such collateral); a
record of the computation of aggregate indebtedness and net capital
pursuant to SEC Rule 15c3-1; and personnel files including applications
for employment executed by each "associated person". Correspondent also
shall maintain a memorandum of each brokerage order, and of any other
instruction, given or received for the purchase or sale of securities,
whether executed or unexecuted. Such memorandum shall show the terms and
conditions of the order or instructions and of any modification or
cancellation thereof, the account for which entered, the time of entry,
the price at which executed and, to the extent feasible, the time of
execution or cancellation.
(c) Books and Records of Both Parties. Southwest and Correspondent shall
each be responsible for preparing and filing the reports required by the
regulatory and self-regulatory agencies and bodies that have
jurisdiction over each, and Southwest and Correspondent will each
provide the other with such information, if any, which is in the control
of one party but is required by the other to prepare any such report.
5. RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES
(a) Receipt and Delivery in the Ordinary Course of Business. As between
Southwest and Correspondent, the party having possession of Customer
funds or securities shall be responsible for safeguarding such funds and
securities. Correspondent shall promptly transmit securities and/or
funds to Southwest when securities and/or funds are to be delivered to
Southwest. However, Southwest will not be responsible for any funds or
securities delivered by a Customer or Correspondent, its agents or
employees, until such funds or securities are physically delivered to
Southwest's premises and accepted by an authorized representative of
Southwest or deposited in bank accounts maintained in Southwest's name.
Correspondent shall be responsible for the prompt payment to Southwest
for securities purchased and prompt delivery of securities sold in
Customer
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<PAGE>
Accounts. Correspondent shall be responsible for the authenticity of
all certificates and delivery of certificates in good form by Customers
to Southwest.
With respect to all payments made or to be made to Southwest, by or for
a Customer of Correspondent, Correspondent shall immediately forward
all such funds to Southwest, either by U. S. Mail or mutually
acceptable courier service or by deposit to local depositary bank, and
an officer of Correspondent shall verify and warrant that said funds
are credited to the proper Southwest Customer Account, and further
shall notify Southwest to enter on Southwest's books and records said
deposit of Customer funds.
With respect to any securities certificates delivered to Southwest for
a Customer of Correspondent, an officer of Correspondent shall verify
and warrant (i) that any securities not bearing a restricted legend are
fully paid for and freely tradable; (ii) that Correspondent has no
reason to suspect any defect or irregularity with respect to any
securities and any endorsements thereon; (iii) that the securities are
free of any liens and adverse claims, (iv) that the party transferring
the securities has legal title to them or the authority to effect the
proposed transfer; and (v) that the regulatory requirements restricting
the sale or transfer of securities that bear a restrictive legend
(pursuant to SEC Rules 144 or 145 or otherwise) have been satisfied or
will be satisfied within the appropriate time frames.
Correspondent acknowledges that it is solely responsible for satisfying
any loss or shortfall of a Customer Account, or for any other event
which causes the assets in a Customer Account to be insufficient in
amount or otherwise unavailable to timely meet the obligations of
Customer to Southwest.
(b) Custody Services. Whenever Southwest has been instructed to act as
custodian of the securities in any Correspondent or Customer Account, or
to hold such securities in "safekeeping," Southwest may hold the
securities in the Customer's name or may cause such securities to be
registered in the name of Southwest or its nominee or in the names of
nominees of any depository used by Southwest. Southwest will perform the
services required in connection with acting as custodian for securities
in Correspondent and Customer accounts, such as (i) collection and
payment of dividends; (ii) transmittal and handling (through
Correspondent) of tenders or exchanges pursuant to tender offers and
exchange offers; (iii) transmittal of proxy materials and other
shareholder communications; and (iv) handling of exercises or
expirations of rights and warrants, and of redemptions of securities.
(c) Receipt and Delivery Pursuant to Special Instruction. Upon instruction
from Correspondent and/or a Customer, Southwest will make such transfers
of securities or Accounts as may be requested. Correspondent shall be
responsible for determining if any securities held in Correspondent or
Customer Accounts are "restricted securities" or "control stock" as
defined by the rules of the SEC and that orders executed for such
securities are in compliance with the applicable laws, rules and
regulations.
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(d) Draft-Issuing Authority. At its discretion Southwest may authorize
certain of Correspondent's employees to sign drafts, with Correspondent
as the drawer, payable to Correspondent's Customers in amounts and
pursuant to conditions as may be determined by Southwest from time to
time. Correspondent agrees that it will not request Southwest to
authorize someone to sign drafts who is not an employee of
Correspondent. With respect to any drafts so issued by Correspondent, an
officer of Correspondent shall verify and warrant before causing the
draft to be issued (i) that the funds to be transmitted are due payee
and that payee has the authority to receive those funds; (ii) that the
funds are free of any liens or adverse claims at the time of payment,
and are not expected to become subject to any such liens or claims
within the foreseeable future; and (iii) that the funds are not needed
at the time of payment to satisfy margin or other collateral
requirements of the Customer.
Correspondent agrees to fully indemnify Southwest from the negligence,
fraud or mistakes of Correspondent, Correspondent's employees,
independent agents and contractors and Customers in connection with any
draft issuing authority granted hereunder. Southwest may in its
discretion require Correspondent to post a performance bond in such
amount and with such deductible as Southwest may determine in order to
protect Southwest against any such losses. Furthermore, Correspondent
authorizes Southwest to charge any Correspondent Account or other assets
of Correspondent held by Southwest with the amount of any such losses.
Notwithstanding Section 5(a), Southwest will not be responsible for the
safeguarding of funds withdrawn by Correspondent or Correspondent's
employees pursuant to such draft issuing authority. Southwest may
withdraw this draft issuing privilege without notice at any time during
the term of this Agreement. Notwithstanding anything herein to the
contrary, Southwest may at any time, at its sole discretion, despite any
prior authorization, refuse payment on any draft for which Correspondent
is drawer and Southwest is drawee.
6. CONFIRMATIONS AND STATEMENTS
(a) Preparation and Transmissions. Southwest will prepare and send to
Customers monthly statements of account (or quarterly statements if no
activity occurs in an account during the calendar quarter covered by
such statement), which statements shall meet Southwest's requirements as
to format and quality and will indicate that Correspondent introduced
the Account. Unless otherwise agreed, Southwest will be responsible for
preparing and transmitting confirmations; provided, however, that
Correspondent may elect to prepare and transmit confirmations, subject
to prior approval by Southwest and compliance by Correspondent with the
provisions of 2230 NASD Conduct Rules. Correspondent shall not generate
and/or prepare any statements, billings or confirmations respecting any
Account except as provided in this Agreement or pursuant to an agreement
executed between Southwest and Correspondent that authorizes
Correspondent to print and mail statements to Accounts on behalf of
Southwest. If such an agreement has been executed, Correspondent
covenants that it shall comply with all requirements for
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<PAGE>
statements imposed upon Southwest of which Correspondent has notice or
has been advised of by Southwest under all applicable laws, rules and
regulations, including, but not limited to, the SEC, NASD, Federal
Reserve Board and all other regulatory and self-regulatory agencies and
bodies. Correspondent further covenants that it shall not modify or
amend the agreed upon statement form provided without the prior written
consent of Southwest.
(b) Examination and Notification of Errors. Correspondent shall examine
promptly all monthly statements of account, monthly statements of
clearing services and other reports provided to Correspondent by
Southwest. Correspondent shall notify Southwest of any error claimed by
Correspondent in any Account in connection with (i) any transaction
prior to the settlement date of such transaction, (ii) information
appearing on daily reports within seven (7) calendar days of such
report, and (iii) information appearing on monthly statements or reports
within thirty (30) calendar days of Correspondent's receipt of any
monthly statement or report. Any notice of error shall be accompanied by
such documentation as may be necessary to substantiate Correspondent's
claim. Correspondent shall provide promptly upon Southwest's request any
additional documentation which Southwest reasonably believes is
necessary or desirable to determine and correct any such error.
7. ACCEPTANCE OF ORDERS, EXECUTION OF TRANSACTIONS, OTHER SERVICES
(a) Customers' Orders. Orders received by Correspondent can be executed by
Correspondent or forwarded to Southwest for execution. The party
executing the order shall be responsible for errors in execution.
Acceptance of orders from Customers shall be the responsibility of
Correspondent, and Correspondent shall be responsible for the
authenticity of all orders. Correspondent shall promptly transmit all
orders to Southwest, and Southwest shall have no responsibility for
orders not promptly transmitted. Correspondent shall advise each of its
Customers that its relationship with Southwest is solely that of an
introducing broker to a clearing broker and that, except as set forth in
Section 2(f) above, Correspondent bears all responsibility for the
Customer's Account. Southwest reserves the right to reject any Customer
order transmitted to Southwest for execution or any order executed by
Correspondent and reported to Southwest for clearance. Correspondent
assumes the risk of failure by any dealer with which Correspondent
executes an order in the event such dealer fails to perform, and will
reimburse Southwest for any loss and/or costs incurred by it in the
transaction.
(b) Transaction Clearing. During the term of this Agreement, Southwest will
clear transactions on a fully disclosed basis for Accounts of
Correspondent and the Customers that Correspondent introduces and
Southwest accepts as provided in Section 2-(c); provided that Southwest
reserves the right not to clear any particular transactions for
Correspondent or Correspondent's Customers.
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(c) Other Services. Southwest will perform such other services, upon such
terms and at such prices, as Southwest and Correspondent shall agree
from time to time.
8. FEES AND SETTLEMENTS FOR SECURITIES TRANSACTIONS
(a) Commissions; Fees for Clearing Services
(i) Correspondent has provided to Southwest its basic commission
schedule and Southwest will charge each Customer the commission
shown on such schedule or which Correspondent otherwise directs
Southwest to charge on each transaction. Correspondent's basic
commission schedule may be amended from time to time by written
instructions to Southwest from Correspondent; provided, however,
that Southwest shall be required to implement such changes only to
the extent they are within the usual capabilities of Southwest's
data processing and operations systems and only over such
reasonable time as Southwest may deem necessary or desirable to
avoid disruption of Southwest's normal operational capabilities.
Southwest may charge Correspondent for changes in the basic
commission schedule. Correspondent's basic commission schedule
shall be within the format of Southwest's computer system.
(ii) Southwest will charge Correspondent for clearing services
according to the fee schedule set forth in Schedule A attached
hereto and, if applicable, Schedule B.
(iii) Southwest may charge Correspondent expenses incurred by Southwest
on behalf of Correspondent pursuant to this Agreement. Expenses
incurred by Southwest on behalf of Correspondent that may be
deducted from any payments due to Correspondent from Southwest
include, but are not limited to, overlay of forms, system
equipment expenses, special programming, changes to commissions
schedules and financial report information related thereto,
installation of data communication lines and brokerage related
credit inquiries, legal transfers, Regulation T extensions,
Mailgrams (buy-in or sellout), microfiche of records, insurance
protection for Accounts in excess of the amounts provided by the
Security Investors Protection Corporation, third party vendor fees
and costs incurred in failure of Correspondent or Customers to
provide correct social security or tax identification numbers.
(b) Settlements. Southwest will collect commissions from Customers on behalf
of Correspondent and through Correspondent. As soon as practicable after
the end of each month, Southwest will forward to the Correspondent a
statement showing the amount of commission and other amounts collected
by Southwest on Correspondent's behalf, and all amounts due to Southwest
from Correspondent (including, without being limited to, clearing
charges, other charges, other fees and each Customer's unsecured debit
items, however arising), together with the amount by which the total
owed Correspondent exceeds the total owed Southwest. If such statement
indicates that Correspondent owes
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monies to Southwest, Correspondent shall promptly pay Southwest the
amount by which the total owed Southwest exceeds the total owed
Correspondent. If Correspondent fails to make such payment within the
time period indicated on such statement, or in any event within thirty
(30) calendar days, Southwest shall have the right to charge any other
Account maintained by Southwest for Correspondent or any other assets of
Correspondent held by Southwest (including the deposit required pursuant
to Section 9 and positions and balances in Correspondent Accounts) for
the net amount due Southwest. Any failure by Southwest to charge any
Account or assets of Correspondent held by Southwest shall not act as a
waiver of Southwest's right to demand payment of, or to charge
Correspondent's Accounts for, the full amount due at any time.
9. DEPOSIT
(a) Required Clearing Deposit. Contemporaneously with the signing of this
Agreement, Correspondent will deliver cash to Southwest, as specified in
Schedule A attached, for deposit in an account maintained by Southwest.
If at any subsequent time Southwest, in its sole discretion, requires an
additional deposit, Correspondent will deposit additional cash in an
amount specified by Southwest. Any failure by Southwest to demand
compliance with the requirement that Correspondent deposit additional
amounts shall not act as a waiver of Southwest's right to demand
compliance with such requirements at any time. If the deposit is not
adequately funded as required by Southwest, Southwest may, in addition
to all other rights under this Agreement, transfer cash or securities of
Correspondent held by Southwest to the deposit account. Southwest shall
be entitled to set-off against any deposit in addition to any and all
other rights or remedies Southwest may have under this Agreement or
otherwise.
(b) Return of Required Clearing Deposit. When this Agreement has been
terminated in accordance with the provisions hereof, and Southwest has
received payment in full of any and all amounts owing to Southwest
hereunder and Correspondent has satisfied each and every of
Correspondent's outstanding obligations to Southwest hereunder,
Southwest shall return the required clearing deposit to Correspondent
within thirty (30) calendar days of the date on which all of said
payments have been received and obligations satisfied. These obligations
include, but are not limited to, any open and unsettled litigation
matters between Correspondent or Customers and Southwest, any unresolved
unsecured Correspondent Account or Customer Account debit balances, any
open fails as a result of trades executed on behalf of Correspondent
Accounts or Customer Accounts, and any failures to transfer to another
broker any Customer Accounts introduced by Correspondent.
