<PAGE>
As filed with the Securities and Exchange Commission on June 24, 1996
Registration No. 333-3589
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------
AMENDMENT
NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------
IMATEC, LTD.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3861 11-3289398
---------- -------------------------------- ----------------------
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)
</TABLE>
150 E. 58th Street
New York, NY 10155
(212) 826-0440
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
150 E. 58th Street
New York, NY 10155
(212) 826-0440
(Address, including zip code, and telephone number, including area code,
of registrant's principal place of business or intended place of business)
Hanoch Shalit
Chief Executive Officer
150 E. 58th Street
New York, NY 10155
(212) 826-0440
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Clifford A. Brandeis, Esq. Lawrence B. Fisher, Esq.
Orrick, Herrington & Sutcliffe Zukerman Gore & Brandeis, LLP
900 Third Avenue 666 Fifth Avenue
New York, New York 10022 New York, NY 10103
(212) 223-6700 (212) 506-5000
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/ [check if necessary]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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: / /
=============================================================================
<PAGE>
IMATEC, LTD.
CROSS REFERENCE SHEET
(SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION REQUIRED BY ITEMS 1
THROUGH 23, PART I, OF FORM SB-2)
<TABLE>
<CAPTION>
Item in Form SB-2 Prospectus Caption
--------------------------------------------------- --------------------------------------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus .................................... Facing Page of Registration Statement; Outside Front
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus ............................................. Inside Front Cover Page of Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information and Risk Factors ................... Prospectus Summary; Risk Factors
4. Use of Proceeds ........................................ Use of Proceeds
5. Determination of Offering Price ........................ Outside Front Cover Page of Prospectus; Underwriting;
Risk Factors
6. Dilution ............................................... Dilution; Risk Factors
7. Selling Security Holders ............................... Outside Front Cover Page of Prospectus;
Selling Security Holders
8. Plan of Distribution ................................... Outside Front Cover Page of Prospectus; Risk Factors;
Underwriting
9. Legal Proceedings ...................................... Business - Legal Proceedings
10. Directors, Executive Officers, Promoters and Control
Persons ................................................ Management
11. Security Ownership of Certain Beneficial Owners and
Management ............................................. Principal Security Holders
12. Description of Securities .............................. Description of Securities; Underwriting
13. Interest of Named Experts and Counsel .................. Experts; Legal Matters
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities ......................... Inside Front Cover Page of Prospectus; Underwriting
15. Organization Within Last 5 Years ....................... Prospectus Summary; The Company; Business; Certain
Transactions
16. Description of Business ................................ Business; Risk Factors
17. Management's Discussion and Analysis or Plan of
Operation .............................................. Plan of Operations
18. Description of Property ................................ Business - Properties
19. Certain Relationships and Related Transactions ......... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters ................................................ Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Securities; Underwriting
Management - Executive Compensation
21. Executive Compensation Selected Financial Information; Financial Statements
22. Financial Statements
23. Changes in and Disagreements with Accountants on Change in Accountants
Accounting and Financial Disclosures
</TABLE>
<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.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 24, 1996
IMATEC, LTD.
1,000,000 SHARES OF COMMON STOCK,
4,000,000 CLASS A REDEEMABLE WARRANTS AND
4,000,000 CLASS B REDEEMABLE WARRANTS
Imatec, Ltd. (the "Company") hereby offers 1,000,000 shares (the "Shares")
of common stock, par value $.0001 per share (the "Common Stock"), 4,000,000
Class A redeemable Common Stock purchase warrants (the "Class A Redeemable
Warrants") and 4,000,000 Class B redeemable Common Stock purchase warrants
(the "Class B Redeemable Warrants"). The Class A Redeemable Warrants and
Class B Redeemable Warrants are collectively referred to as the "Redeemable
Warrants." The Shares and the Redeemable Warrants (collectively, the
"Securities") may be purchased separately and will be separately tradeable
immediately upon issuance. It is currently anticipated that the initial
public offering prices of the Common Stock, the Class A Redeemable Warrants
and the Class B Redeemable Warrants will be $5.00, $.25 and $1.00,
respectively. Each Class A Redeemable Warrant and each Class B Redeemable
Warrant entitles the registered holder thereof to purchase one share of
Common Stock at an exercise price of $6.50 and $5.50, respectively, subject
to adjustment, commencing on the date of this Prospectus until _________,
1998 [24 months from the date of this Prospectus] and _______, 2001 [60
months from the date of this Prospectus], respectively, at which time the
Redeemable Warrants shall expire. Upon the prior written consent of A.S.
Goldmen & Co., Inc. (the "Underwriter"), each Class A Redeemable Warrant and
each Class B Redeemable Warrant is redeemable by the Company at any time
after ________, 1997, [9 months from the date of this Prospectus] and [
_______, 1997, [12 months from the date of this Prospectus], respectively, at
a redemption price of $.10 per Redeemable Warrant, on 30 days' prior written
notice, provided that the average closing bid price of the Common Stock, as
reported on the Nasdaq SmallCap Market ("Nasdaq") shall equal or exceed $7.50
and $9.00, respectively, for any 20 trading days within a period of 30
consecutive trading days ending on the fifth trading day prior to the date of
notice of redemption. See "Risk Factors," "Description of Securities" and
"Underwriting."
(Cover continued on next page)
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS"
BEGINNING ON PAGE 4 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>
Price Underwriting Proceeds to
to Public Discount (1) Company (2)
- -----------------------------------------------------------------------------
Per share of Common Stock ....... $ $ $
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
Per Class A Redeemable Warrant .. $ $ $
- -----------------------------------------------------------------------------
Per Class B Redeemable Warrant .. $ $ $
- -----------------------------------------------------------------------------
Total (3) ....................... $ $ $
</TABLE>
- -----------------------------------------------------------------------------
(1) Does not include additional compensation to the Underwriter in the form
of a non-accountable expense allowance equal to 3% of the gross proceeds
of this offering (the "Offering"). For indemnification arrangements with,
and additional compensation payable to, the Underwriter, see
"Underwriting."
(2) Before deducting estimated expenses of the Offering payable by the
Company of $800,000, including the non-accountable expense allowance
payable to the Underwriter.
(3) The Company has granted to the Underwriter a 45 day option, to purchase
up to an additional 150,000 shares of Common Stock and/or 600,000 Class A
Redeemable Warrants and/or 600,000 Class B Redeemable Warrants on the
same terms and conditions as set forth above solely to cover
over-allotments, if any. If such over-allotment option is exercised in
full, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $ _________, $ ________ and $ _________, respectively.
See "Underwriting."
------
The Securities are being offered by the Underwriter, subject to prior sale
when, as and if delivered to and accepted by the Underwriter, and subject to
the approval of certain legal matters by its counsel and certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
the Offering and to reject any order in whole or in part. It is expected that
the delivery of the certificates representing the Securities and payment
therefor will be made at the offices of A.S. Goldmen & Co., Inc. at 99 Wood
Avenue South, Iselin, New Jersey 08830, or its counsel on or about ,
1996.
A.S. GOLDMEN & CO., INC.
The date of this Prospectus is _________________, 1996
<PAGE>
(cover continued from previous page)
Prior to this Offering, there has been no public market for the
Securities, and no assurance can be given that such a market will develop
upon completion of this Offering, or if developed, that it will be sustained.
The initial public offering prices of the Securities and the exercise price
and other terms and conditions of the Redeemable Warrants have been
arbitrarily determined by negotiations between the Company and the
Underwriter and do not necessarily bear any relationship to the Company's
assets, book value, results of operations or other generally accepted
criteria of value. Application has been made for listing of the Common Stock,
the Class A Redeemable Warrants and the Class B Redeemable Warrants on Nasdaq
under the symbols IMEC, IMECW and IMECZ, respectively. See "Risk Factors" and
"Underwriting."