10. INDEMNIFICATION
(a) Indemnity. Correspondent agrees to indemnify and hold harmless
Southwest, each person who controls Southwest within the meaning of the
Securities Exchange Act of
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1934 and any directors, officers, employees, agents and attorneys of
Southwest ("Southwest Indemnified Persons") for and against all claims,
demands, proceedings, suits and actions and all liabilities, losses,
expenses and costs (including any legal and accounting fees and
expenses) relating to Southwest's defense of any failure, for any
reason, fraudulent or otherwise, by Correspondent, Correspondent's
employees, independent agents or contractors, or Customers to comply
with any obligation under this Agreement or any other agreement executed
and delivered to Southwest in connection with Southwest's performance of
services hereunder and any act or failure to act by Southwest
Indemnified Persons, except any act or failure to act which is the
result of gross negligence or willful misconduct on the part of any such
Southwest Indemnified Person. Without limiting the generality of the
foregoing, such failure is explicitly intended by the parties to include
failure resulting from (i) suspension of trading or bankruptcy or
insolvency of any company, securities of which are held in Customer's
Accounts; (ii) failure by any Customer to maintain adequate margin; or
(iii) breach of any obligation existing between Correspondent and a
customer of Correspondent or any law, rule or regulation of the United
States, a state or territory thereof, or any regulatory or
self-regulatory agency or body, applicable to any transaction
contemplated by this Agreement.
Southwest shall indemnify and hold Correspondent harmless against any
losses, claims, damages, liabilities or expenses including without
limitation those asserted by Customers (which shall include, but not be
limited to, all costs of defense and investigation and all attorney's
fees) to which Correspondent may become subject, insofar as such losses,
claims, damages, liabilities or expenses arise out of, or are based upon
the gross negligence or willful misconduct of Southwest or its employees
in providing the services contemplated hereunder.
Promptly after receipt by any indemnified party under this Section of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify the indemnifying party of the
commencement thereof, but the emission so to notify the indemnifying
party will not relieve it from any liability that it may have to any
indemnified party otherwise than under this Section.
In case any such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent
that it may wish, to assume the defense thereof, subject to the
provisions herein stated, with counsel satisfactory to such indemnified
party. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to the indemnified party under this Section for
any legal or other expense subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs
of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed
the defense of the action with counsel satisfactory to the indemnified
party.
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<PAGE>
(b) Security Interest and Authorization to Charge. Correspondent grants to
Southwest a first lien and security interest in any Correspondent
Account maintained by Southwest and any other assets of Correspondent
now or hereafter held by Southwest and authorizes Southwest to discharge
such lien by charging such Account and assets with all amounts owing to
Southwest including, but not limited to, (i) any cost or expense
resulting from failures to deliver or failures to receive, (ii) any
losses resulting from unsecured debit balances in any Customer or
Correspondent Account, (iii) any losses resulting from the failure by a
Customer or Correspondent to promptly satisfy upon demand by Southwest
any indebtedness of Customer or Correspondent to Southwest, including
but not limited to any debit balances in any Customer Account or
Correspondent Account and (iv) any amounts to which Southwest is
otherwise entitled pursuant to the provisions of Section 10(a).
Southwest shall have discretion to liquidate or sell any securities
without notice to Correspondent, and to determine which securities to
sell. Such charge may be made against Correspondent Accounts or assets
at any time and in such amount as Southwest deems appropriate. No delay
in charging any Correspondent Account or asset shall operate as a waiver
of Southwest's right to do so at any time as and when Southwest deems
appropriate. Southwest shall have the unlimited right to set-off any
indebtedness or other obligations of Correspondent under this Agreement
or otherwise (absolute or contingent, matured or unmatured) against any
obligations of Southwest to Correspondent, including from the required
clearing deposit (as described in Section 9) and/or, any other money,
securities, or other property of Correspondent in Southwest's
possession.
(c) Reserves. In connection with any claim that does or could give rise to a
claim for indemnification under this Section for Southwest or a
Southwest Indemnified Person, Southwest may, in its discretion, in
addition to any and all other rights and remedies under this Agreement,
reserve and retain any money, securities or other property of
Correspondent pending a determination of such claim. The money,
securities or other property of Correspondent set aside in such a
reserve shall be subject to Southwest's standard lien and security
interest described in Section 10(b) above.
11. UNDERTAKINGS OF CORRESPONDENT
(a) Financial Statements and Other Reports. Correspondent will furnish to
Southwest promptly upon request copies of Correspondent's balance sheet
and statement of earnings for the current fiscal year and for each of
Correspondent's previous fiscal years. Each such balance sheet and
statement of earnings shall be certified by independent public
accountants. Correspondent also shall furnish to Southwest promptly upon
request copies of Correspondent's monthly and quarterly Focus filing,
and the results and/or reports of all exams from self-regulatory bodies,
federal or state securities agencies.
(b) Exclusive Agreement. It is intended by the parties that Southwest will
be the exclusive provider of clearing services to Correspondent and its
Customers during the term of this Agreement. Correspondent will not,
without the express written consent of Southwest, retain any other
broker or other entity to provide clearing services during the term of
this Agreement.
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(c) Disciplinary Action. In the event that Correspondent or any employee of
Correspondent shall become subject to any disciplinary action, including
but not limited to expulsion, suspension or restriction by any
regulatory or self-regulatory agency or body having jurisdiction over
Correspondent and Correspondent's securities business, Correspondent
will notify Southwest immediately and Correspondent authorizes Southwest
to take such steps as may be necessary for Southwest to maintain
compliance with the rules and regulations to which Southwest is subject.
Correspondent further authorizes Southwest, in any event, to comply with
directives or demands made upon Southwest by any regulatory or
self-regulatory agency or body relative to Correspondent and Customers.
In connection with such directives or demands, Southwest may seek advice
or legal counsel and Correspondent will reimburse Southwest for
reasonable fees and expenses of such counsel. Correspondent shall,
during the term of this Agreement, notify Southwest if Correspondent
fails to remain in compliance with the net capital and financial
reporting and record keeping requirements of the SEC, any state which
has jurisdiction over Correspondent, or any regulatory or
self-regulatory body which has jurisdiction over Correspondent,
(d) Fixed Price Offerings. Correspondent agrees that in making sales of
securities, as part of a fixed price offering, it will comply with all
applicable rules of the NASD, including, without limitation, the NASD's
Interpretations with respect to Free-Riding and Withholding and under
2740 of NASD Conduct Rules.
(e) Customer Transactions. Correspondent represents that all orders and
other transactions received by Southwest will be in accordance with
their Customers' instruction. The parties hereto expressly agree that
Southwest shall not be bound to any investigation into the facts
surrounding any transaction that Correspondent may have with its
Customers or other persons, nor shall Southwest be under any
responsibility for compliance by Correspondent with any laws or
regulations which may be applicable to Correspondent.
(f) Inquiries on Certificates. Southwest agrees to act as Correspondent's
direct inquirer under the Lost and Stolen Securities Program under SEC
Rule 17f-1. (17 CFR 240.17f-1).
(g) Compliance with Rules and Regulations. Correspondent shall comply with,
and shall be responsible for complying with, all laws, rules and
regulations to which it is subject, including but not limited to those
promulgated by the SEC, the NASD and securities exchanges of which
Correspondent is a member.
(h) Certain Expenses. Correspondent will not hold Southwest responsible for
any of Correspondent's office expenses or operating costs. Correspondent
will reimburse Southwest for any costs or expenses Southwest may incur
in complying with any request by a court, or regulatory or
self-regulatory agency or body for any documents, papers or data in any
form pertaining to any matters relating to this Agreement. If Southwest
deems it necessary to retain legal counsel to advise Southwest in
connection with any matter governed by this Agreement, including but
not limited to Southwest's manner of handling any transaction on behalf
of Correspondent or a Customer, Correspondent will reimburse Southwest
for the fees of such counsel.
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<PAGE>
(i) Option Transactions. Correspondent shall appoint a Registered Option
Principal before handling option transactions. Correspondent shall
comply with all requirements of the NASD and other regulatory bodies
regarding the handling of option transactions.
(j) Correspondent Accounts. Correspondent shall be required to pay for
securities purchased for its own Accounts on the settlement date.
Notwithstanding the foregoing, Correspondent may finance any portion of
the debit balance in a Correspondent Account under applicable stock
exchange and Federal Reserve regulations. If such financing is extended
by Southwest, Correspondent agrees to satisfy the debit balance of such
Account upon demand by Southwest. Southwest shall charge interest on
such debit balances at a rate set at the discretion of Southwest.
Interest will be calculated by multiplying the average daily debit
balance by the average interest rate (1/360 of the annual interest rate)
times the number of days in the interest period. The rate of interest
and method of calculation may be changed by Southwest automatically and
without notice from time to time.
Correspondent agrees to maintain in any Account which has a debit
balance such positions and margins as may be required by applicable
statutes, rules, regulations, procedures and customs, or as may be
requested by Southwest from time to time. Any financing described in
this Section 11(j) shall be subject to all other terms and provisions of
this Agreement relating to obligations of the Correspondent to
Southwest, including but not limited to being secured by the lien and
security interest granted by Correspondent pursuant to Section 10(b) of
this Agreement.
In the case of an Event of Default, as defined below, all debit balances
in any Correspondent Account, and interest thereon, shall bear interest
at the highest lawful rate. An Event of Default shall be deemed to have
occurred if (i) Correspondent fails to meet any call by Southwest for
additional collateral to be deposited in a Correspondent Account; (ii)
Correspondent fails to make payment of any debit balance in a
Correspondent Account upon demand by Southwest; (iii) Correspondent
becomes insolvent, makes an assignment for the benefit of creditors,
applies for or consents to the appointment of a receiver, or institutes
or has instituted against it any insolvency, reorganization,
liquidation, dissolution or similar proceeding; (iv) a petition naming
Correspondent as debtor shall be filed under the United States
Bankruptcy Code; or (v) an attachment is levied against any
Correspondent Account or Account in which Correspondent has an interest.
Regardless of any provision of this Section 11(j), any other section
of this Agreement or any other agreement between Southwest and
Correspondent, all agreements between
15
<PAGE>
Southwest and Correspondent, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand being made
in respect of an amount due from Correspondent to Southwest, shall the
amount paid, or agreed to be paid, for the use, forbearance or detention
of money loaned by Southwest to Correspondent exceed the maximum
nonusurious rate of interest permitted to be charged under applicable
law (the "Highest Lawful Rate"). If, as a result of any circumstance
whatsoever, fulfillment of or compliance with any provision hereof or of
any of such other agreements at the time performance of such provisions
shall be due or at any other time shall involve exceeding the amount
permitted to contracted for, taken, reserved, charged or received by
Southwest under applicable usury law, then ipso facto, the obligation to
be fulfilled or complied with shall be reduced to the limit prescribed
by such applicable usury law, and if, from any such circumstance,
Southwest shall ever receive interest or anything that might be deemed
interest under applicable law which would exceed the Highest Lawful
Rate, such amount which would be excess interest shall be applied to the
reduction of the principal amount owing on the Correspondent Account in
question or the amounts owing on other obligations of Correspondent to
Southwest, or if such excessive interest exceeds the unpaid principal
balance of any amount owing on other obligations of Correspondent to
Southwest, such excess shall be refunded to Correspondent. All sums paid
or agreed to be paid to Southwest shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout
the full term of such indebtedness until payment in full of the
principal (including the period of any renewal or extension thereof) so
that the interest on account of such indebtedness shall not exceed the
Highest Lawful Rate. Notwithstanding anything to the contrary contained
in any agreement between Correspondent and Southwest, it is understood
and agreed that if at any time the rate of interest which accrues on the
outstanding balance of any indebtedness of Correspondent to Southwest
shall exceed the Highest Lawful Rate, the rate of interest which accrues
on the outstanding principal balance of any such indebtedness shall be
limited to the Highest Lawful Rate, but any subsequent reductions in the
rate of interest which accrued on the outstanding principal balance of
any indebtedness shall not reduce the rate of interest which accrues on
the outstanding principal balance of any indebtedness below the Highest
Lawful Rate until the total amount of interest accrued on the
outstanding principal of any indebtedness equals the amount of interest
that would have accrued if such interest rate had been in effect at all
times.
In consideration for Southwest opening or maintaining one or more
inventory Accounts for Correspondent, Correspondent agrees to allow
Southwest at any time within the limitations imposed by applicable laws,
rules and regulations, to pledge, hypothecate, and/or make deliveries
with any and all securities in such Accounts, including fully paid and
excess margin securities, without notice to Correspondent. Such
securities will be segregated from other bona fide customers of
Southwest in the event that they are pledged as collateral for bank
loans. Without abrogating any of Southwest's rights under this Agreement
and subject to any indebtedness of Correspondent to Southwest,
Correspondent is entitled, upon demand, to receive delivery of fully
paid for securities in Correspondent's inventory Accounts.
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<PAGE>
The provisions of this Section 11(j) shall be construed in conjunction
with the express terms and conditions of any separate applicable Account
agreement(s) between Southwest and Correspondent.
(k) Forms BD and U4. Within thirty (30) days after the execution of this
Agreement, Correspondent shall provide to Southwest a copy of
Correspondent's Form BD, and copies of the Forms U4 for the principals
and all registered employees of Correspondent, and copies of any other
documents relating to Correspondent, its principals or employees that
are available on the Central Registration Depository ("CRD").
Thereafter, within thirty (30) days after the hiring of any new
employee, Correspondent shall provide to Southwest a copy of such new
employee's Form U4 and other documents available on the CRD.
Additionally, throughout the term of this Agreement, Correspondent shall
promptly provide copies of any subsequent amendments of all Forms and
other documents described in this Section 11(k).