This Prospectus also relates to the registration by the Company, at its
expense, (a) for the account of the Company of 8,000,000 shares of Common
Stock issuable by the Company upon the exercise of 8,000,000 Redeemable
Warrants to be issued in the Offering, (b) for the account of various
security holders who provided interim bridge financing (the "Bridge
Financing") to the Company (collectively, the "Bridge Selling Security
Holders"), of an aggregate of (i) 551,785 shares of Common Stock, (ii)
4,000,000 Class A Redeemable Warrants, and (iii) 4,000,000 shares of Common
Stock issuable by the Company upon the exercise of the 4,000,000 Class A
Redeemable Warrants issued to the Bridge Selling Security Holders, and (c)
for the account of the founding stockholders of the Company (the "Founding
Selling Security Holders") of an aggregate of 2,210,000 shares of Common
Stock. Except with respect to 150,000 shares of Common Stock being registered
on behalf of certain of the Founding Selling Security Holders, including
50,000 shares for Dr. Hanoch Shalit, the Company's President and Chief
Executive Officer, the Bridge Selling Security Holders and the Founding
Selling Security Holders have agreed with the Underwriter not to effect any
sales of the securities issued to them until 18 months after the date of this
Prospectus without the prior written consent of the Underwriter. The Company
will not receive any proceeds from any of the securities offered for sale by
either the Bridge Selling Security Holders or the Founding Selling Security
Holders, although it will receive proceeds from the exercise of Redeemable
Warrants by the Bridge Selling Security Holders. The Bridge Selling Security
Holders and the Founding Selling Security Holders are sometimes hereinafter
referred to collectively as the "Selling Security Holders," and all of the
securities offered for sale by the Selling Security Holders are hereinafter
referred to as the "Selling Security Holders' Securities." See "Prospectus
Summary - The Offering," "Selling Security Holders," and "Description of
Securities."
The sale of the Selling Security Holders' Securities may be effected from
time to time in transactions (which may include block transactions by or for
the account of the Selling Security Holders) in the over-the-counter market
or in negotiated transactions, through the writing of options on the Selling
Security Holders' Securities, through a combination of such methods of sale,
or otherwise. Sales may be made at fixed prices which may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. If any
Selling Security Holder sells his, her or its Securities, or options thereon,
pursuant to this Prospectus at a fixed price or at a negotiated price which
is, in either case, other than the prevailing market price or in a block
transaction to a purchaser who resells, or if any Selling Security Holder
pays compensation to a broker-dealer that is other than the usual and
customary discounts, concessions or commissions, or if there are any
arrangements either individually or in the aggregate that would constitute a
distribution of the Selling Security Holders' Securities, a post-effective
amendment to the Registration Statement of which this Prospectus is a part,
would need to be filed and declared effective by the Securities and Exchange
Commission before such Selling Security Holders could make such sale, pay
such compensation or make such a distribution. The Company is under no
obligation to file a post-effective amendment to the Registration Statement
of which this Prospectus is a part under such circumstances.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements after the close of each fiscal year.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND/OR THE REDEEMABLE WARRANTS OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified by, and must be read in conjunction
with, the more detailed information and financial statements set forth
elsewhere in this Prospectus. Unless otherwise indicated herein, all share
and per share information does not give effect to (i) the exercise of the
Underwriter's over- allotment option to purchase up to an additional 150,000
shares of Common Stock and/or 600,000 Class A Redeemable Warrants and/or
600,000 Class B Redeemable Warrants and the issuance of up to 1,200,000
shares of Common Stock upon exercise of the Redeemable Warrants included in
the Underwriter's over- allotment option; (ii) the issuance of 12,000,000
shares of Common Stock issuable upon exercise of the Redeemable Warrants,
including the Redeemable Warrants offered by the Bridge Selling Security
Holders; (iii) the issuance upon exercise of warrants granted to the
Underwriter (the "Underwriter's Warrants") of up to 100,000 shares of Common
Stock, 400,000 Class A Redeemable Warrants, 400,000 Class B Redeemable
Warrants and the underlying 800,000 shares of Common Stock issuable upon
exercise of the Redeemable Warrants contained in the Underwriter's Warrants;
and (iv) 500,000 shares of Common Stock reserved for issuance upon the
exercise of stock options that may be granted pursuant to the Company's stock
option plan. See "Management -- Stock Option Plan" and "Underwriting." Unless
otherwise indicated herein, all share and per share information gives effect
to (i) a 1-for-4 reverse stock split effected in May 1995 and (ii) a
22,100-for-1 stock forward split effected in October 1995.
THE COMPANY
Imatec, Ltd. (the "Company") was formed in 1988 to develop, design, market
and license its Imatec 20/20 system ("Imatec 20/20(TR)"), which enhances
image reproduction by reducing distortion that normally occurs in the imaging
process. Based on the results of extensive testing by the Company, the Imatec
20/20(TR) system is capable of improving the quality of film reproduction of
images taken by medical imaging devices such as Magnetic Resonance Imaging
machines ("MRI"), Computer Topography machines ("CT") and Ultrasound
machines. In addition, the Imatec 20/20(TR) system achieves this goal
regardless of the type of the medical imaging film used and as a consequence,
may result in cost savings to the user. The Company also recently developed
the Imatec 20/20(TR) system to improve the quality of images in the medical
imaging field of teleradiology; which is the viewing of the same image on
different monitor screens in separate locations. The Company believes that,
in addition to the medical imaging field, the Imatec 20/20(TR) system can be
used in markets such as graphic arts, computers and video display.
The Imatec 20/20(TR) system is designed to measure the image
characteristics of an original image and compare it to its reproduction,
computing the existing distortion between the two images and correcting such
distortion. Current imaging systems create reproductions that have
distortions and are compensated for by subjective adjustments during the
reproduction process. Aspects of the Imatec 20/20(TR) system are set forth in
three United States patents (the "Patents") which have been licensed by the
Company from Dr. Hanoch Shalit, the Company's President and Chief Executive
Officer. The Company has designed, built and tested a prototype of a device
incorporating the Imatec 20/20(TR) system that can be used with MRI, CT and
Ultrasound machines.
In 1995, U.S. sales of MRI, CT and Ultrasound machines were approximately
$1.59 billion, representing sales of approximately 9,775 units. In addition,
approximately $238 million was spent in 1994 in connection with upgrading and
improving these medical imaging devices either to extend the life of the
machines or to add on technical improvements. At the end of 1995, there were
approximately 96,680 MRI, CT and Ultrasound machines operating in the United
States. Based on industry statistics, the U.S. market for medical imaging
devices represents approximately 50% of the worldwide market. See "Business
- -- The Company -- The Medical Imaging Market."
The Company's strategy is to (i) license the Imatec 20/20(TR) system to
manufacturers of medical imaging products such as scanners and cameras, (ii)
engage in marketing activities to facilitate the licensing of the Imatec
20/20(TR) system, and (ii) continue its research and development activities
with respect to
1
<PAGE>
the use of the Imatec 20/20(TR) system for other applications in the medical
imaging field and in other imaging fields, such as graphic arts, computers
and video display. The Company does not presently intend to engage in any
manufacturing, sales, distribution or service activities with respect to
products that incorporate the Imatec 20/20(TR) system.
The Company is a development stage company and was incorporated in the
State of New York on November 17, 1988 and reincorporated in the State of
Delaware on October 20, 1995. The Company maintains its offices at 150 E.
58th Street, New York, NY 10155 and its telephone number is (212) 826- 0440.
2
<PAGE>
THE OFFERING
Securities Offered............. 1,000,000 shares of Common Stock, 4,000,000
Class A Redeemable Warrants and 4,000,000
Class B Redeemable Warrants. See
"Description of Securities."