(1) Advertising. Correspondent shall obtain Southwest's prior written
consent before using Southwest's name or logo, or the name or logo of
any affiliate of Southwest, in any advertising in print, broadcast,
electronic or any other media. Without the express written consent of
Southwest, Correspondent also shall not display the name or logo of
Southwest or any of its affiliates on any Internet web page or other
electronic advertising; nor shall Correspondent display on any such web
page or electronic advertising, a hyperlink to or the Internet address
of any web page or electronic advertising of Southwest or any of its
affiliates
12. TERMINATION OF AGREEMENT; TRANSFER OF ACCOUNTS
(a) Effectiveness. This Agreement shall commence to be effective on the date
set forth on the signature page hereof, subject to any required approval
by the NASD and other regulatory or self-regulatory agencies or bodies,
and shall remain in effect as more fully described in Schedule A.
(b) Automatic Termination. In addition to any other provision for
termination herein, this Agreement shall terminate immediately in the
event that either Correspondent or Southwest ceases to conduct its
business or that Southwest:
(i) is no longer registered as a broker/dealer with the SEC; or
(ii) is no longer a member in good standing of the NASD; or
(iii) is suspended by any national securities exchange of which
Southwest is a member for failure to comply with the rules and
regulations thereof.
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<PAGE>
(c) Survival. Termination of this Agreement shall not affect Southwest's
rights or liabilities relating to business transacted prior to the
effective date of such termination. From the date of termination until
transfer or delivery of all Customer and Correspondent Accounts,
Southwest's rights and liabilities relating to business transacted
after such termination shall be governed by the same terms as those set
forth in this Agreement.
(d) No Obligation to Release. Southwest shall not be required to release to
Correspondent any securities or cash held by Southwest for Correspondent
in one or more Correspondent Accounts until any and all amounts owing to
Southwest pursuant to the provisions of this Agreement are paid; and
Correspondent's outstanding obligations hereunder to Southwest are
determined, including determination of any disputed amounts, and
satisfied, and any property of Southwest in the possession of
Correspondent is returned to Southwest.
(e) Conversion of Accounts Upon Termination. In the event that this
Agreement is terminated for any reason, it shall be Correspondent's
responsibility to arrange for the conversion of Correspondent and
Customer Accounts to another clearing broker. Correspondent will give
Southwest notice (the "Conversion Notice") of.
(i) the name of the broker that will assume responsibility for
clearing services for Customers and Correspondent;
(ii) the date on which such broker will commence providing such
services;
(iii) Correspondent's undertaking, in form and substance satisfactory
to Southwest, that Correspondent's agreement with such broker
provides that such broker will accept on conversion all
Correspondent and Customer Accounts, then maintained by
Southwest, and all positions of such Accounts; and
(iv) the name of an individual within that organization who Southwest
can contact to coordinate the conversion. The Conversion Notice
shall accompany Correspondent's notice of termination or within
thirty (30) days of the occurrence of an event specified in
Section 12(b).
If Correspondent fails to give the Conversion Notice to Southwest,
Southwest may give to Customer such notice as Southwest deems
appropriate of the termination of this Agreement and may make such
arrangements as Southwest deems appropriate for transfer or delivery of
Customer and Correspondent Accounts. In addition, Correspondent shall
pay any costs incurred by Southwest as billed by any third party vendors
such as transfer agents, etc.
(f) Other Transfers of Accounts. When Southwest receives a properly executed
authorization to transfer a Customer Account from the receiving
broker/dealer, Southwest shall promptly transfer the Customer Account to
such receiving broker/dealer. Correspondent shall discontinue doing
business in any Customer Account scheduled for transfer.
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13. CONFIDENTIALITY.
(a) Documents and Business Information. All agreements, documents, papers
and data in any form, supplied by either party hereto concerning the
disclosing party's business or any Customers shall be treated by the
receiving party as confidential. To the extent such documents or data
are retained by the receiving party, they shall be kept in a safe place
and shall be made available to third parties only as authorized by the
disclosing party in writing or pursuant to any order or request of a
court or regulatory body having appropriate jurisdiction. The receiving
party shall give the disclosing party prompt notice of the receipt by
the receiving party of any such order or subpoena, unless prohibited
from doing so by the issuing authority, which notice shall be given
prior to the receiving party's compliance therewith. Such documents
shall be made available by the receiving party for inspection and
examination by the disclosing party's auditors, by properly authorized
agents or employees of any regulatory bodies or commissions or by such
other persons as the disclosing party may authorize in writing.
Notwithstanding anything herein to the contrary, the disclosing party
expressly authorizes the receiving party to supply any information
requested relating to the disclosing party, its business, or Customers
to any regulatory body having appropriate authority.
(b) Terms of Agreement. Correspondent agrees that it shall not disclose to
any third party the terms and conditions of this Agreement, including
but not limited to pricing information, except to the extent
Correspondent is required to do so by the provisions of any law, rule or
regulation, or in response to the order or request of a court or
regulatory body having appropriate jurisdiction.
14. EMPLOYEES
Neither party will solicit, engage in negotiations to employ, or
employ any person who is, or within the preceding twelve (12) months has
been, employed by the other party, without first obtaining such other
party's express written consent.
15. NOTICE TO CUSTOMERS
Subject to the requirements of the NASD Rules of Fair Practice,
Correspondent shall provide to each Customer upon the opening of a
Customer Account, in a manner which is reasonably acceptable to
Southwest, a written notice which shall be furnished by Southwest
describing the general nature of the services being performed by
Southwest in accordance with this Agreement.
16. CUSTOMER COMPLAINT PROCEDURES
Correspondent will be responsible for the initial handling of all
Customer complaints. Any Customer who initiates a complaint with
Southwest will be referred by Southwest to Correspondent. If any such
complaint is based upon an alleged act or failure to act by Southwest,
Correspondent will notify Southwest promptly of such complaint and the
basis therefor; and will consult with Southwest. And the parties will
cooperate in determining the validity of such complaint and the
appropriate action to be taken.
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17. REMEDIES CUMULATIVE
The enumeration herein of specific remedies shall not be exclusive of
any other remedies. Any delay or failure by any party to this Agreement
to exercise any right, power, remedy or privilege herein contained, or
now or hereafter existing under any applicable statute or law, shall not
be construed to be a waiver of such right, power, remedy or privilege,
nor to limit the exercise of such right, power, remedy or privilege, nor
shall it preclude the further exercise thereof or the exercise of any
other right, power, remedy or privilege.
18. GUARANTEE
The corporation or indiviual(s) who guarantee the obligations of
Correspondent under this Agreement by executing the signature lines
designated for such purpose at the end of the Agreement (the
"Guarantor(s)"), in consideration of Southwest's entering into the
Agreement do(es) hereby personally guarantee(s) (jointly and severally,
if more than one) the performance by Correspondent of the provisions of
this Agreement (including without limitation the indemnification
provisions of Section 10) and shall promptly pay any amount that is not
paid by Correspondent to Southwest under this Agreement. This is an
absolute, unconditional and unlimited guarantee of payment and may be
proceeded upon by Southwest or a Southwest Indemnified Person before
filing any action against Correspondent or after any action against
Correspondent has been commenced. Guarantor(s) grant(s) to Southwest a
first lien and security interest in any and all money and securities
of Guarantor(s) held by Southwest. Southwest shall have the unlimited
right to set-off any amounts owed to it by Correspondent or a
Guarantor(s) against any obligation of Southwest to any Guarantor(s).
Southwest also shall have the absolute and unlimited right to sell,
transfer, or liquidate any of the assets in any of Guarantor(s)'
accounts with Southwest for any amounts owed to it by Correspondent or a
Guarantor(s). The obligations of Guarantor(s) shall not be discharged or
impaired or otherwise affected by the failure of Southwest or a
Southwest Indemnified Person to assert, claim, demand or enforce any
remedy under this Agreement, nor by waiver, modification or amendment of
this Agreement or any compromise, settlement or discharge of obligations
of Correspondent under this Agreement, or any release or impairment of
any collateral by Southwest or a Southwest Indemnified Person.
20
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19. LIMIT ON LIABILITY; NO CONSEQUENTIAL DAMAGES
In any action by Correspondent against Southwest for any claim arising
out of the relationship created by this Agreement, Southwest shall only
be liable to Correspondent in cases of negligence or willful misconduct,
and in such cases Southwest shall only be liable for the amount or
actual monetary losses suffered by Correspondent. Correspondent shall
not, in any such action or proceeding or otherwise, assert any claim
against Southwest for consequential damages on account of any loss,
cost, damage or expense which Correspondent may suffer or incur related
to transactions in connection with this Agreement or otherwise.
20. MISCELLANEOUS
(a) Modification. Except as otherwise expressly provided herein, this
Agreement may be modified only by a writing signed by both parties to
this Agreement. Such modification shall not be deemed as a cancellation
of this Agreement. Subject to the NASD Rules of Fair Practice and other
applicable rules and regulations, this Agreement and all modifications
may be required to be submitted to the NASD and other regulatory or
self-regulatory agencies or bodies prior to effectiveness. It is
expressly understood that services cannot be provided under this
Agreement until such approval, if required, is received.
(b) Assignment. This Agreement shall be binding upon all successors, assigns
or transferees of both parties hereto irrespective of any change with
regard to the name or of the personnel of Correspondent or Southwest.
Any assignment of this Agreement shall be subject to the requisite
review and/or approval of any regulatory or self-regulatory agency or
body whose review and/or approval must be obtained prior to the
effectiveness and validity of such assignment. No assignment of this
Agreement shall be valid unless the non-assigning party, in its sole
discretion, consents to such an assignment in writing. Notwithstanding
the foregoing, Southwest, upon giving written notice to Correspondent,
may assign it rights and obligations under this Agreement to any entity
that purchases a majority of the stock or assets of Southwest or of any
of Southwest's subsidiaries or affiliates, to any majority-owned
subsidiary that Southwest may create or to any entity directly or
indirectly controlled by, controlling or under common control with
Southwest, and an assignment by Southwest to any such party will be
deemed valid and enforceable in the absence of any consent from
Correspondent. Neither this Agreement nor any operation hereunder is
intended to be, shall not be deemed to be, and shall not be treated as a
general or limited partnership, association, or joint venture or agency
relationship between Correspondent and Southwest.
(c) Choice of Law. The construction and effect of every provision of this
Agreement, the rights of the parties hereunder and any questions arising
out of the Agreement, shall be subject to the statutory and common law
of the State of Texas, without regard to the choice of law provisions
thereof.
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(d) Severability. If any provision or condition of this Agreement shall be
held to be invalid or unenforceable by any court, or regulatory or
self-regulatory agency or body with appropriate jurisdiction, such
invalidity or unenforceability shall attach only to such provision or
condition. The validity of the remaining provisions and conditions
shall not be affected thereby and this Agreement shall be carried out
as if any such invalid or unenforceable provision or condition were
not contained herein.
(e) Notice. For the purposes of any and all notices, consents, directions,
approvals, restrictions, requests or other communications required or
permitted to be delivered hereunder, Southwest's address shall be:
Southwest Securities, Inc.
1201 Elm Street
Suite 3500
Dallas, Texas 75270
Attention: William D. Felder, Senior Executive Vice President
And Correspondent's address shall be:
All-Tech Investment Group, Inc.
-------------------------------
160 Summit Ave.
-------------------------------
Montvale, NJ 07645
-------------------------------
Attention: Mark Shefts
--------------------
Either party may provide notice or change its address for notice
purposes by giving written notice pursuant to registered or certified
mail, return receipt requested, addressed to the other party at its
address for notice.
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<PAGE>
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute a single
agreement. When each party has executed and delivered to the other a
counterpart, this Agreement will become binding on both parties, subject
only to any required approval by the NASD.
MADE AND EXECUTED THIS 15th DAY OF July, 1997.
SOUTHWEST SECURITIES, INC.
By:/s/ William D. Felder
----------------------
William D. Felder
Senior Executive Vice President
All-Tech Investment Group,Inc.
- ------------------------------
CORRESPONDENT:
By: /s/ Mark Shefts
------------------
Name: Mark Shefts
----------------
Title: President
---------------
23
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[letterhead] August 4, 1997
Mr. William Felder
Southwest Securities, Inc.
1201 Elm St., Suite 3500
Dallas, TX 75270
Dear Bill:
We have agreed that Paragraph 7(b) of that certain Fully Disclosed
Clearing Agreement between Southwest Securities, Inc. and All-Tech Investment
Group, Inc. executed July 15, 1997 shall be amended to insert the word
"particular" between the words "any" and "transaction" appearing in the
penultimate line thereof.
Please indicate the agreement of Southwest that the foregoing
accurately sets forth our understanding by signing the duplicate copy of this
letter enclosed herewith and returning it to me.
Very truly yours,
ALL-TECH INVESTMENT GROUP, INC.
By/s/Mark Shefts
-----------------
Mark Shefts, President
Accepted and Agreed:
SOUTHWEST SECURITIES, INC.
By/s/William D. Felder
------------------
William Felder
SCHEDULE A -- Schedule of Commissions and Charges
SCHEDULE B -- Schedule of Clearing Charges for Exchange and Nasdaq Listed
Securities
* The Company has filed a request with the Securities & Exchange Commission for
confidential treatment of the fee Schedules. Accordingly, the schedules have
been ommitted, however, they have been separately filed with the Commission
pursuant to the Company's confidentiality request.
<PAGE>
PC QUOTE
- --------------------------------------------------------------------------------
STANDARD LICENSE AGREEMENT
This Agreement made effective this 31st day of January, 1995 by and between PC
QUOTE, INC. (hereinafter referred to as "PCQ"), a Delaware Corporation with its
principal place of business at 300 S. Wacker Drive, Chicago, Illinois 60606,
and:
All-Tech Investment Group, Inc.