Securities Registered for the
Selling Security Holders..... An aggregate of 551,785 shares of Common
Stock and 4,000,000 Class A Redeemable
Warrants are being registered hereby and may
be sold by the Bridge Selling Security
Holders. An additional 150,000 shares of
Common Stock are being registered and may be
sold by the Founding Selling Security
Holders. None of the Selling Security
Holders' Securities are being underwritten
in the Offering and the Company will not
receive any proceeds from their sale
although it will receive the exercise price
of $6.50 per share in the event that any
Class A Redeemable Warrants are exercised.
See "Selling Security Holders".
Terms of Redeemable Warrants... Each Class A Redeemable Warrant and Class B
Redeemable Warrant entitles the holder
thereof to purchase one share of Common
Stock at an exercise price of $6.50 and
$5.50 per share, respectively, at any time
commencing on the date of this Prospectus
until ________, 1998 [24 months after the
date of this Prospectus] and ________, 2001
[60 months from the date of this
Prospectus], respectively, subject to
adjustment in certain circumstances. Each
Class A Redeemable Warrant and each Class B
Redeemable Warrant, is redeemable by the
Company commencing ________, 1997 [9 months
after the date of this Prospectus] and
_______, 1997 [12 months after the date of
this Prospectus] respectively. The Class A
Redeemable Warrants and the Class B
Redeemable Warrants are redeemable by the
Company with the consent of the Underwriter
and will be subject to redemption at a
redemption price of $.10 per Class A
Redeemable Warrant and per Class B
Redeemable Warrant provided that the average
closing bid price of the Common Stock as
reported by Nasdaq equals or exceeds $7.50
and $9.00 per share, respectively, 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
Securities."
Common Stock Outstanding:
Prior to the Offering........ 2,761,785 shares
After the Offering............ 3,761,785 shares
Use of Proceeds................ Repayment of indebtedness, research and
development, marketing and licensing and
working capital purposes. See "Use of
Proceeds."
Risk Factors................... The Securities offered hereby involve a high
degree of risk and immediate and substantial
dilution. See "Risk Factors" and "Dilution."
Proposed Nasdaq SmallCap
Symbols (1):
Common Stock................ IMEC
Class A Redeemable
Warrants................... IMECW
Class B Redeemable
Warrants................... IMECZ
- ------
(1) Application has been made for quotation of the Common Stock and the
Redeemable Warrants on Nasdaq. See "Risk Factors -- No Assurance of
Public Trading Market or Continued Nasdaq Inclusion, Risk of Low-Priced
Securities."
3
<PAGE>
RISK FACTORS
Development Stage Company; Lack of Revenues; Accumulated Deficit;
Continued Losses for the Foreseeable Future; No Assurance of
Profitability. The Company is in the development stage and, to date, has only
earned nominal revenues from operations. Since inception in November 1988,
the Company's principal activities have been (i) research and development
related to the development of the Imatec 20/20(TR) system, (ii) testing of
the Imatec 20/20(TR) system, and (iii) the filing of, and other activities
related to obtaining, the Patents. Primarily as a result of expenses incurred
in connection with research and development and related activities, as of
December 31, 1995 the Company had an accumulated deficit of $1,268,682. The
Company has continued to incur losses since December 31, 1995. Potential
investors should be aware of the problems, delays, expenses, difficulties and
risks encountered by a company in the development stage, many of which may be
beyond the Company's control. Such risks may include, but are not limited to,
unanticipated problems relating to developing, testing and marketing new
technologies. In addition, the Company will also face a number of risks
specific to entities attempting to introduce new technologies, including, but
not limited to, the existence or development of competing technologies, the
existence or development of new technologies that are incompatible with the
Imatec 20/20(TR) system, the inability of the Company to respond in a timely
manner to changing technologies, the potential obsolescence of the Imatec
20/20(TR) system as a result of changing technologies, and the failure of a
market to develop for the Imatec 20/20(TR) system. The Company expects to
continue to incur losses until such time, if ever, as the Company's revenues
exceed its expenses. There can be no assurance that the application of the
Imatec 20/20(TR) system to the medical imaging field, or to any other fields,
will be successful, or that the Company will be able to successfully license
or otherwise exploit the Imatec 20/20(TR) system. There can be no assurance
that the Company will ever achieve profitability. See "Business," "Plan of
Operations" and Financial Statements.
Significant Capital Requirements; Dependence on Proceeds of this
Offering. The Company's cash requirements are significant. The Company is
dependent on the net proceeds of this Offering to repay $4,000,000 of
indebtedness plus interest that it incurred in an interim financing that was
completed in April, 1996 and to implement its current business plan. The
Company intends to substantially increase its level of business activities
following the consummation of this Offering and, in connection therewith,
will incur significant expenses without the guarantee of any revenues. See
"Plan of Operations" and "Use of Proceeds."
Possible Need For Additional Financings. Although the Company anticipates
that the net proceeds of the Offering will be sufficient to finance its
activities for at least the 12 months following the date of this Prospectus,
there is no assurance that the Company will not require additional financing
and if required, that such additional financing will be available to the
Company on acceptable terms, or at all. Factors that may lead to a need for
additional financing include delays in market acceptance, changes in
technologies or the need for the Company to directly engage in the
manufacture, sales, distribution and service of products based on the Imatec
20/20(TR) system. There can be no assurance that the Company will not suffer
from these or any other problems, which may have a material adverse effect on
the Company See "Plan of Operations."
Uncertainty of Market Acceptance of the Company's Technology. Although the
Company has successfully tested the Imatec 20/20(TR) system with respect to
the medical imaging field, the Company is unknown in the marketplace and
there can be no assurance that a market for products that incorporate the
Imatec 20/20(TR) system will develop. Consequently, although the Company will
seek to license the Imatec 20/20(TR) system to third parties in the medical
imaging field, there can be no assurance that the Company will be successful
in generating any licensing income. In addition, part of the Company's
strategy is to continue its research and development activities with respect
to the use of the Imatec 20/20(TR) system for other applications in the
medical imaging field and in other imaging fields, such as graphic arts,
computers and video display, although to date the Company has not engaged in
any research and development or marketing efforts with respect to any other
imaging fields besides medical imaging. There can be no assurance, however,
that the Company will be able to apply the Imatec 20/20(TR) system to any
other markets or that a market will develop for any products incorporating
the Imatec 20/20(TR) system in the medical imaging field or any other field,
or that any product incorporating the Imatec 20/20(TR) system will ever
receive acceptance from any intended users. See "Business -- The Company's
Business Strategy."
4
<PAGE>
Risks of Technological Change; Competition. The image enhancement field is
subject to rapid and significant technological change that may render the
Imatec 20/20(TR) system obsolete or products that incorporate the Imatec
20/20(TR) system obsolete or incompatible with the machines they are intended
to complement. In addition, such rapid changes may impose additional,
unforeseen costs on the Company in that the Company may be required to modify
its Imatec 20/20(TR) system to adapt to such changes. There can be no
assurance that the Company will be able to successfully modify or upgrade its
Imatec 20/20(TR) system as may be necessary in a timely manner, or at all.
While the Company is not aware of any entities that build image
enhancement devices that compete with the Imatec 20/20(TR) system, there are
a number of entities that are engaged in the research and development of
image enhancement products. These entities may in the future develop
technologies or products that compete with the Imatec 20/20(TR) system.
Potential competitors of the Company include independent companies,
universities and public and private research organizations, most of which are
well established and have substantially greater marketing, financial,
technological and other resources than the Company. In addition, the medical
imaging field in particular is dominated by large, well established
corporations. There can be no assurance that competitors will not succeed in
securing patents and/or developing technologies or products that are more
effective than the Imatec 20/20(TR) system, as a result of which the Imatec
20/20(TR) system may become obsolete or non- competitive. See "Business --
Competition".