- --------------------------------------------------------------------------------
(hereinafter referred to as "CUSTOMER") at:
160 Summit Ave
- --------------------------------------------------------------------------------
Montvale, NJ 07645
Whereas PCQ provides a service (hereinafter referred to as the "SERVICE")
consisting of software (hereinafter referred to as the "LICENSED SOFTWARE"),
combined with information (hereinafter referred to as the "DATAFEED") obtained,
selected and consolidated under the authority of various agencies and other
information providers; and
Whereas CUSTOMER desires to utilize LICENSED SOFTWARE and DATAFEED;
Now, therefore, CUSTOMER and PCQ hereby agree to the following:
1. SOFTWARE AND DATAFEED LICENSE AGREEMENT
A. PCQ agrees to grant and CUSTOMER agrees to accept on the following terms and
conditions, a non-transferable and non-exclusive license to use the LICENSED
SOFTWARE and DATAFEED provided by PCQ to CUSTOMER.
B. PCQ shall retain title and all copyrights or proprietary rights to said
LICENSED SOFTWARE. CUSTOMER shall have a non-exclusive license only to use the
LICENSED SOFTWARE only in conjunction with the DATAFEED, and shall have no right
to sell, transfer, sub-license, rent, lease, copy, modify, translate, convert to
another programming language, decompile or disassemble the LICENSED SOFTWARE for
any purpose.
C. The license granted by PCQ to CUSTOMER to use the DATAFEED, in addition to
being non-exclusive and non-transferrable, is limited to use only in conjunction
with the LICENSED SOFTWARE. Further, CUSTOMER agrees to use the DATAFEED only
within CUSTOMER's operations at the locations set forth in this Agreement.
D. CUSTOMER acknowledges and agrees that DATAFEED is intended for the exclusive
internal use of CUSTOMER and that said service, the data included in such
service or any derivations thereof shall not be redistributed in any form to any
third party, whether or not that third party's business involves further
redistribution of said data to paying clients, without prior written consent.
However, and notwithstanding anything to the contrary in this Agreement,
CUSTOMER may provide and distribute to CUSTOMER's clients small subsets of
specific data items included in the DATAFEED.
1. CUSTOMER may not charge such clients separately for contents of the
DATAFEED.
2. In client statements, client confirmations, client reports, and other
publications as part of the ordinary course of CUSTOMER's existing
business.
3. In connection with client financial transactions.
2. TERM
A. The initial term of this license Agreement shall be 24 months (2) year(s)
from its effective date. The effective date for purposes of this Agreement is
the date upon which LICENSED SOFTWARE is authorized by PCQ to access the
DATAFEED. Neither PCQ nor CUSTOMER shall terminate or alter this Agreement
except as follows.
B. At the conclusion of the initial term, this entire Agreement shall
automatically renew itself annually for an additional one (1) year term unless
either party sends notice to the other party at least sixty (60) days prior to
the anniversary of the effective date of this Agreement, by certified mail to
the address indicated above, expressing a desire to terminate the Agreement.
Said termination will be effective as of the last day of the month in which this
anniversary occurs.
<PAGE>
PC QUOTE, INC. STANDARD LICENSE AGREEMENT / 2
C. Notwithstanding the provisions of 2(A), and 2(B) above, should a party to
this Agreement be in material breach of the Agreement, the other party may
terminate the Agreement sixty (60) days after notice of said material breach is
received and only if such material breach is not cured within thirty (30) days
of receipt of notice.
D. PCQ may terminate this Agreement for non-payment as provided in Sections
4(F), 5(A) and 5(D) below.
3. EQUIPMENT
A. PCQ, to facilitate CUSTOMER's use of its DATAFEED and LICENSED SOFTWARE, may
provide to CUSTOMER computer hardware, a satellite dish antenna or other
equipment that may be required. PCQ shall retain title to any equipment if
furnishes. CUSTOMER as lessor and user of such equipment, agrees to be
responsible for it and shall reimburse PCQ for all damages sustained by the
equipment or for the cost of replacing the equipment in the event that it is
lost, stolen, or destroyed while in the possession of CUSTOMER. In the event
that this Agreement is terminated by either party, CUSTOMER shall remain
responsible for the safety of the equipment and shall reimburse PCQ for any
damages sustained or its replacement cost if lost, stolen or destroyed, from the
date that the Agreement is cancelled until such time trial PCQ repossesses such
equipment. CUSTOMER agrees to insure all equipment owned by PCQ which is
provided the CUSTOMER incident to the services purchased in a sum equal to its
replacement value under a commercial multi-peril policy or its equivalent.
CUSTOMER further agrees to name PCQ as an additional insured under said policy
and to furnish PCQ with a certificate of insurance evidencing such coverage it
so requested by PCQ. CUSTOMER agrees to provide access to the equipment for
purposes of installation, removal, maintenance, or repair during reasonable
business hours.
B. PCQ will provide its standard installation, consisting of labor to connect
communications equipment (satellite dish, modems or hardware), 100 feet of
regular RG-59 coaxial cable, 6 feet of interface cable with appropriate RS-232
connectors, ground shipment of equipment, handling charge, and support for
installation of software, at a cost as defined in the appended Schedule(s) of
Services and Fees specified in Section 14. If during the installation a
satellite dish is proven infeasible, the CUSTOMER shall pay all charges
necessary to lease and install short haul modems or long haul modems as well as
all other time and material expenses incurred by PCQ in excess of the standard
installation provided that CUSTOMER receives prior notice and approves such
expenses before incurred. CUSTOMER acknowledges that in the event data lines are
necessary to install the service, CUSTOMER shall pay for such data lines, and
CUSTOMER acknowledges that the monthly expense of such data lines may not be
known prior to installation, and that this expense may be subject to change
without notice based upon chances in local or long distance telephone carrier
charges. Non-standard installation costs will be paid to PCQ by the CUSTOMER on
a time and materials basis, provided that the CUSTOMER receives prior notice
that the standard installation is inappropriate and an estimate of the cost of
non-standard installation.
C. Upon termination of this Agreement CUSTOMER shall, within thirty (30) days
following the effective date of termination, return all property of PCQ held and
used by the CUSTOMER and CUSTOMER shall pay all removal cost incurred.
<PAGE>
4. PAYMENT
A. During the initial term the CUSTOMER shall pay the monthly charges set fourth
in the Schedule(s) of Services and Fees specified in Section 14. PCQ agrees that
no increase in monthly charges shall occur during this initial term.
B. Upon renewal of this Agreement for subsequent one (1) year terms, CUSTOMER
shall pay, during each subsequent annual term, the prevailing price for services
in existence of each Agreement anniversary date without further adjustment until
the following anniversary date.
C. All payments made pursuant to this Agreement shall be in United States
currency only.
D. Upon termination of this Agreement, CUSTOMER will pay all charges for
services and fees for the entire month in which that termination becomes
effective.
E. The charges for each service set forth in the Schedule(s) of Services and
Fees specified in Section 14 shall be invoiced monthly and CUSTOMER agrees to
pay said charges within thirty (30) days of the invoice date. All payments which
have not been received by PCQ within thirty (30) days of the invoice date shall
be subject to a FINANCE CHARGE of 1.0% per month which is a corresponding ANNUAL
PERCENTAGE RATE of 12% of the outstanding balance.
F. In the event any invoice is not paid by CUSTOMER within thirty (30) days
after receipts PCQ, at its sole option and discretion, without any notice
whatsoever to CUSTOMER, may terminate this Agreement and CUSTOMER's access to
and use of the LICENSED SOFTWARE and DATAFEED provided hereunder. Any invoice
submitted by PCQ shall be deemed correct unless CUSTOMER advises PCQ in writing
within thirty (30) days of the receipt of the invoice that it disagrees with the
invoice and specifies the nature of the disagreement. The remedies contained
herein are cumulative and are in addition to all other rights and remedies
available to PCQ under this Agreement, by operation of law, or otherwise.
5. EXCHANGE AUTHORIZATION AND CONTRIBUTED DATA
<PAGE>
PC QUOTE, INC. STANDARD LICENSE AGREEMENT / 3
A. The CUSTOMER hereby acknowledges and agrees that the DATAFEED provided under
this Agreement contains information obtained, selected and consolidated by PCQ
under the authority of various agencies, including but not limited to, the New
York Stock Exchange, American Stock Exchange, Pacific Stock Exchange, Midwest
Stock Exchange, Chicago Board Options Exchange, the Options Price Reporting
Authority, the Consolidated Tape Association, Chicago Board of Trade, Chicago
Mercantile Exchange/International Monetary Market, Kansas City Board of Trade,
Minneapolis Grain Exchange, Commodities Exchange Center, New York Futures
Exchange, and Mid-America Commodity Exchange and that the CUSTOMER's use of the
DATAFEED is authorized and regulated by said agencies. Prior to commencement of
services under this Agreement, CUSTOMER's authority to use the information
provided to PCQ by said agencies shall be obtained by CUSTOMER, with assistance
by PCQ, directly from said agencies. If such authorization is not obtained
within thirty (30) days of execution, this Agreement may be cancelled by PCQ
without further notice.
B. PCQ includes in the DATAFEED, additional information (hereinafter referred to
as "CONTRIBUTED DATA") which PCQ obtains from "INFORMATION PROVIDERS"
(hereinafter referred to as IPs") that may not require that CUSTOMER obtain
authority to use such information directly from the contributing IPs. The term
"CONTRIBUTED DATA" refers not only to such information, but also to the
compilation and formal of such information, and associated documentation and
software, and to the distribution of such information by IP to PCQ and by PCQ to
CUSTOMER. CUSTOMER acknowledges and agrees that individual IPs may request that
PCQ terminate CUSTOMER's access to said IP's data at any time and that PCQ will
carry out such request in accordance with the provisions of said IP's
agreement with PCQ. CUSTOMER further acknowledges and agrees that in the event
that any agreement between PCQ and an IP is terminated in accordance with its
provisions, the CONTRIBUTED DATA will no longer include that IP's data.
C. CUSTOMER acknowledges that PCQ is required to report certain information
related to CUSTOMER's use of the DATAFEED to the various agencies and IPs from
whom the information selected and consolidated by PCQ is obtained. To enable PCQ
to meet its obligation in this regard, CUSTOMER agrees to inform PCQ, in
writing, whenever its usage of the DATAFEED changes materially. Such changes
shall include, but not be limited to:
1. An increase or decrease in the number of simultaneously operable
devices having the ability to display information obtained from
the DATAFEED
2. The physical address(es) at which information from the DATAFEED
is utilized.
D. CUSTOMER agrees that PCQ shall have the right to audit and inspect during
CUSTOMER's operational business hours all CUSTOMER's receiving terminals to
insure that the information transmitted by PCQ is not being shared, distributed,
or transmitted to unauthorized terminals, computers, screens or persons.
E. CUSTOMER hereby agrees to pay any and all fees or charges for any agency or
IP authorization involved. FAILURE TO PAY SAID AUTHORIZATI0N CHARGES SHALL
RESULT IN IMMEDIATE TERMINATION OF CUSTOMER'S SERVICE AS DEFINED BY THIS
AGREEMENT.
<PAGE>
6. LIMITATIONS OF LIABILITY; REMEDIES ON DEFAULT
A. The information and data used in the DATAFEED and LICENSED SOFTWARE provided
under this Agreement, including, but not limited to, option prices, stock
prices, commodity prices, dividends, dividend dates, volatilities, deltas and
other variables, which are obtained by PCQ from the various agencies as
described in Paragraph 5(A) which are believed to be reliable and PCQ agrees to
run reasonable control checks thereon to verify that the data transmitted by PCQ
is the same as the data received from the various exchanges and other sources.
However, PCQ shall not be subject to liability for truth, accuracy, or
completeness of the information received by PCQ from the various exchanges and
other sources and conveyed to CUSTOMER or for errors, mistakes or omissions
therein or for any delays or interruptions of the DATAFEED or LICENSED SOFTWARE
from whatever cause.
B. PCQ OBTAINS THE CONTRIBUTED DATA FROM IPs CONSIDERED TO BE RELIABLE AND BOTH
PCQ AND IPs ENDEAVOR TO OBTAIN, SELECT, CONSOLIDATE AND DISTRIBUTE THE
CONTRIBUTED DATA WITHOUT ERROR. HOWEVER, CUSTOMER ACKNOWLEDGES AND AGREES THAT
THE CONTRIBUTED DATA IS DISTRIBUTED ON AN "AS-IS", "AS-AVAILABLE" BASIS AND THAT
PCQ AND IPs DO NOT GUARANTEE OR MAKE ANY WARRANTIES WHATSOEVER WITH RESPECT TO
THE CONTRIBUTED DATA OR TO THE SEQUENCE, ACCURACY, CURRENCY OR COMPLETENESS OF
ANY QUOTATIONS, MARKET INFORMATION OR OTHER INFORMATION CONTAINED THEREIN, AND
THAT NEITHER PCQ NOR IPs SHALL BE LIABLE TO CUSTOMER FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING THEREFROM OR OCCASIONED
THEREBY AND WHETHER OR NOT RESULTING FROM NEGLIGENCE.
C. CUSTOMER FURTHER ACKNOWLEDGES THAT NEITHER PCQ NOR IPs WARRANT THAT THE
CONTRIBUTED DATA MAY BE RELIED UPON FOR TRADING PURPOSES OR FOR ANY OTHER
PURPOSES AND THAT NEITHER PCQ NOR IPs SHALL BE LIABLE TO CUSTOMER FOR ANY
DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES ARISING
THEREFROM OR OCCASIONED THEREBY AND WHETHER OR NOT RESULTING FROM NEGLIGENCE.
D. CUSTOMER and PCQ shall not be responsible for, nor be in default under this
Agreement due to delays or failure of performance resulting from acts or causes
beyond its control, including but not limited to: acts of God, strikes,
lockouts, riots, acts of war, epidemics, government acts, fire, satellite
malfunctions, communications line or equipment failures, power failures,
earthquakes, or other disasters.
<PAGE>
PC QUOTE, INC. STANDARD LICENSE AGREEMENT / 4
E. CUSTOMER acknowledges that the LICENSED SOFTWARE provided by PCQ is designed
and intended to be used with computer hardware and hardware configurations
specifically delineated in the appended Schedule(s) of Services and Fees
specified in Section 14. CUSTOMERS using non-authorized computer hardware or
hardware configurations shall pay PCQ for any support services provided on a
time and materials basis.
F. LIABILITY UNDER THIS AGREEMENT FROM ANY AND ALL CAUSES, INCLUDING, BUT NOT
LIMITED TO, PROGRAM MALFUNCTION OR OPERATIONAL NEGLIGENCE, SHALL BE LIMITED TO
GENERAL MONEY DAMAGES IN AN AMOUNT NOT TO EXCEED ONE MONTH'S AVERAGE TOTAL
MONTHLY CHARGES PAID BY CUSTOMER FOR THE SERVICES DURING THE TWELVE (12) MONTHS
PRECEDING THE MONTH IN WHICH THE DAMAGE OR INJURY IS ALLEGED TO HAVE OCCURRED,
OR SUCH LESSER NUMBER OF MONTHS IF CUSTOMER HAS NOT RECEIVED TWELVE (12) MONTHS'
SERVICE. SUCH LIMITATION SHALL BE THE EXTENT OF PCQ'S LIABILITY REGARDLESS OF
THE FORM IN WHICH ANY LEGAL OR EQUITABLE ACTION MAY BE BROUGHT AGAINST PCQ, AND
THE FOREGOING SHALL CONSTITUTE CUSTOMER'S SOLE REMEDY. IN NO EVENT WILL PCQ BE
RESPONSIBLE FOR LOST PROFITS OR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES WHICH CUSTOMER MAY INCUR OR EXPERIENCE ON ACCOUNT OF ENTERING INTO OR
RELYING ON THIS AGREEMENT, EVEN IF PCQ HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
G. Any sales, use, excise, value added and local property taxes will be payable
by CUSTOMER should such taxes be applicable.
7. WARRANTIES
A. It is expressly understood and agreed to by the parties hereto that EXCEPT AS
SPECIFICALLY PROVIDED HEREIN, ALL WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
ARE HEREBY EXCLUDED.
B. CUSTOMER agrees not to use or permit anyone to use the LICENSED SOFTWARE or
any information provided in the DATAFEED for any unlawful or unauthorized
purpose.
C. CUSTOMER agrees not to use the data included in the DATAFEED to develop,
update or maintain a database for the purpose of looking up CUSIP numbers.
8. CONFIDENTIALITY OF PROPRIETARY INFORMATION
A. CUSTOMER understands and acknowledges the proprietary nature of the SERVICE
and LICENSED SOFTWARE provided by PCQ and that said SERVICE and LICENSED
SOFTWARE have been developed as a trade secret of PCQ and at its expense.
CUSTOMER agrees to hold said proprietary information in strictest confidence and
shall not release, disclose, or divulge such proprietary information to any
other person or company. Furthermore, CUSTOMER agrees not to attempt any reverse
engineering of the DATAFEED to decode the signals used by PCQ in transmitting
the information.
B. The CONTRIBUTED DATA, as it exists from time to time during the term of this
Agreement, whether or not the subject of copyright or patent protection, shall
at all times be the property of PCQ and the data therein shall at all times be
the property of IPs. CUSTOMER acknowledges that the CONTRIBUTED DATA constitutes
confidential and proprietary information and a trade secret of PCQ and IPs in
which they have invested significantly and which is of significant value to PCQ
and IPs. CUSTOMER shall accord to the contents of the CONTRIBUTED DATA such
protection as is necessary to prevent any unauthorized use, disclosure,
dissemination or duplication, which protection shall be no less than that which
CUSTOMER accords to its own confidential and proprietary information, and
CUSTOMER shall comply with such instructions as PCQ may issue from time to time
with regard to the return, destruction or other disposition of the contents of
the CONTRIBUTED DATA and associated documentation after use. This provision
shall survive the termination or expiration of this Agreement.
C. PCQ understands the proprietary nature of any information belonging to
CUSTOMER and recognizes the harm that can be occasioned to CUSTOMER by
disclosure of information relative to CUSTOMER's activities. PCQ agrees to hold
such information in the same manner as PCQ deals with its own proprietary
information and trade secrets.
9. INDEMNIFICATION
A. CUSTOMER hereby agrees to defend, indemnify and hold PCQ, its employees,
agents, successors and assigns, harmless, including reasonable attorney's fees,
from any and all claims, liabilities or obligations made against PCQ:
1. By the various agencies from whom PCQ has obtained selected and
consolidated information for failure by CUSTOMER to pay any fees
or charges owed by CUSTOMER to said agencies.
2. By any third party or parties arising in any way, directly or
indirectly out of CUSTOMER's use of the SERVICE.
<PAGE>
PC QUOTE, INC. STANDARD LICENSE AGREEMENT / 5
3. Resulting from CUSTOMER's misrepresentations, breach or warranty or
non-performance of any of the covenants or obligations under this Agreement or
from any misrepresentations or omissions made by CUSTOMER to PCQ or any third
party respecting any authorizations or certificates furnished or to be furnished
to PCQ including specifically, but not limited to, any authority required of
CUSTOMER pursuant to Section 5 hereof.
B. PCQ hereby agrees to defend, indemnify and hold CUSTOMER harmless, including
reasonable attorney's fees, from and against any claim that the LICENSED
SOFTWARE infringes on the patent, copyright, or other propritary rights of
another.
10. ASSIGNMENT
This Agreement or any rights or obligations granted hereunder may not be
assigned by CUSTOMER without the prior written consent of PCQ.
11. APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Illinois and the
parties to this Agreement hereby vest the federal and state courts sitting in
the City of Chicago with sole and exclusive jurisdiction over the interpretation
and enforcement of this Agreement.
12. SEVERABILITY
Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
13. ENTIRE AGREEMENT
A. As used herein, the term "Agreement" includes any written amendments,
modifications or supplements made in accordance herewith.
B. CUSTOMER acknowledges that it has read this Agreement, understands it, and
agrees to be bound by its terms and further acknowledges and agrees that it
constitutes the entire agreement of the parties hereto and supersedes all other
proposals, oral or written, and all other communications between the parties
relating to the subject matter hereof and this Agreement may not be modified or
terminated orally. No amendment to this Agreement shall be effective unless it
is in writing and signed by all duly-authorized representatives of both parties.
14. APPENDED SCHEDULE(S) OF SERVICES AND FEES
The following Schedule(s) of Services and Fees are appended to this Agreement:
- --------------------------------------------------------------------------------
SCHEDULE TITLE
NO.
- --------------------------------------------------------------------------------
GNR-94-06 Schedule of Services and Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto hereby execute this Agreement.
- --------------------------------------------------------------------------------
AGREED TO: AGREED TO:
PC QUOTE, INC, CUSTOMER
- --------------------------------------------------------------------------------
By: By: Mark Shefts
- --------------------------------------------------------------------------------
Name: Name: Mark Shefts
- --------------------------------------------------------------------------------
Title: Title: Pres.
- --------------------------------------------------------------------------------
Date: Date: 2-1-95
- --------------------------------------------------------------------------------
Sign Here
<PAGE>
<TABLE>
<CAPTION>
Reference: Service date:
----------- -------------
<S> <C> <C>
PC QUOTE Contract date: Contract Term:
-------------- --------------
1/31/95 12 mos
- --------------------------------------------------------------------------------
Customer: All-Tech Pro/Non: Pro
--------- --------
SCHEDULE OF Address: 160 Summit Ave.
SERVICES AND FEES ------- Montvale, NJ 07645
Agreement date:
---------------
Total Interrogation Devices:
----------------------------
- --------------------------------------------------------------------------------
GNR-94-06
MONTHLY SERVICES
Item Quantity Site First Unit Add'l Units Total
Hyperfeed Site Fee (To include both server as long as there is a 1 1000 $1,000
minimum of 10 PCW units. Otherwise $250/Month)
Windows Workstation 10 100 100 $1,000
Nasdaq Level II 10 50 50 $500
Dow Jones News 10 25 25 30 day trial
Agreement may be cancelled without penalty during 1st
60 days after installation if not 100% satisfied.
1st month of operation -- no charge.
Monthly Total Payable to PC Quote $2,500
ONE TIME CHARGES
Item Site First Unit Add'l Units Total
Installation & Training 1500 $1,500
Final Months service $2,500
Total Due with Contract $4,000
</TABLE>
<PAGE>
EXCHANGE CHECKLIST
Units Exchange Existing Acct. if any
- --------------------------------------------------------------------------------
10 New York Consolidated Last Sale
10 New York Consolidated Bid/Ask
10 American Last Sale
10 American Bid/Ask
10 American Stock Exchange
10 NASDAQ Last Sale NMS
10 NASDAQ Bid/Ask Level I
10 NASDAQ Level II
10 Options Price Reporting Authority
Chicago Board of Trade
Chicago Mercantile Exchange/International Monetary Market
Commodities Exchange Center/New York Futures Exchange
Commodity Exchange, Inc. (COMEX)
Kansas City Board of Trade
MidAmerican Commodities Exchange
Minneapolis Grain Exchange
Canadian Consolidated Equities
Global HyperFeed please complete and attach International Exchange
Checklist
DOW JONES NEWS CHECKLIST
Units For PC Quote for Windows or with Third Party Application
- --------------------------------------------------------------------------------
10 Dow Jones News Service (or Broadtape)
FOR PC QUOTE FOR DOS & OS/2 or with third Party Application
Interactive Headline News
Dow Jones Financial
Capital Markets Report
SIGNATURES Sign Here
Customer: Mark Shefts PC Quote, Inc.
Title: Pres. Title:
Date: 2-1-95 Date:
<PAGE>
PC Quote Customer Information CI-92-7
- --------------------------------------------------------------------------------
For Company or Individual
- --------------------------------------------------------------------------------
Full Legal Name: All-Tech Investment Group, Inc.
- --------------------------------------------------------------------------------
Address: 160 Summit Ave.
Summit, NJ 07645
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Phone. 201-307-4000 Fax: 201-782-9090 County: Bergen
- --------------------------------------------------------------------------------
For Individual Only
- --------------------------------------------------------------------------------
Please describe your occupation:
- --------------------------------------------------------------------------------
SSN:
- --------------------------------------------------------------------------------
For Company Only
Ownership [X] Corporation--state of incorporation: NY
[ ] Partnership [ ] Proprietorship
- --------------------------------------------------------------------------------
Type of Office: [X] Home [ ] Branch [ ] Independent [ ] Other:
- --------------------------------------------------------------------------------
Primary Contact: Mark Shefts Phone or ext.: 201-782-0200
- --------------------------------------------------------------------------------
Secondary Contact: Harry Loftkuitz Phone or ext.: 201-782-0200
- --------------------------------------------------------------------------------
Technical Contact (if different): Phone or ext.: 201-782-0200
Mark Sandusky
- --------------------------------------------------------------------------------
Tax ID No.: 13 2581640 Years in business:* 7 Yr
- --------------------------------------------------------------------------------
For Company or Individual
- --------------------------------------------------------------------------------
Bank.: United Jersey Bank
- --------------------------------------------------------------------------------
Account No.: 154131806 Type: Checking
- --------------------------------------------------------------------------------
Account No.: 154131733 Type: Checking
- --------------------------------------------------------------------------------
Credit Reference: XXXXXXXXXXXXX
- --------------------------------------------------------------------------------
Account No.: None Phone: 201-573-0370
- --------------------------------------------------------------------------------
Credit Reference: XXXXXXXXXXXXXXXXX
- --------------------------------------------------------------------------------
Account No.: All-Tech Phone: 201-546-4458
- --------------------------------------------------------------------------------
Credit Reference: Computer Supplies International
- --------------------------------------------------------------------------------
Account No.: 100041 Phone: 201-666-4306
- --------------------------------------------------------------------------------
All information provided above will be hold confidential but will be used for
credit checking purposes. I/We hereby authorize PC Quote, Inc. to whom this
application is made to investigate the references listed pertaining to my/our
credit and financial responsibility.
- --------------------------------------------------------------------------------
By: Mark Shefts
- --------------------------------------------------------------------------------
Title: Pres. Date: 2-1-95
- --------------------------------------------------------------------------------
For service billed to company other than company or Individual above
- --------------------------------------------------------------------------------
Please provide a letter from bill recipient accepting financial responsibility,
plus the Information below.
- --------------------------------------------------------------------------------
Company Name:
- --------------------------------------------------------------------------------
Authorized Contact: Phone:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less than 2 years in business: add'l credit information may be required.
- --------------------------------------------------------------------------------
Internal Use Ref.: Rep:
- --------------------------------------------------------------------------------
<PAGE>
1066
ALL-TECH INVESTMENT GROUP, INC.
160 SUMMIT AVE.
MONTVALE, NJ 07645 55-216 54
------------------ ------
212
2/2 1995
PAY
TO THE
ORDER OF PC QUOTE $4,000.xx
Four Thousand dollars and 00--------------------------------- DOLLARS
UNITED
JERSEY BANK
80 Chestnut Ridge Road, Montvale, NJ 07645
F0R ______________________________ _________Mark Shift___________MP
"001066 021202162 154 " 13173" 3"
<PAGE>
Amendment to PC Quote Standard License Agreement
Dated January 31, 1995 By and Between
PC Quote, Inc. and All-Tech Investment Group, Inc.
This amendment will supersede the Schedule of Services and Fees as set forth in
the above captioned agreement and shall apply to all All-Tech offices as a group
as set out below.
Site Licenses:
- --------------
At Montvale, NJ $1,200 per month to include two(2) NT dual Pentium servers
At New York, NY $700 No machinery
At Minneapolis, MN $700 No machinery
Additional Sites $700 No machinery
$ 450.00 per month per server for all additional servers
required beyond those specified at all sites.