No Manufacturing, Sales, Distribution and Technical Services Support
Capabilities; Limited Marketing Capabilities. The Company does not presently
intend to engage in the manufacturing process or the accompanying sales,
distribution and technical services support functions. The Company will be
dependent on licensees of its Imatec 20/20(TR) system and other third parties
with which it will attempt to establish commercial relationships in
connection with the manufacturing, distribution and service of products that
incorporate its Imatec 20/20(TR) system. The manufacturing, sales,
distribution and service of products are capital and labor intensive, and
beyond the Company's current capabilities. Similarly, the Company has, and
will continue to have for the foreseeable future, limited marketing and
licensing capabilities. The Company's marketing and licensing strategy will
rely on unaffiliated licensees and other third parties to successfully
manufacture and effect sales of products which incorporate the Imatec
20/20(TR) system as well as provide the necessary service, repair and
technical support. There can be no assurance that the Company will be able to
rely on unaffiliated licensees and third parties to successfully effect the
manufacture, sales and service of products incorporating the Imatec 20/20(TR)
system, or that the Company will not have to make significant additional
capital expenditures in the event that it cannot rely on such licensees and
third parties. Moreover, any such additional capital expenditures are beyond
the Company's current means, and may also include the employment of
additional personnel, in order to successfully effect the manufacture, sales,
distribution or service of products incorporating the Imatec 20/20(TR)
system. See "Business -- The Company's Business Strategy" "--Manufacturing
and Distribution."
No Assurance as to Validity or Enforceability of Intellectual Property
Rights. The Company is the exclusive licensee of the Patents. The owner and
licensor of the Patents is Dr. Hanoch Shalit, the Company's President and
Chief Executive Officer. Notwithstanding the Company's exclusive license with
respect to the Patents, there can be no assurance that others will not
independently develop similar technologies, or design around the Patents. If
others are able to design around the Patents, the Company's business will be
materially adversely affected. Further, the Company will have very limited,
if any, protection of its proprietary rights in those jurisdictions where it
has not effected any patent filings or where it fails to obtain patent
protection despite filing therefor.
Even though the Patents have been issued by the United States Patent and
Trademark Office, challenges may be instituted by third parties as to the
validity and enforceability of the Patents. There also can be no assurance
that third parties will not be able to successfully assert a claim with
regard to the Patents and/or the Imatec 20/20(TR) system under their own
intellectual property rights. The Company is not presently aware of any
challenges to the Patents. Similarly, the Company may also have to institute
legal actions in order to protect infringement of its Patents by third
parties. The Company is not presently aware of any such infringements. The
costs of litigation or settlement in connection with the defense of any third
party challenges relative to the validity and enforceability of its Patents
and/or to prevent any infringement of the Patents by third parties, which
pursuant to the License Agreement are the Company's responsibilities, could
be substantial. Moreover, in the event that the Company was unsuccessful in
any such litigation, the Company could be materially adversely affected.
5
<PAGE>
In certain instances, for business reasons, the Company may choose not to
seek patent protection for all of its innovations. In such instances, the
Company may rely on trade secrets and know-how to protect its innovations.
There can be no assurance that protectable trade secrets or know-how will be
established or, if established, that they will remain protected, or that
others will not independently and lawfully develop similar or superior
innovations. The Company requires all employees to sign non-disclosure,
non-competition, confidentiality and invention assignment agreements.
Similarly, all directors, consultants and other parties to whom confidential
information has been or will be disclosed contain confidentiality provisions
and covenants not to compete. There can be no assurance, however, that any
such confidentiality or non-compete provisions will be complied with or will
be enforceable. See "Intellectual Property" and "Management -- Executive
Compensation."
Possible Need for FDA Clearance. The Company is presently uncertain
whether clearance from the United States Food and Drug Administration ("FDA")
will be required for the Imatec 20/20(TR) System. The clearance process is
expensive and time consuming. In order to clinically test, produce, and
market a medical device that requires FDA clearance, the Company must satisfy
numerous mandatory procedures, regulations, and safety standards established
by the FDA, and comparable state and foreign regulatory agencies. Typically,
such standards require that the products be cleared by the FDA as safe and
effective for their intended use prior to being marketed for human
applications. In the event that any FDA clearances are required, there can be
no assurance that any such clearances will be granted, or that the length of
time for clearance will not be extensive, or that the cost of attempting to
obtain any such clearances will not be prohibitive.
The FDA employs a rigorous system of regulations and requirements
governing the clearance processes for medical devices, requiring, among other
things, the presentation of substantial evidence, including clinical studies,
establishing the safety and efficacy of new medical devices. The principal
methods by which FDA clearance is obtained are pre-market approval ("PMA"),
which is for products that are not comparable to any other product in the
market, or filing a pre-market notification under Section 510(k) of the
Federal Food, Drug and Cosmetic Act (a "510(k)") which is for products that
are similar to products that have already received FDA clearance. Although
both methods may require clinical testing of the products in question under
an approved protocol, because PMA clearance relates to more unique products,
the PMA procedure is more complex and time consuming. Applicants under the
510(k) procedure must prove that the products for which clearance is sought
are substantially equivalent to products on the market prior to the Medical
Device Amendments of 1976, or products approved thereafter pursuant to the
510(k). The review period for a 510(k) application is approximately one
hundred fifty (150) days from the date of filing the application, although
there can be no assurance that the review period will not extend beyond such
a period.
Under the PMA procedure, the applicant is required to conduct substantial
clinical testing to determine the safety, efficacy and potential hazards of
the product. The review period under a PMA application is one hundred eighty
(180) days from the date of filing, and the application is not automatically
deemed cleared if not rejected during that period. The preparation of a PMA
application is significantly more complex, expensive and time consuming than
the 510(k) procedure. Further, the FDA can request additional information,
which can prolong the clearance process.
In order to conduct human clinical studies for any medical procedure
proposed for the Company's products, the Company could also be required to
obtain an Investigational Device Exemption ("IDE") from the FDA, which would
further increase the time before potential FDA clearance. In order to obtain
an IDE, the Company would be required to submit an application to the FDA,
including a complete description of the product, and detailed medical
protocols that would be used to evaluate the product. In the event an
application were found to be in order, an IDE would ordinarily be granted
promptly thereafter.
The FDA also imposes various requirements on manufacturers and sellers of
medical devices under its jurisdiction, such as labeling, manufacturing
practices, record keeping and reporting requirements. The FDA may also
require post-market testing and surveillance programs to monitor a product's
effect. In the event that FDA clearance is required for the Imatec 20/20(TR)
system, there can be no assurance that the appropriate clearance from the FDA
will be obtained, that the process to obtain such clearance will not be
excessively expensive or lengthy, or that the Company will have sufficient
funds to pursue such clearances. Moreover, failure to receive requisite
clearance for the Imatec 20/20(TR) system, would prevent the Company from
commercializing its technologies as intended, and would have a material
adverse effect on the business of the Company.
6
<PAGE>
Even after regulatory clearance is obtained, any such clearance may
include significant limitations on indicated uses. Further, regulatory
clearances are subject to continued review, and later discovery of previously
unknown problems may result in restrictions with respect to a particular
product or manufacturer, including withdrawal of the product from the market,
or sanctions or fines being imposed on the Company.
Distribution of the Imatec 20/20(TR) system in countries other than the
United States may be subject to regulation in those countries. There can be
no assurance that the Company will be able to obtain the approvals necessary
outside of the United States. See "Business -- FDA Clearance."
Management's Broad Discretion in Application of Proceeds. Although the
Company intends to apply the net proceeds from the sale of the Common Stock
and Redeemable Warrants in the manner described under "Use of Proceeds," it
has broad discretion within such proposed uses as to the precise allocation
of the net proceeds, the timing of expenditures and all other aspects of the
use thereof. Further, approximately 27% of the net proceeds of this Offering
are allocated to working capital, which is a general category that gives
management a significant degree of latitude as to the expenditure thereof.
See "Use of Proceeds."
Company's Obligation to Make Substantial Payments to Principal
Stockholder. The Company will be obligated to make substantial payments to
Dr. Hanoch Shalit, its President, Chief Executive Officer and Chairman of the
Board of Directors and a principal stockholder of the Company, regardless of
whether the Company ever achieves any revenues. Pursuant to the terms of his
five-year exclusive employment agreement, the Company is obligated to pay to
Dr. Shalit a base salary of $60,000 per annum, which shall increase at the
rate of 5% per annum, plus benefits. Dr. Shalit is also entitled to receive a
bonus of $10,000 for every $1,000,000 of gross annual sales received by the
Company. In addition, pursuant to the terms of the License Agreement, Dr.
Shalit is entitled to receive an annual flat royalty fee of $140,000 for so
long as the Company or any successor of the Company is in existence. However,
in the event that Dr. Shalit is no longer President, Chief Executive Officer
and Chairman of the Board of the Company for any reason whatsoever, but the
Company, or any successor of the Company, continues in existence, the annual
flat royalty fee shall increase to $250,000. The annual flat royalty fee
increases at the rate of 5% per annum so long as the Company or any successor
of the Company continues to be in existence.
Dependence Upon Key Personnel. The Company's success depends upon the
continued involvement of Dr. Hanoch Shalit, the Company's President and Chief
Executive Officer. The loss or unavailability of Dr. Shalit could materially
adversely affect the Company. On July 1, 1995, the Company entered into a
five-year employment agreement with Dr. Shalit. The Company is the sole
beneficiary of a "key man" life insurance policy on the life of Dr. Shalit in
the principal amount of $1,000,000. See "Management" and "Certain
Transactions."
Limited Business Experience of Management; Need for Additional
Personnel. Since its inception in 1988, the Company has primarily engaged in
research and development activities and the manufacture of research and
production prototypes. Presently, the Company has only two executive
officers. Dr. Hanoch Shalit and Lawrence Kollender. Dr. Hanoch Shalit, the
Company's President and Chief Executive Officer does not have any experience
in operating a business engaged in the licensing of intellectual property.
Mr. Kollender, the Company's Vice President of Marketing and Sales, is
primarily responsible for the marketing and sales activities of the Company.
The Company's ability to implement its business plan, the essential elements
of which are licensing, marketing and research and development activities,
will depend upon the Company's ability to hire and retain senior level,
highly-skilled personnel experienced in the operation of certain aspects of
the Company's business, such as accounting, management, licensing and
marketing. Competition for such personnel is intense and there can be no
assurance that the Company will be successful in attracting and retaining
personnel. The Company's failure to attract and retain such additional
personnel would have a material adverse effect on the Company. See
"Management."
No Product Liability Insurance. The Company's business could expose the
Company to product liability claims. The Company currently has no product
liability insurance, although it intends to attempt to obtain such insurance
before any of its products are sold commercially. There can be no assurance
that the Company will be able to obtain such insurance on acceptable terms or
that such insurance, if obtained, will provide adequate coverage against
potential liabilities.
Control by Officers and Directors. Upon completion of the Offering, the
Company's current officers and directors will own approximately 24.5% of the
issued and outstanding shares of Common Stock. Accordingly,
7
<PAGE>
although not representing a majority of the Company's voting securities, the
current management of the Company will nevertheless be able to significantly
influence the election of the Company's directors and generally direct the
affairs of the Company. See "Management," "Principal Stockholders" and
"Description of Securities- Common Stock."
Immediate Substantial Dilution. Upon completion of the Offering,
purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution of the net tangible book value of their investment in
the Company of $3.22 per share, or approximately 64% per share. See
"Dilution."
Repayment of Indebtedness. Approximately fifty percent (50%) of the net
proceeds of this Offering have been allocated for the repayment of the Notes
which were issued to the Bridge Selling Security Holders in the Bridge
Financing. See "Use of Proceeds."
Absence of Dividends. The Company has never paid any dividends with
respect to its Common Stock and does not anticipate paying dividends on its
Common Stock in the foreseeable future. Any earnings which the Company may
realize in the foreseeable future will be retained to finance the growth of
the Company. See "Description of Securities" and "Dividend Policy."
Anti-Takeover Provisions; Issuance of Preferred Stock. The Company's Board
of Directors has the authority to issue up to 2,000,000 shares of preferred
stock in one or more series and to determine the number of shares in each
series, as well as the designations, preferences, rights and qualifications
or restrictions of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue shares of preferred stock. In addition, the Company is
subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law. In general, this statute 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. See "Description of
Securities -- Preferred Stock."
Speculative Nature of Redeemable Warrants; Adverse Effect of Possible
Redemption of Redeemable Warrants. The Redeemable Warrants do not confer any
rights of Common Stock ownership on its 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 on the date of this Prospectus, holders of the Class
A Redeemable Warrants and Class B Redeemable Warrants may exercise their
right to acquire the Common Stock and pay an exercise price of $5.50 or $6.50
per share, respectively, subject to adjustment, prior to ___________, 1998
[24 months after the date of this Prospectus] or ________, 2001 [60 months
after the date of this Prospectus], respectively, after which date any
unexercised Redeemable Warrants will expire and have no further value.
Moreover, following this Offering, the market value of the Redeemable
Warrants is uncertain and there can be no assurance that the market value of
the Redeemable Warrants will equal or exceed their initial public offering
prices. There can be no assurance that the market price of the Common Stock
will ever equal or exceed the exercise price of the Redeemable Warrants, and
consequently, whether it will ever be profitable for the holders of the
Redeemable Warrants to exercise their Redeemable Warrants.
In addition, the Class A Redeemable Warrants and the Class B Redeemable
Warrants are subject to redemption by the Company, subject to the approval of
the Underwriter, commencing _____, 1997 [nine (9) months after the date of
this Prospectus] and ______, 1997 [twelve (12) months after the date of this
Prospectus], respectively, on 30 days' prior written notice, at a price of
$.10 per Redeemable Warrant if the average closing bid price for the Common
Stock equals or exceeds $7.50 and $9.00 per share, respectively, 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. In the event
that the Redeemable Warrants are redeemed by the Company, holders of the
Redeemable Warrants will lose their right to exercise their Redeemable
Warrants after the 30 day notice period. Upon receipt of notice of
redemption, holders of Redeemable Warrants would be required to: (i) exercise
the Redeemable Warrants and pay the exercise price at a time when it may be
disadvantageous for them to do so; (ii) sell the Redeemable Warrants at the
then market price, if any, when they might otherwise wish to hold the
Redeemable Warrants; or (iii) accept the redemption price, which is likely to
be substantially less than the market value of the Redeemable Warrants at the
time of redemption. In the event that holders of the Redeemable Warrants
elect not to exercise their Redeemable Warrants upon notice of redemption,
the unexercised Redeem-
8
<PAGE>
able Warrants will be redeemed prior to exercise, and the holders thereof
will lose the benefit of the appreciated market price of the Redeemable
Warrants, if any, and/or the difference between the market price of the
underlying Common Stock as of such date and the exercise price of such
Warrants, as well as any possible future price appreciation in the Common
Stock. See "Description of Securities--Redeemable Warrants."