Workstation Charges:
- --------------------
All sites will be combined for purposes of determining applicable
workstation charges.
First fifty (50) w/s $100.00 per month per terminal
All w/s above 50 $ 75.00 per month per terminal
New Services (per feed) $ 25.00 per month per terminal*
Charting $ 25.00 per month per terminal
*Does not include news provider fees.
Installation, Exchange Fees and One-Time Charges.
- -------------------------------------------------
All of the original terms and conditions shall apply.
IN WITNESS WHEREOF, the parties hereto hereby execute this Amendment.
AGREED TO: AGREED TO:
PC QUOTE, INC. ALL-TECH INVESTMENT GROUP, INC.
Mark Shefts
BY:--------------------- By:--------------------------
Mark Shefts
NAME: ------------------ Name: -----------------------
Exec VP
Title ------------------ Title: -----------------------
2-23-96
Date: ------------------ Date: -----------------------
<PAGE>
Dow Jones Financial News Services
2 YEAR PLAN SUBSCRIPTION AGREEMENT
THIS AGREEMENT, between the undersigned firm or corporation
("Subscriber") and DOW JONES & COMPANY, INC. ("Dow Jones"), sets forth the terms
under which Subscriber may receive the Dow Jones News Service(R) (the "DJ
Service") within the United States.
1. Service Format. Subscriber hereby subscribes to the DJ Service in
the following combined format: (A) interactive, retrievable format, which
permits the user to search (by stock symbol or company/industry code) a database
consisting of the most recent 90 days (or when made available by both Dow Jones
for the Service in question and by Subscriber's third-party vendor, if any, 180
days) of stories appearing in the DJ Service; and (B) continuous, online
printing of all headlines appearing in the DJ Service, Any Subscriber terminal,
printer, or other device that receives the DJ Service is referred to herein as a
"DJ Terininal".
2. Monthly Charges. Subscriber shall pay to Dow Jones in advance for
the DJ Service the applicable monthly fees (the "Subscription Fees")
corresponding to Subscriber's minimum commitment level, as set forth in Schedule
A, plus applicable sales or similar taxes.
(i) Commitment Levels. Subscriber's initial commitment level
shall be 50 terminals. On or before April 1, 1997 Subscriber may elect to
increase its commitment level with a corresponding change in the Subscription
Fees, which shall then remain in effect for the duration of the Term.
(ii) Minimum Monthly Charge. In any event, Subscriber shall pay
Dow Jones the "Minimum Monthly Charge" corresponding to Subscriber's commitment
level, which is calculated by multiplying the applicable Base Terminal Number by
the applicable Volume-based Terminal Charges, as set forth on Schedule A;
provided, however, that over the term hereof, Subscriber for any reason may
cancel (and thereby reduce such Base Terminal Number with a corresponding
reduction in such Minimum Monthly Charge) DJ Terminals such that the number of
DJ Terminals receiving the DJ Service at all times during the Term is greater
than or equal to the applicable Reduced Base Terminal Number, as set forth on
Schedule A. In the event Subscriber cancels sufficient DJ Terminals so that the
number of DJ Terminals is less than such Reduced Base Terminal Number,
Subscriber shall pay Dow Jones a Minimum Monthly Charge equal to such Base
Terminal Charge as applied to such Reduced Base Terminal Number.
3. Third-Party Vendor. Subscriber acknowledges that the DJ Service may
be delivered to Subscriber by, and made available on equipment supplied by, a
third-party vendor, and Subscriber agrees to pay to such vendor all applicable
delivery or other fees charged by such vendor. If Dow Jones delivers any DJ
Service directly to Subscriber, additional delivery fees may apply.
4. Dow Jones Equipment Charges. Subscriber may lease from Dow Jones any
DJ Terminal, related equipment and communications lines (collectively,
"Equipment") then available from Dow Jones at rates then in effect. Subscriber
shall be responsible for any loss or damage to the Equipment while in its care
and custody other than loss or damage caused by the negligence of Dow Jones or
its agents.
5. Copyright; Redistribution Restrictions. Subscriber agrees that the
DJ Service and the Equipment are the property of Dow Jones or its licensors and
the DJ Service is protected by copyright Subscriber agrees that it shall permit
access to the DJ Service hereunder (i) only through DJ Terminals located at
Subscriber's premises and under its exclusive control, and (ii) only by its
clients who have been authorized to access such DJ Terminals and who have signed
Dow Jones' Individual User Agreement, a current copy of which is attached as
Schedule B ("Authorized Clients"). Subscriber further agrees that neither it nor
any Authorized Client shall store, copy, reproduce, retransmit, disseminate,
sell, distribute, publish, broadcast or circulate the DJ Service in whole or in
part to anyone, including, but not limited to, other employees of Subscriber,
without the express prior written consent of Dow Jones; provided, however, that
Authorized Clients may on an occasional basis include limited portions of the DJ
Service in oral communications with others in the normal course of business.
<PAGE>
6. Plan Reports; Records. Within 20 days after the end of each month
during the term hereof, Subscriber shall supply Dow Jones with a report
certifying the number of DJ Terminals and Authorized Clients and the originals
of the Individual User Agreements signed by Authorized Clients during the
period covered by the report. (If Subscriber receives the DJ Service through a
third-party vendor, Dow Jones may, at its option, rely on such vendor's monthly
report of the information described in this Paragraph 3). Subscriber shall
maintain at all times during the Term of this Agreement adequate books and
records, which shall include the information required for the above reports and
the names and addresses of all Authorized Clients. Dow Jones shall have the
right, upon reasonable advance notice, from time to time to inspect Subscriber's
offices and records to confirm the accuracy of the information contained in such
reports.
7. Disclaimer. SUBSCRIBER AGREES THAT NEITHER DOW JONES NOR ANY OF ITS
DISTRIBUTORS, AFFILIATES, AGENTS OR LICENSORS WARRANT THE ACCURACY,
COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OF THE DJ SERVICE. IN NO EVENT WILL DOW JONES OR ANY OF ITS DISTRIBUTORS,
AFFILIATES, AGENTS OR LICENSORS BE LIABLE FOR ANY LOSS, INCLUDING CONSEQUENTIAL,
SPECIAL OR SIMILAR DAMAGES, RESULTING DIRECTLY OR INDIRECTLY FROM SUBSCRIBER'S
USE OF THE DJ SERVICE OR THE EQUIPMENT, OR FROM ANY DECISION MADE OR ACTION
TAKEN BY SUBSCRIBER OR ANY THIRD PARTY IN RELIANCE UPON INFORMATION CONTAINED IN
THE DJ SERVICE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT
SHALL THE LIABILITY OF DOW JONES, ITS DISTRIBUTORS, AFFILIATES, AGENTS AND
LICENSORS ARISING OUT OF ANY CLAIM RELATED To THIS AGREEMENT EXCEED THE
AGGREGATE AMOUNT PAID BY SUBSCRIBER HEREUNDER IN THE 12 MONTHS IMMEDIATELY
PRECEDING THE EVENT GIVING RISE TO SUCH CLAIM.
8. Term; Liquidated Damages. The term of this Agreement shall commence
on the date of execution of this Agreement (the "Commencement Date") and shall
continue for two (2) years from the Commencement Date (the "Term"). If
Subscriber terminates this Agreement for any reason other than a default by Dow
Jones, Subscriber shall pay to Dow Jones as liquidated damages (and not as a
penalty) an amount equal to the Minimum Monthly Charge times the number of
months remaining in the Term at the time of termination.
9. Miscellaneous. Neither party shall be liable to the other for any
delay or failure of performance of any of its obligations hereunder (other than
the payment of money) for reasons beyond the reasonable control of such party,
including natural disasters, actions or decrees of governmental bodies or
communications line failure not the fault of the affected party. This Agreement
contains the entire understanding of the parties and supersedes and terminates
all prior oral or written agreements on the subject hereof. Subscriber shall not
assign this Agreement to anyone without Dow Jones' prior written consent. This
Agreement shall not be contravened by any terms contained in any purchase order,
confirmation or acknowledgment signed by the parties hereto, and no modification
or amendment of this Agreement shall be deemed effected by any purchase order,
confirmation or acknowledgment containing other or different terms. This
Agreement will be governed by, and construed in accordance with, the laws of the
State of New York applicable to contracts entered into and wholly performed in
New York.
DOW JONES & COMPANY, INC. ALL-TECH INVESTMENT GROUP, INC.
-------------------------------
SUBSCRIBER
By: Mark Hevy By: Mark Shefts - V.P.
-------------------------- ----------------------------
Name(printed): Mark Hevy Name(printed): Mark Shefts
Title: Account Executive Title: V.P.
Dated: 1/16/98 Address: 160 Summit Ave.
Activation Date: November 1, 1996 Montvale, NJ 07645
2
<PAGE>
ALL-TECH INVESTMENT GROUP, INC.
MEMBER: NATIONAL ASSOCIATION OF SECURITIES DEALERS o SECURITIES INVESTOR
PROTECTION CORP.
March 31, 1997
Mr. Mark Hevy
Dow Jones and Company Inc.
P.O. Box 300
Princeton, NJ 08543-0300
Re: Commitment Revision
Dear Mark:
Following our March 14, 1997 letter, please change our commitment
level to fifty (50) terminals.
We understand that the news service will now be $120.00 per unit per
month for the balance of 1997 and will be increased to $122.00 for 1998.
Should you have any questions, please feel free to give me a call.
Very truly yours,
/s/ Robert Varsalona
------------------------------
Robert Varsalona
Controller
160 Summit Ave, Montvale, NJ 07645
(201) 782-0200 Fax (201) 782-9090
<PAGE>
================================
S&P COMSTOCK
================================
Subscriber Agreement
<TABLE>
<CAPTION>
==========================================================================================================
<S> <C> <C> <C>
Subscriber Name: All-Tech Investment Group, Inc. Acct# (Office Use only): DRY
- ----------------------------------------------------------------------------------------------------------
Professional: x Tax Identification# ________________________
-----
Non Professional: Social Security# ________________________
-----
Vendor:
==========================================================================================================
Installation Site: Billing Site:
Primary Contact, Attn: Billing Contact, Attn: Mark D. Shefts
- ----------------------------------------------------------------------------------------------------------
Street Address: 160 Summit Avenue Company: Same
- ----------------------------------------------------------------------------------------------------------
Suite/Floor: Street Adress:
- ----------------------------------------------------------------------------------------------------------
City: Montvale City: Suite/Floor:
- ----------------------------------------------------------------------------------------------------------
State/Zip Code: NJ 07645 State/Zip Code:
- ----------------------------------------------------------------------------------------------------------
Telephone: 201-782-0200 Telephone:
- ----------------------------------------------------------------------------------------------------------
Technician: Exchange Contact:
- ----------------------------------------------------------------------------------------------------------
Telephone: Telephone:
- ----------------------------------------------------------------------------------------------------------
Any Additional Contact: Any Additional Contact:
- ----------------------------------------------------------------------------------------------------------
General Use Facsimile: 201-782-9090 General Use Facsimile:
- ----------------------------------------------------------------------------------------------------------
(Office Use Only) CTR UCTR MACCT HWC 4/1/95
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Subscriber Agreement
Exhibit B Page #____ of ____if more than one Exhibit B
Subscriber Name: All-Tech Investment Group Inc. Acct #(Office Use Only) DRY
- ----------------------------------------------------- --------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LAN or Stand Alone / # of Authorized Display Devices L/50 / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
Software application: (Provided By S&P ComStock) TAL
- -----------------------------------------------------------------------------------------------------------------------------------
software application: (Provided By Third Party)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Initial Display Devices=
===================================================================================================================================
Optional Services: Subtotal
- -----------------------------------------------------------------------------------------------------------------------------------
International Data Access $50 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Dial Back-Up Fee $100 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly High Speed Dial Back-Up Fee $200 $0
- -----------------------------------------------------------------------------------------------------------------------------------
S&P ComStock Access Software $10 $0
- -----------------------------------------------------------------------------------------------------------------------------------
S&P ComStock Fundamental Software $25 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Leased Terminals $50 $0
- -----------------------------------------------------------------------------------------------------------------------------------
S&P News Retrieval Software $50 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Nasdaq Level II Access $25 $0
- -----------------------------------------------------------------------------------------------------------------------------------
Total Optional Services Total(D): $0
===================================================================================================================================
===================================================================================================================================
S&P ComStock Monthly and One Time Fees:
===================================================================================================================================
Monthly Fees: | One Time Fees:
|
Basic Monthly Fee: $520.00 (A) | Communication Installation: $1,500.00
--------- | ---------
(Includes 1st Authorized Display Device (if Checked) x | Software Installation:
| ---------
Communication Fee: | Site Survey:
| ---------
Satellite Equipment $200.00 (B) | Expedite: (If service available)
--------- | ---------
Dedicated Land Line | Satellite Equipment:
--------- | ---------
Authorized Display Devices | Shipping:
| ---------------------- ---------
1 to 75 for TAL @ $125 Ea. $6250 | Dial Back-up:
- ------- ------ ------- --------- |
for @ Ea. (C) | Modem(s):
- ------- ------ ------- --------- | --------- @$ ------- ---------
for @ Ea. (C) | Auto A/B Switch:
- ------- ------ ------- --------- | ---------
Total Optional Services (D) | S&P ComStock dial line installation:
--------- | ---------
Total S&P ComStock Monthly Fees: $6970 (E) | Other:
========= | ---------------------- ---------
Total Exchange Fees |
| ---------------------- ---------
Billed Through S&P ComStock: (E) |
--------- | ---------------------- ---------
Total Third Party Fees: (F) | Equipment Deposit:
--------- | (Fully Refundable) --------------- ---------
|
Total Monthly Fees: $6970 (F) | Total One Time Fees $1,500.00
========= | =========
Total Payment Due for the Initiation of Service: | $8,470
- -----------------------------------------------------------------------------------------------------------------------------------
The initial term of this Subscriber Agreement is: 12 Months
- -----------------------------------------------------------------------------------------------------------------------------------
The minimum number of Authorized Display Devices during the initial term of this agreement will be: 50 12/21/95
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Subscriber Agreement
Exhibit C
Subscriber Name: Acct# (Office Use only) DRY
================================================================================
Office Use Only Page #_____ of _____ if more than on Exhibit C
- --------------------------------------------------------------------------------
Satellite:: (2') (2.5') (4') Phone Circuit:: Analog / Metro-Fiber
- --------------------------------------------------------------------------------
LAN or Stand Alone / # of Display Devices / / / / / / Comments
- --------------------------------------------------------------------------------
TID # / Port # / / / / / /
- --------------------------------------------------------------------------------
Port Feature - Q, D, I
- --------------------------------------------------------------------------------
Port Baud Rate / Terminal Type / / / / / /
- --------------------------------------------------------------------------------
Software Code
- --------------------------------------------------------------------------------
Exchange Services: (The Level of this Service is _____ ) $ Sub Total
- --------------------------------------------------------------------------------
NYSE B/A (Q) N.P.: $4.25) *
- --------------------------------------------------------------------------------
NYSE LS (N) *
- --------------------------------------------------------------------------------
NYSE Listed Bonds (2) *
- --------------------------------------------------------------------------------
AMEX B/A (R) N.P.: $3.25)
- --------------------------------------------------------------------------------
AMEX LS (A) *
- --------------------------------------------------------------------------------
NASDAQ (O) N.P.: $4.00)
- --------------------------------------------------------------------------------
NASDAQ OTC Bulletin Board (3 (K)(I))
- --------------------------------------------------------------------------------
OPRA (Stocks & Indices) (P) N.P.: $2.00)
- --------------------------------------------------------------------------------
Indices (D) $0
- --------------------------------------------------------------------------------
CME (M) $55/$10
- --------------------------------------------------------------------------------
CBT (B) $60/$10
- --------------------------------------------------------------------------------
CEC/NYFE $88/$9
- --------------------------------------------------------------------------------
COMEX $55/$10
- --------------------------------------------------------------------------------
NYMEX (6) $55/$10
- --------------------------------------------------------------------------------
London FOX (Lc) $75/$0
- --------------------------------------------------------------------------------
Amsterdam Stocks (Ld) $21/$21
- --------------------------------------------------------------------------------
LIFFE/LTOM (Lf,o,v) $30/$9
- --------------------------------------------------------------------------------
Frankfurt Stocks (Lk) $35/$35
- --------------------------------------------------------------------------------
DTB (Ll) $20/$20
- --------------------------------------------------------------------------------
Rudolf Wolff (Lm) $50/$0
- --------------------------------------------------------------------------------
MATIF (Lq) $30/$10
- --------------------------------------------------------------------------------
Paris Stocks (Lr) $15/$15
- --------------------------------------------------------------------------------
London Stocks (Ls) $30/$30
- --------------------------------------------------------------------------------
IPE (Lt) $55/$13
- --------------------------------------------------------------------------------
SEAQ Level I (Lu) $14/$14
- --------------------------------------------------------------------------------
SEAQ Level II $80/$80
- --------------------------------------------------------------------------------
LME (Ly) $75/$3.20
- --------------------------------------------------------------------------------
Swiss & Zurich Stocks/SOFEX T(b,g,o,z) $25/$25
- --------------------------------------------------------------------------------
Hong Kong Futures (Tf) $4/$4
- --------------------------------------------------------------------------------
Hong Kong Metals (Tm) $4/$4
- --------------------------------------------------------------------------------
SIMEX (Ts) $6/$6
- --------------------------------------------------------------------------------
Sydney Futures (Ty) $65/$8
- --------------------------------------------------------------------------------
Canadian Stocks 3(abmntuvw) **
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Exchange Fees Billed Through S&P ComStock Total (E) $0.00
- --------------------------------------------------------------------------------
All Sources are Real Time unless Delay (DL) or End of Day (ED) is indicated in
the appropirate box.