Current Prospectus and State Registration Required to Exercise
Warrants. The Redeemable Warrants are not exercisable unless, at the time of
exercise, the Company has a current prospectus covering the shares of Common
Stock issuable upon exercise of the Redeemable Warrants and such shares have
been registered, qualified or deemed to be exempt under the securities or
"blue sky" laws of the state or residence of the exercising holder of the
Redeemable Warrants. In addition, in the event that any holder of the
Redeemable Warrants attempts to exercise any Redeemable Warrants at any time
after nine months from the date of this Prospectus, the Company will be
required to file a post-effective amendment to the Registration Statement of
which this Prospectus is a part and deliver a current prospectus before the
Redeemable Warrants may be exercised. Although the Company has undertaken to
use its best efforts to have all of the shares of Common Stock issuable upon
exercise of the Redeemable Warrants registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the Redeemable Warrants, there is no assurance that it will be
able to do so. The value of the Redeemable Warrants may be greatly reduced if
a current prospectus covering the Common Stock issuable upon the exercise of
the Redeemable Warrants is not kept effective or if such Common Stock is not
qualified or exempt from qualification in the States in which the holders of
the Redeemable Warrants then reside. The Redeemable Warrants will be
separately tradeable immediately upon issuance and may be purchased
separately from the Common Stock. Although the Redeemable Warrants will not
knowingly be sold to purchasers in jurisdictions in which the Redeemable
Warrants are not registered or otherwise qualified for sale, investors may
purchase the Redeemable Warrants in the secondary market or may move to
jurisdictions in which the shares underlying the Redeemable Warrants are not
registered or qualified during the period that the Redeemable Warrants are
exercisable. In such event, the Company will be unable to issue shares to
those persons desiring to exercise their Redeemable Warrants unless and until
the shares are qualified for sale in jurisdictions in which such purchasers
reside, or an exemption from such qualification exists in such jurisdictions,
and holders of the Redeemable Warrants would have no choice but to attempt to
sell the Redeemable Warrants in a jurisdiction where such sale is permissible
or allow them to expire unexercised. See "Description of
Securities--Redeemable Warrants."
Shares Eligible for Future Sale. Upon consummation of the Offering, there
will be 3,761,785 shares of Common Stock outstanding (3,911,785 if the
Underwriter's over-allotment option is exercised in full). Prior to the
Offering there were 2,761,785 shares of Common Stock issued and outstanding.
Of such shares, 551,785 are being registered on behalf of the Bridge Selling
Security Holders and 2,210,000 shares of Common Stock are being registered on
behalf of the Founding Selling Security Holders pursuant to the registration
statement of which this Prospectus is a part. Except with respect to 150,000
shares of Common Stock being registered on behalf of certain of the Founding
Selling Security Holders, including 50,000 shares for Dr. Hanoch Shalit, the
Chief Executive Officer and President of the Company, all of the Selling
Security Holders have agreed not to directly or indirectly offer, sell,
transfer, or otherwise encumber or dispose of any of the Company's
securities, whether or not presently owned, for a period of 18 months after
the date of this Prospectus unless otherwise permitted by the Underwriter.
Possible or actual sales of the Company's outstanding Common Stock by certain
of the present stockholders may, in the future, have a depressive effect on
the price of the Common Stock should a public market develop for such shares.
See "Shares Available for Future Sale," "Management--Stock Option Plan,"
"Principal Stockholders," "Underwriting" and "Certain Transactions--Escrow
Agreement."
The 4,000,000 Class A Redeemable Warrants being offered by the Company and
the 4,000,000 Class A Redeemable Warrants being registered for the account of
the Bridge Selling Security Holders entitle the holders thereof to purchase
up to an aggregate of 8,000,000 shares of Common Stock any time during the
period commencing on the date of this Prospectus and expiring 24 months from
the date of this Prospectus. The 4,000,000 Class B Redeemable Warrants being
offered by the Company entitle the holders thereof to purchase up to an
aggregate of 4,000,000 shares of Common Stock at any time during the period
commencing on the date of this Prospectus and expiring 60 months from the
date of this Prospectus. Sales of either the Redeemable Warrants or the
underlying shares of Common Stock, or even the existence of the Redeemable
Warrants, may depress the price of the Common Stock or the Redeemable
Warrants in any markets that may develop for such Securities. See "Selling
Security Holders," "Plan of Operations--Liquidity and Capital Resources,"
"Shares Eligible for Future Sale" and "Underwriting."
9
<PAGE>
No Assurance of Public Trading Market or Continued Nasdaq Inclusion; Risk
of Low-Priced Securities. Prior to this Offering, there has been no public
market for the Securities, and there can be no assurance that an active
public market for the Common Stock or Redeemable Warrants will develop after
the completion of this Offering, or if developed, be sustained. To qualify
for initial listing on Nasdaq, the Company must have, among other criteria,
$4,000,000 in total assets and $2,000,000 in total capital and surplus, at
least 300 stockholders, and a minimum bid price of $3.00. In order to qualify
for continued listing on Nasdaq, a company, among other things, must have
$2,000,000 in total assets, $1,000,000 in capital and surplus and a minimum
bid price of $1,00 per share. If the Company is unable to satisfy the
maintenance requirements for quotation on Nasdaq, of which there can be no
assurance, it is anticipated that the Securities would be quoted in the
over-the-counter market National Quotation Bureau ("NQB") "pink sheets" or on
the NASD OTC Electronic Bulletin Board. As a result, an investor may find it
more difficult to dispose of, or obtain, accurate quotations as to the market
price of the Securities, which may materially adversely affect the liquidity
of the market for the Securities. In addition, if the Securities are delisted
from Nasdaq they might be subject to the low-priced security or so-called
"penny stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities. For any transaction involving a
penny stock the rules require, among other things, the delivery, prior to the
transaction, of a disclosure schedule required by the Securities and Exchange
Commission (the "Commission") relating to the penny stock market. The
broker-dealer also must disclose the commission payable to both the
broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements must be sent disclosing recent
price information for the penny stocks held in the customer's account. It is
presently expected that the Underwriter will be the principal market maker in
the Securities. Such market making activity may be discontinued at any time.
The prices and liquidity of the Securities may be materially adversely
affected if such market making activity were discontinued for any reason.
Although the Company believes that the Securities will not be defined as a
penny stock due to their anticipated continued listing on Nasdaq, in the
event the Securities subsequently become characterized as a penny stock, the
market for and liquidity of the Securities could be severely affected. In
such an event, the regulations relating to penny stocks could limit the
ability of broker-dealers to sell the Securities and, thus, the ability of
purchasers in the Offering to sell their Securities in the secondary market.
Forward Looking Statements. This Prospectus contains certain forward
looking statements concerning the Company's operations, economic performance
and financial condition. Such statements are subject to various risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors, including those identified under
"Risk Factors" and elsewhere in this Prospectus.
10
<PAGE>
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of the Securities
offered hereby, after deducting the underwriting discount and estimated
offering expenses, will be approximately $8,200,000, (or approximately
$9,505,000 if the Underwriter's over-allotment option is exercised in full).
The Company intends to allocate the net proceeds of the Offering
approximately as follows:
<TABLE>
<CAPTION>
Approximate Approximate
Amount Percentage
------------- -------------
<S> <C> <C>
Repayment of indebtedness(1) . $4,209,363 51.4%
Research and development(2) . 1,000,000 12.2%
Marketing and licensing(3) .. 750,000 9.1%
Working capital ............. 2,240,637 27.3%
------------- -------------
Total ..................... $8,200,000 100.0%
============= =============
</TABLE>
- ------
(1) Reflects outstanding principal of $4,000,000 and accrued interest thereon
at the rate of 10% per annum of approximately $209,363 through July 31,
1996. The Company used the principal amount (i) to make a one- time
payment of $350,000 to the Company's President and Chief Executive
Officer, Dr. Hanoch Shalit, pursuant to the License Agreement, and (ii) for
marketing and working capital purposes.
(2) Consists of expenditures for equipment, materials and outside consultants
and in connection with research and development activities with respect
to the use of the Imatec 20/20(TR)system for other applications in the
medical imaging field and in other imaging fields such as the graphic
arts, computer and video display. In addition, the Company may also from
time to time purchase technologies related to or which may enhance the
Imatec 20/20(TR)system, although the Company has no understandings or
arrangements to do so at this time
(3) Consists of expenditures in connection with participating in trade shows
(which includes constructing a booth for, and renting space at, trade
shows, preparation of special marketing materials, and travel to and
attendance at trade shows), preparation of marketing materials, hiring of
sales and marketing personnel and consultants, and general marketing and
licensing activities.