- --------------------------------------------------------------------------------
Third Party Services:
- --------------------------------------------------------------------------------
S&P Basic Fundamental Data *** $25/$0
- --------------------------------------------------------------------------------
S&P Fundamental Data 1 and 2 $35/$35
- --------------------------------------------------------------------------------
S&P Marketscope Alert $100/$65
- --------------------------------------------------------------------------------
MMS International **
- --------------------------------------------------------------------------------
Dow Jones Broadtape **
- --------------------------------------------------------------------------------
Futures World News $75/$50
- --------------------------------------------------------------------------------
Bear Stearns / Street Software, Fixed Income 40/40
- --------------------------------------------------------------------------------
S&P ComStock Forex L(x) $50/$50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Third Party Fees (Non Exchange Fees) Total (F) $0.00
- --------------------------------------------------------------------------------
*For Professionals, Sources Bill Directly
**For Professionals and Non Professionals, Sources Bill Directly
***(W)SPC and QDS Applications only. 8/97
<PAGE>
SUBSCRIBER AGREEMENT
SUBSCRIBER NAME ____________________ A# (For Office Use Only ___________/_______
The Subscriber set forth above ("Subscriber") hereby subscribes to the
information service provided by S&P ComStock, Inc., known as the S&P ComStock
Service and comprised of the information and software components (including
documentation) selected by Subscriber as set forth in Exhibit B hereto (any and
all such components collectively referred to herein as "the Service"), to be
furnished to the Subscriber address completed on Exhibit A hereto (any such
software components and related documentation collectively referred to herein
as "the Software"). Prompt written notice of any change of the name, nature, or
place of Subscriber's business shall be given by Subscriber to S&P ComStock,
Inc. Subscriber and S&P ComStock, Inc. hereby mutually agree as follows:
1. The initial term of this Agreement is specified in Exhibit B and begins on
the day that S&P ComStock, Inc. has completed its installation of the S&P
ComStock Service. Thereafter, this Agreement shall automatically renew at the
end of each term for successive renewal terms, each of the same duration as the
initial term, unless it is terminated effective at the end of any term with
written notice by either party given to the other party at least thirty (30)
days prior to the end of the then-current term.
2. The Service is to be received by Subscriber solely for its internal use in
the Subscriber's business on the number of Authorized Display Device(s)
initially as set forth in Exhibit B and as may be subsequently increased or
decreased (but provided that Subscriber at all times shall be considered to
have at least the minimum number of Authorized Display Devices set forth in
Exhibit B) from time to time by written notice to S&P ComStock, Inc., and at
the installation address designated in Exhibit A. Subscriber will not
communicate, distribute, transfer, sell or otherwise furnish or permit to be
furnished the Service or any of the data, information, or Software contained
therein to any branch office, other place of business, or to any third party
person, firm or corporation, without the express prior written consent of
S&P ComStock, Inc. Subscriber will adopt and enforce all measures which S&P
ComStock, Inc. reasonably requires in order to prevent data, information or
Software from the Service from being redistributed or relocated from its
authorized place of business. Subscriber further agrees that it will comply
with any and all reasonable restrictions concerning the location of the S&P
ComStock, Inc. equipment or Software in its place of business.
3. Subscriber shall not access or use for any purpose any data or information
which are not selected by Subscriber in Exhibit B and Exhibit C hereto or in a
written signed amendment to this Agreement. Subscriber shall, prior to
commencing any use of the Service, submit application to and receive written
approval from each and every entity whose approval is required for receipt of
those portions of the Service which Subscriber elects to receive. Subscriber
shall, where applicable, and as required, enter into separate agreements with
exchanges or other third party data and/or Software providers and comply with
any conditions, restrictions, or limitations imposed therein. Failure of
Subscriber to comply with the provisions of this Paragraph shall constitute a
material breach of this Agreement. In addition, Subscriber agrees to indemnify
and hold S&P ComStock, Inc. and its affiliates and its third party data Software
providers harmless from any and all losses, damages, liabilities, costs,
charges, and expenses, including reasonable attorneys' fees and such fees and/or
penalties as any exchanges or other third party data or Software providers may
impose, arising out of any breach or alleged breach by Subscriber of its
obligations under this Agreement or any failure to comply with the requirements
of or obligations imposed by any such exchange or third party data or Software
provider; the foregoing indemnification obligation shall survive any termination
of this Agreement.
4. (a) Subscriber expressly acknowledges that the Service is prepared by S&P
ComStock, Inc., the exchanges, and other third party data and Software providers
through the application of methods and standards of judgment developed and
applied through the expenditure of substantial time, effort, and money.
Subscriber acknowledges that the Service (including but not limited to the
Software) contains trade secrets and proprietary data and that nothing in this
Agreement shall be construed to convey any title or ownership rights in the
Service or any portion thereof to Subscriber. Subscriber may not use, copy,
-1-
<PAGE>
modify, or transfer the Software, in whole or in part, except as expressly
provided for herein. Subscriber agrees to protect all proprietary rights of
S&P ComStock, Inc., the exchanges, and S&P ComStock, Inc.'s other third party
data and Software providers in their respective portions of the Service; and
Subscriber shall honor and comply with all reasonable requests to protect the
contractual, statutory, and common law rights of S&P ComStock, Inc., the
exchanges, and S&P ComStock, Inc.'s other third party data and Software
providers.
(b) Subscriber agrees and acknowledges that the ComStock Data Specifications
for TID Interrogation Format and TID Data Stream format ("the Specifications")
are confidential and proprietary to S&P ComStock, Inc. and that nothing in this
Agreement conveys any rights whatsoever with regard to the use of the
Specifications unless Subscriber has executed, and S&P ComStock, Inc. has
accepted, a Confidentiality Agreement with regard to the Specifications.
Subscriber shall not use the Specifications for any purpose other than as
expressly permitted by such Confidentiality Agreement. Subscriber may not copy,
disclose, convey, provide, transmit, sell or otherwise transfer the
Specifications to any other entity without S&P ComStock, Inc.'s express prior
written consent. Subscriber further agrees to take all steps necessary to
prevent the Specifications from being disclosed to any unauthorized persons
and to otherwise safeguard the confidentiality of the Specifications.
(c) Subscriber agrees not to reverse engineer, decompile, dissassemble or
otherwise seek to duplicate the performance characteristics of the Software or
any part thereof, nor to sell, assign or distribute the Software or any part
thereof to any other person, firm, corporation or entity and Subscriber further
agrees to transfer knowledge of and access to the Software only to its employees
who require such knowledge and access in the ordinary course and scope of their
employment by Subscriber.
(d) Subscriber may make one (1) copy of each authorized Software program for
archival and back-up purposes, provided that such copy shall be subject to this
Agreement (including fees) and bear the appropriate trademarks, copyright
notices and other proprietary notices contained in versions of the Software
provided by S&P ComStock, Inc. under this Agreement. From and after the date of
a written request by S&P ComStock, Inc., Subscriber shall deliver to S&P
ComStock, Inc. on a monthly basis a written report certifying the number of
authorized display devices using or displaying the Software.
5. Subscriber represents that it is not engaged in the business of vending
financial quotation information and that Subscriber's place of business
designated in Exhibit A is not and shall not be directly connected by any
private or other means of outgoing communication with any place of business
engaged in vending financial quotation information without the express written
consent of S&P ComStock, Inc.
6. Subscriber will advise S&P ComStock, Inc. in advance of any equipment not
supplied by S&P ComStock, Inc. which is to be used in connection with the
Service and shall adhere to any reasonable restrictions imposed by S&P ComStock,
Inc. with respect thereto.
7. At all times, upon 24 hours notice to Subscriber, any person or persons
designated by S&P ComStock, Inc. will have full and free access to the place
of business designated in Exhibit A to observe the use of the Service and
associated equipment and/or Software and to inspect, maintain, and/or remove
any S&P ComStock, Inc. equipment or Software.
8. Subscriber agrees to pay S&P ComStock, Inc. in advance on the first day of
each month the applicable S&P ComStock, Inc. monthly fees for the Service and
other fees and charges as set forth in Exhibit B and Exhibit C, (including any
Software license, maintenance, and installation fees) plus any applicable
federal, state or local sales, use, property, or other taxes, duties, or
assessments imposed on transactions hereunder. It is understood that such
monthly fees will include exchange fees and third party data and Software
provider fees for those exchanges and other third party data and Software
providers which bill through S&P ComStock, Inc.; such fees will
-2-
<PAGE>
be remitted by S&P ComStock, Inc. to the appropriate exchanges and other third
party data and Software providers. Subscriber agrees to pay all exchange fees
and third party data and Software provider fees as billed by S&P ComStock, Inc.
or as may be billed to Subscriber directly by the exchanges or such other
providers.
9. S&P ComStock, Inc. may, in its sole discretion, revise the S&P ComStock, Inc.
monthly fees and other fees and charges set forth in Exhibit B and Exhibit C,
effective as of the end of the first term by giving at least six (6) weeks'
prior written notice to Subscriber. Thereafter, S&P ComStock, Inc.may in its
sole discretion revise the S&P ComStock, Inc. monthly fees and other fees and
charges to Subscriber at any time by giving at least six (6) weeks' prior
written notice to Subscriber; provided, however, that S&P ComStock, Inc. shall
not make more than one (1) such revision in any twelve (12) month period. Upon
receipt of notice of increase in the S&P ComStock, Inc. monthly fees, and/or
other fees and charges, Subscriber shall thereupon have the right to terminate
this Agreement by giving written notice to S&P ComStock, Inc. within such
six-week notice period. All exchange fees (including quote server connection
fees) and third party data and Software provider fees are subject to change
at any time.