The initial application for the use of proceeds represents management's
estimates based upon current business and economic conditions. Although the
Company does not contemplate material changes in the proposed use of
proceeds, to the extent the Company finds that adjustment is required by
reason of existing business conditions, the amounts shown may be adjusted
among the uses indicated above.
The Company believes that the net proceeds of this Offering will be
sufficient for the Company to sustain its operations and implement its
business plan for at least twelve (12) months after the date of this
Prospectus, although there can be no assurance that such net proceeds will be
sufficient to finance the Company's operations for such period.
To the extent that the Company's expenditures are less than projected
and/or the net proceeds of this Offering increase as a result of the exercise
by the Underwriter of its over-allotment option, the resulting balance will
be retained and used for general working capital purposes. The net proceeds
of this Offering that are not expended immediately shall be deposited in
interest bearing accounts, or invested in government obligations,
certificates of deposit or similar short-term, low risk investments.
DIVIDEND POLICY
The Company has never paid cash or other dividends and does not expect to
pay any cash or other dividends in the foreseeable future with respect to its
Common Stock. The Company's future dividend policy will depend upon the
Company's earnings, capital requirements, financial condition and other
factors considered relevant by the Company's Board of Directors. The Company
presently intends to retain any earnings which the Company may realize in the
foreseeable future to finance the growth of the Company.
11
<PAGE>
DILUTION
After giving pro forma effect to the Second Closing of the Company's
Bridge Financing (as such terms are defined in "Plan of Operations--Liquidity
and Capital Resources"), the Company had a pro forma net tangible book value
of $(503,450) or ($.18) per share as of March 31, 1996. Net tangible book
value per share is determined by dividing the net tangible book value of the
Company (total tangible assets less total liabilities) by the number of
outstanding shares of Common Stock. After giving effect to the receipt of the
net proceeds from the sale of the Securities offered hereby (after deducting
the underwriting discount and estimated offering expenses) and the initial
application of the net proceeds therefrom, the pro forma net tangible book
value of the Company at March 31, 1996 would have been $6,713,405 or $1.78
per share, representing an immediate dilution of $3.22 (or approximately 64%)
per share to the public investors as illustrated by the following table:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock ... $5.00
Pro forma negative net tangible book value per share before Offering ($ .18)
Increase in net tangible book value per share of Common Stock
attributable to public investors .................................. 1.96
---------
Pro forma net tangible book value per share after the Offering .... 1.78
-------
Dilution per share to public investors(1) ......................... $3.22
=======
</TABLE>
- ------
(1) In the event that the Underwriter exercises its over-allotment option in
full, the pro forma net tangible book value after this Offering would be
approximately $2.08 per share, which would result in immediate dilution
in net tangible book value to public investors of approximately $2.92 per
share.
The following table sets forth, as of the date of this Prospectus, the
number of shares of Common Stock purchased, the percentage of Common Stock
purchased, the total consideration paid, the percentage of total
consideration paid, and the average price per share paid, by the existing
stockholders of the Company and the investors in the Offering.
<TABLE>
<CAPTION>
Number of Percent Percent of
Shares of Total Total Consid- Total Consid- Average Price
Purchased Shares eration Paid eration Paid Per Share
----------- ---------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Present Stockholders. . 2,761,785 73% 26% $ 1,719,104 $ .62
Public Investors .... 1,000,000 27% 74% 5,000,000(1) $5.00
----------- ---------- --------------- ---------------
Total ............... 3,761,785 100% 100% $ 6,719,104
=========== ========== =============== ===============
</TABLE>
- ------
(1) Allocates no value to the Redeemable Warrants offered hereby.
The foregoing table assumes no exercise of the Redeemable Warrants or any
stock options, of which none are currently issued. To the extent that any
options issued by the Company in the future or the Redeemable Warrants are
exercised, there may be further dilution to the new investors in this
Offering.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) at
March 31, 1996, (ii) on a pro forma basis to give effect to the Second
Closing of the Bridge Financing on April 12, 1996, and (iii) on a pro forma
as adjusted basis to give effect to the sale of the Common Stock, Class A
Redeemable Warrants and Class B Redeemable Warrants in this Offering at
assumed initial public offering prices of $5.00, $.25 and $1.00,
respectively, and the initial application of the net proceeds therefrom.
<TABLE>
<CAPTION>
March 31, 1996 Pro Forma
--------------------------------
As
Actual Pro Forma(1) Adjusted(1)(2)
-------------- -------------- --------------
<S> <C> <C> <C>
Long term notes payable ............................. $1,510,037(3) $3,016,855(4) $ 0
============== ============== ==============
Stockholders' (Deficit) Equity:
Preferred Stock, par value $.0001 per share,
2,000,000 shares authorized, no shares issued
and outstanding .............................. $ 0 $ 0 $ 0
Common Stock, par value $.0001, 20,000,000 shares
authorized, 2,465,194 shares issued and
outstanding actual, 2,761,785 pro forma, and
3,761,785 pro forma as adjusted .............. 246 276 376
Additional paid-in capital ..................... 1,026,947 1,532,757 9,732,657
Deficit accumulated during the development stage . (1,600,198) (1,600,198) (2,993,733)
-------------- -------------- --------------
Total stockholders' (deficit) equity ................ $ (573,005) $ (67,165) $ 6,739,300
============== ============== ==============
Total Capitalization ................................ $ 937,032 $ 2,949,690 $ 6,739,300
============== ============== ==============
</TABLE>
- ------
(1) Gives pro forma effect to (i) the issuance of 296,591 shares of Common
Stock and Notes with a face amount of $1,556,816, net of original issue
discount of $593,184, in connection with the Second Closing of the Bridge
Financing on April 12, 1996, (ii) the repayment, from the proceeds
therefrom, of a Note, with a face amount of $50,000, issued prior to the
First Closing of the Bridge Financing on November 30, 1995, and (iii)
expenses of $311,935.
(2) Gives effect on an as adjusted basis to (i) the sale of 1,000,000 shares
of Common Stock, 4,000,000 Class A Warrants and 4,000,000 Class B
Warrants in connection with this Offering at assumed initial public
offering prices of $5.00, $.25 and $1.00, respectively, (ii) the
repayment, from the proceeds of this Offering, of Notes with a face
amount of $4,000,000 issued in the Bridge Financing, (iii) expenses of
$1,800,000 and (iv) the write off of unamortized original issue discount
and deferred debt issuance costs of $1,393,535.
(3) Net of $389,963 of unamortized original issue discount.
(4) Net of $983,115 of unamortized original issue discount.
13
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data has been derived from the financial
statements of the Company. In the opinion of the Company's management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the information set forth therein have been made. The selected
financial data should be read in conjunction with the Financial Statements
and related notes thereto, which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
November 17, 1988
(inception) to
December 31, 1995 Three months
Year Ended December 31 (Cumulative) Ended March 31,
---------------------------- ----------------- ---------------------------
1994 1995 1995 1996
------------ ------------ ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Income ...................................... $ 1,960 -- $ 133,973 -- --
------------ ----------------- ----------- ------------
Royalties ................................... -- $ 420,000 $ 420,000 -- $ 35,000
Research and development .................... $ 17,881 -- $ 325,616 -- --
General and administrative .................. $ 99,243 $ 164,028 $ 598,959 $ 7,376 $ 123,334
Interest expense (net) ...................... -- $ 67,139 $ 58,080 -- $ 173,182
============ ================= =========== ============
Net loss .................................... $ (115,164) $ (651,167) $(1,268,682) $ (7,376) $ (331,516)
Net loss per share .......................... $ (.05) $ (.29) $ (.57) * $ (.13)
Weighted average number of shares outstanding . 2,210,000 2,232,978 2,213,243 2,210,000 2,468,377
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
----------------------------------------------
Pro forma as
adjusted
Balance Sheet Data: Actual Pro forma (1) (1)(2)
------------ ------------- --------------
<S> <C> <C> <C>
Working capital (deficit) .... $ 645,913 $2,457,548 $6,657,548
Total assets ................. $1,049,136 $3,061,794 $6,851,404
Total liabilities ............ $1,622,141 $3,128,959 $ 112,104
Stockholders' equity (deficit) . $ (573,005) $ (67,165) $6,739,300
</TABLE>
- ------
* Less than ($.01)
(1) Gives pro forma effect to (i) the issuance of 296,591 shares of Common
Stock and Notes with a face amount of $1,556,816, net of original issue
discount of $593,184, in connection with the Second Closing of the Bridge
Financing on April 12, 1996, (ii) the repayment, from the proceeds
therefrom, of a Note, with a face amount of $50,000, issued prior to the
First Closing of the Bridge Financing on November 30, 1995, and (iii)
expenses of $311,935.