10. In addition to and notwithstanding any other term of this Agreement, S&P
ComStock, Inc. may, in its sole discretion, make a Cost of Living Adjustment
(COLA) to the monthly fees at the end of any twelve month period without prior
notice, provided that the COLA percentage increase is limited to the percentage
increase in the U.S. Government's Consumer Price Index for the period of time
since the last such COLA adjustment was made to the monthly fees charged to
Subscriber.
11. (a) In addition to the monthly fees, Subscriber agrees to pay any applicable
standard S&P ComStock, Inc. charges for order cancellation prior to
installation, disconnection, or removal of any S&P ComStock, Inc. equipment or
Software, for addition or deletion of exchange or third party data or Software,
for addition of S&P ComStock, Inc. equipment, or for other Subscriber-requested
modifications to the Service, as may be in effect from time to time. Subscriber
agrees to pay all other charges (such as installation, configuration, shipping,
purchases) as incurred by Subscriber and billed by S&P ComStock, Inc. Current
charges are available from S&P ComStock, Inc. as part of its standard price
sheet.
(b) Any equipment deposit will be returned to Subscriber upon termination,
settlement of any outstanding balances due, and return of all S&P ComStock, Inc.
equipment in good condition.
12. The furnishing of the Service is conditioned upon Subscriber's strict
compliance with the provisions of this Agreement and with all federal, state,
local, and exchange rules, regulations, and contract terms which may pertain
to the use of the Service. Notwithstanding any other term of this Agreement,
it is understood and agreed by Subscriber that S&P ComStock, Inc. may
discontinue the Service or portions thereof, without notice or liability,
whenever the exchanges, or cable operators, or other third party data or
software providers require such discontinuance. In addition, S&P ComStock, Inc.
shall not be liable for any actions taken by any cable operators which may
affect the Service, including, without limitation, actions which result in the
termination or interruption of the Service.
13. S&P ComStock, Inc. represents and warrants that it has the right to provide
the Service and the data and information contained therein. THIS WARRANTY IS IN
LIEU OF ANY OTHER EXPRESS OR IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION,
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
NEITHER S&P COMSTOCK INC., ANY OF ITS AFFILIATES, THE EXCHANGES OR OTHER THIRD
PARTY DATA AND SOFTWARE PROVIDERS AND DEVELOPERS WARRANT THAT THE SERVICE WILL
BE UNINTERRUPTED OR ERROR-FREE, NOR DO THEY MAKE ANY WARRANTIES AS TO RESULTS
TO BE OBTAINED FROM USE OF THE SERVICE. SUBSCRIBER EXPRESSLY AGREES THAT USE OF
THE SERVICE IS AT SUBSCRIBER'S SOLE RISK.
-3-
<PAGE>
14. S&P ComStock, Inc., its affiliates, and the exchanges and third party data
and Software providers and developers will in no way be liable to Subscriber or
to any other entity for any inaccuracies, errors, omissions, or delays
regardless of cause, in the Service or in any of the data and information and
Software contained therein, or caused by any S&P ComStock, Inc. or third party
equipment or Software used in connection therewith, or for any damages (whether
direct or indirect, or consequential, punitive, special or exemplary, including
but not limited to loss of profits) resulting therefrom, regardless of cause.
Liability of S&P ComStock, Inc. and its affiliates and its third party data and
Software providers and developers in any and all categories, whether arising
from contract, warranty, negligence, or otherwise shall, in the aggregate, in
no event exceed the average monthly fees charged for the Service.
15. (a) Notwithstanding any other term of this Agreement, S&P ComStock, Inc.
may, in its sole discretion and at any time, change the communications carriers
used by S&P ComStock, Inc.
(b) If communications carrier charges incurred by S&P ComStock, Inc. are
increased by the carriers, S&P ComStock, Inc. may, on written notice to
Subscriber, immediately increase the monthly fees charged to Subscriber to
reflect such increase in communications charges. In the event of such an
increase, Subscriber shall have the right to terminate this Agreement without
penalty provided that Subscriber gives written notice of termination to S&P
ComStock, Inc. within thirty (30) days of receipt of notice from S&P ComStock,
Inc.
16. Failure by Subscriber to pay any monthly fees or other fees or charges in
connection with the Service within thirty (30) days of the due date shall
constitute a material breach of this Agreement. S&P ComStock, Inc. reserves the
right, in addition to other remedies, to suspend access to the service. S&P
ComStock, Inc. may assess a late charge at a rate not exceeding 1.5% per month
on all amounts payable which Subscriber has not paid within thirty (30) days of
the due date.
17. Subscriber shall have no right in or to any S&P ComStock, Inc. equipment,
Software, or to data and information received, except the right to use the
same in the course of Subscriber's business consistent with the provisions
herein. Subscriber shall not move the S&P ComStock, Inc. equipment or Software
without written permission by S&P ComStock, Inc. Subscriber shall pay for any
extraordinary costs of installation, repair or replacement, over and above
ordinary installation costs and/or maintenance. Extraordinary installation
includes special cable requirements such as teflon, cabling in excess of 100
feet, installation work performed during non-business hours, electrical work
done external to the S&P ComStock, Inc. equipment, maintenance of accessories
or attachments; and includes repair of damage to the equipment, earth station,
antenna, or the modem resulting from accident, neglect, misuse, failure of
electrical power or causes other than ordinary use. Subscriber shall not
assign, pledge, or encumber the S&P ComStock, Inc. equipment or Software and
Subscriber shall keep the S&P ComStock, Inc. equipment and Software free and
clear of all liens, levies, and encumbrances; failure to do so shall constitute
a material breach of this Agreement. Subscriber will promptly return to
S&P ComStock, Inc. or its contractors or agents the S&P ComStock, Inc. equipment
and Software in good condition, ordinary wear and tear excepted, when the
Service is terminated, or when swapout is required for maintenance. Subscriber
agrees and understands that it shall be responsible for the replacement cost to
S&P ComStock, Inc. or its agents of any S&P ComStock, Inc. equipment and
Software not returned in good working condition within thirty (30) days of
notification. Subscriber will pay all S&P ComStock, Inc. equipment shipping and
handling charges as billed in addition to any other non-recurring charges.
-4-
<PAGE>
18. (a) During the term of this Agreement, if Subscriber licenses Software from
S&P ComStock, Inc. and pays all the required fees, S&P ComStock, Inc. or its
authorized agents shall provide maintenance service to Subscriber for the
Software and will use reasonable efforts to attempt to correct identifiable and
reproducible material errors due solely to causes within the reasonable control
of S&P ComStock, Inc. or its third party Software providers or developers. In
such case, S&P ComStock, Inc. shall have the option to either promptly replace
or correct the Software so that the Software performs free of such errors, or to
credit the applicable fee on a pro-rata basis according to the amount of time
during which the Software failed to perform. S&P ComStock, Inc. does not
guarantee maintenance service results or represent or warrant that all errors
will be corrected. Subscriber agrees and understands that it will be separately
and additionally charged for any training, copies of materials, assistance in
installation, and upgrades. Provision of maintenance services for any software
program is dependent upon Subscriber's compliance with all minimum hardware
and operating system requirements for such Software in conformity with
specifications provided by S&P ComStock, Inc. To permit S&P ComStock, Inc. to
provide maintenance services, S&P ComStock, Inc. requires that Subscriber
isolate and document Software problems, provide appropriate modems and lines for
S&P ComStock, Inc. to access Subscriber's system remotely, install and test all
fixes and updates, install Subscriber's system from backup, and perform those
other actions reasonably required by S&P ComStock, Inc.; if S&P ComStock, Inc.
performs any such services, Subscriber will be additionally charged at S&P
ComStock, Inc.'s then-current rates.
(b) S&P ComStock, Inc. may change or discontinue Software maintenance
services for any reason at any time after the initial term of this Agreement
upon six (6) month's notice after the initial term of their agreement has been
completed.
(c) S&P ComStock, Inc. shall have no responsibility whatsoever with regard
to the maintenance of any third party software which is not Software
specifically listed in Exhibit B.
19. Should Subscriber file a petition in bankruptcy or be adjudicated a
bankrupt, or if a petition in bankruptcy is filed against Subscriber, or
Subscriber makes an assignment for the benefit of its creditors or an
arrangement pursuant to any bankruptcy act or takes advantage of the insolvency
laws of any State, or if Subscriber discontinues all of its business, the
Service may be immediately terminated by S&P ComStock, Inc. without notice.
S&P ComStock, Inc. may terminate the Service, upon written notice to Subscriber,
if in S&P ComStock, Inc.'s reasonable judgment Subscriber is in material breach
of any of its obligations under this Agreement. Termination of this Agreement
under the provisions of this paragraph shall be without prejudice to any other
remedy which S&P ComStock, Inc. may have against the Subscriber. Upon
termination of this Agreement, all fees and charges incurred to such date shall
become immediately due and payable. In addition to and notwithstanding the
above, if Subscriber or any of its employees, agents or representatives, shall
attempt to use or dispose of the Service in a manner contrary to the terms of
this Agreement, S&P ComStock, Inc. shall have the right, in addition to such
other remedies as may be available to it, to injunctive relief enjoining such
acts or attempts, it being acknowledged that legal remedies are inadequate.
20. Subscriber agrees that it will not engage in, and represents that it is not
currently engaged in, the operation of any unlawful transactions or business
and that it will not use or permit anyone to use the Service for any unlawful
purpose.
21. The relationship between Subscriber and S&P ComStock, Inc. is that of
independent contractors and nothing contained in this Agreement shall be
construed to constitute the parties as partners, joint ventures or agents of
one another. This Agreement shall not be assigned or otherwise transferred by
Subscriber without the prior written consent of S&P ComStock, Inc.
-5-
<PAGE>
22. Subscriber represents that the signatory below is authorized to act in
behalf of the named Subscriber. This Agreement constitutes the entire agreement
between the parties and supersedes any prior agreements between the parties
with respect to its subject matter, and nothing stated heretofore or hereafter
will be considered part of this Agreement without a mutually agreeable amendment
executed by authorized representatives of the parties. None of the provisions
of the Agreement shall be deemed to be waived or modified, other than as
expressly stated in writing signed by both parties. The failure of either of
the parties hereto to enforce, or the delay by either party in enforcing, any of
its rights under this Agreement shall not be deemed to be a waiver or
modification by the parties of any of their rights under this Agreement.
Any notices required to be sent hereunder shall be sent by mail to the
respective address set forth below or by fax to the number set forth below,
unless either party notifies the other of a change in such address or number.
23. This Agreement shall be governed by the laws of the State of New York,
without regard to the choice of law provisions thereof, and Subscriber agrees
that any action arising out of this Agreement or the breach thereof shall be
resolved in New York and Subscriber hereby agrees to submit to the exclusive
jurisdiction of the New York courts for the resolution of any such dispute.
24. In the event any legal action is taken by S&P ComStock, Inc. with respect
to the Service, Subscriber agrees to pay all court costs, including
disbursements and reasonable attorneys' fees.
25. Neither party shall have any liability for any default resulting from force
majeure, which shall be deemed to include any circumstances beyond its control.
Such circumstances shall include, but are not limited to: acts of the
government, fires, floods, strikes, civil disturbances or terrorism, or power,
communications line, satellite or network failures.
SERVICE REQUESTED BY: SUBSCRIPTION ACCEPTED BY:
/s/ Mark Sheft
- ----------------------------------- -----------------------------------------
(Authorized Signature) (S&P ComStock, Inc. Authorized Signature)
Mark Sheft - President
- -----------------------------------
(Name & Title - Please Print) S&P ComStock, Inc.
600 Mamaroneck Avenue
All Tech Investment Group Inc. Harrison, New York 10528
- -----------------------------------
(Subscriber Name)
11-21-97
- ----------------------------------- ----------------------------------------
(Date) (Date)
OTHER (complete if applicable)
Subscriber has made arrangements with ______________________________, an
authorized broker, for receipt of the Service. S&P ComStock, Inc. will not bill
Subscriber for the Service but will receive payment solely from such authorized
broker. Subscriber represents that it intends to use the Service for research
purposes for the benefit of its customers. Subscriber, as a condition of the
receipt of the Service, agrees to abide by the terms and conditions of this
Agreement (excepting those relating to payment).
-6-
<PAGE>
ComStock
600 Mamaroneck Avenue
5th Floor
Harrison, NY 10528-1624
Tel 914 381 7000
Fax 914 381 7021
Standard & Poor's
A Division of The McGraw-Hill Companies [LOGO]
RIDER A
TO SUBSCRIBER AGREEMENT BETWEEN
S&P COMSTOCK, INC.
AND ALL-TECH INVESTMENT GROUP, INC.
Subscriber shall have the right to terminate this Agreement on thirty (30) days
prior written notice to ComStock if, in Subscriber's reasonable judgment, any
new statute, rule, regulation or interpretation thereof of the Securities and
Exchange commission, any state or any self regulatory organization materially
negatively affects active intra-day electronic trading or imposes substantial
costs or otherwise substantially affects Subscriber's use of the services
provided by ComStock hereunder.
S&P ComStock will charge Subscriber full installation Fees per actual installed
site, if Subscriber fails to maintain any site for less than twelve (12)
concurrent months.
ALL-TECH INVESTMENT GROUP, INC. S&P COMSTOCK, INC.
By: /s/ Mark Sheft By: /s/ David R. Young
------------------------------- -------------------------------
Title: President Title: National Sales Manager
---------------------------- ----------------------------
Date: November 21, 1997 Date: January 5, 1998
----------------------------- -----------------------------
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement on Form S-1 filed with the
Securities and Exchange Commission of our report dated August 12, 1997 with
respect to the financial statements of All-Tech Investment Group, Inc. included
herein and to the reference to us under the caption "Experts" in the
Prospectus.
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
July 10, 1998
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0
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<COMMON> 15,469
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<TOTAL-REVENUES> 16,063,816
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<PERIOD-TYPE> 9-MOS
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<TRADING-REVENUE> (147,105)
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