(2) Gives effect on an as adjusted basis to (i) the sale of 1,000,000 shares
of Common Stock, 4,000,000 Class A Warrants and 4,000,000 Class B
Warrants in connection with this Offering at assumed initial public
offering prices of $5.00, $.25 and $1.00, respectively, (ii) the
repayment, from the proceeds of this Offering, of Notes with a face
amount of $4,000,000 issued in the Bridge Financing, (iii) expenses of
$1,800,000 and (iv) the write off of unamortized original issue discount
and deferred debt issuance costs of $1,393,535.
14
<PAGE>
PLAN OF OPERATIONS
The Company was organized on November 17, 1988 and is in the development
stage. To date, the Company's activities have primarily consisted of research
and development activities with respect to developing the Imatec 20/20(TR)
system. During this time, the Company has received only minimal revenues from
limited non- recurring consulting activities. The Company believes, based
upon its internal budgets, that the net proceeds of this Offering will be
sufficient for the Company to (i) engage in licensing the Imatec 20/20(TR)
system to manufacturers of medical imaging products such as scanners and
cameras, (ii) engage in marketing activities to facilitate the licensing of
the Imatec 20/20(TR) system, (iii) continue research and development
activities with respect to use of the Imatec 20/20(TR) system for other
applications in the medical imaging field and in other imaging fields, such
as graphic arts, computers and video display, and (iv) otherwise conduct its
operations for at least the twelve (12) month period following the date of
this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the development stage, and primarily as a consequence of
expenses incurred in connection with research and development activities, at
December 31, 1995 and March 31, 1996 the Company had accumulated
stockholders' deficit of $1,268,682 and $1,600,198, respectively. The Company
has continued to incur losses since March 31, 1996.
To date, the Company has financed its operations principally from the sale
of securities and loans. In 1991, the Company issued an aggregate of 55,250
shares of Common Stock to an investor for aggregate gross proceeds of
$500,000. In 1994, the Company issued an aggregate of 12,615 shares of Common
Stock to two investors for aggregate gross proceeds of $114,224.
In the second and third quarters of 1995 the Company borrowed an aggregate
of $175,000 from five non- affiliated, accredited investors pursuant to one
(1) year promissory notes. All of these investors converted their respective
loans into Units in the Bridge Financing described immediately below.
On November 30, 1995, the Company effected the initial closing (the "First
Closing") of a private placement (the "Bridge Financing") pursuant to which
it sold an aggregate of 37 units (the "Units") to non-affiliated, accredited
investors, each Unit consisting of (i) a $50,000 10% promissory note due the
earlier of fifteen (15) months from the date of issuance and the Company's
receipt of gross proceeds of at least $8,000,000 from a public or private
sale of its securities (the "Note"), (ii) 6,897 shares of Common Stock, and
(iii) 50,000 warrants (the "Bridge Warrants") exercisable at $1.00 per share.
See "Description of Securities." The Company received gross proceeds from the
sale of the 37 Units in the First Closing of $1,850,000, pursuant to which it
issued an aggregate of 255,194 shares of Common Stock and 1,850,000 Bridge
Warrants. The investors in the First Closing received financial statements
from the Company which did not properly account for the Company's research
and development costs. As a result thereof, the Company circulated revised
financial statements and gave recission offers to all of the investors in the
First Closing, only one of whom accepted such recission offer. All of the
other investors in the First Closing affirmatively chose not to rescind. On
April 12, 1996 the Company effected a second closing of the Bridge Financing
(the "Second Closing") pursuant to which it received an additional $2,150,000
in gross proceeds for which it issued an aggregate of 43 Units, 296,591
shares of Common Stock and 2,150,000 Bridge Warrants. The net proceeds from
the Bridge Financing were approximately $3,220,000 (after commissions and
expenses) and in connection therewith the Company issued an aggregate of
551,785 shares of Common Stock and 4,000,000 warrants. The Company issued an
additional 25 shares of Common Stock in the Bridge Financing as a consequence
of rounding to the nearest whole share in connection with the purchase of
fractional Units.
In connection with the issuance of Notes with a face amount of $4,000,000,
551,785 shares of Common Stock, and 4,000,000 Bridge Warrants in the Bridge
Financing, the Company recorded an original issue discount of $1,103,570
based upon the allocating of the relative fair market value of the Notes and
the Common Stock on the date of issuance. No value was allocated to the
Bridge Warrants. The Company incurred approximately $664,000 of offering
costs related to the Bridge Financing, of which approximately $480,000 was
recorded as deferred debt issuance costs with the remainder recorded as a
reduction to the paid-in capital of the Common Stock and Bridge Warrants
issued therewith. The original issue discount is to be amortized over the
term of the
15
<PAGE>
Notes as interest expense. Upon the closing of this Offering, all of the
Notes will be repaid with a portion of the net proceeds of this Offering at
which time, assuming a July 31, 1996 closing, the Company will take a non-
recurring charge to interest expense in an amount equal to the then remaining
unamortized portion of the original issue discount and deferred debt issuance
costs, of approximately $1,000,000, after amortization of original issue
discount and deferred debt issuance cost through July 31, 1996. See "Use of
Proceeds."
The Company believes that the net proceeds of this Offering will be
sufficient for the Company to sustain its operations and implement its
business plan for at least twelve (12) months after the date of this
Prospectus, although there can be no assurance that such net proceeds will be
sufficient to finance the Company's operations for such period.
NET OPERATING LOSS CARRYFORWARDS
As of March 31, 1996, the Company had net operating loss carryforwards
under Section 172 of the Internal Revenue Code, as amended (the "Code"), of
approximately $900,000 for Federal income tax purposes which may be used to
offset future taxable income. The Federal income tax carryforward will expire
as follows: $130,000 in the year 2008; $75,000 in the year 2009; $94,000 in
the year 2010; and $601,000 in the year 2011.
16
<PAGE>
BUSINESS
GENERAL
The Company was formed in 1988 to develop, design, market and license its
Imatec 20/20(TR) system, which enhances image reproduction by reducing
distortion that normally occurs in the imaging process. Based on the results
of extensive testing by the Company, the Imatec 20/20(TR) system is capable
of improving the quality of film reproduction of images taken by medical
imaging devices such as MRI, CT and Ultrasound machines. In addition, the
Imatec 20/20(TR) system achieves this goal regardless of the type of the
medical imaging film used which may result in cost savings to the user. The
Company also developed the Imatec 20/20(TR) system to improve the quality of
images in the medical imaging field of teleradiology; which is the viewing of
the same image on different monitor screens in separate locations. The
Company believes that, in addition to the medical imaging field, the Imatec
20/20(TR) system can be used in markets such as graphic arts, computers and
video display.
The Imatec 20/20(TR) system is designed to measure the image
characteristics of an original image and compare it to its reproduction,
computing the existing distortion between the two images and correcting such
distortion. Current imaging systems create reproductions that have
distortions and are compensated for by subjective adjustments during the
reproduction process. Aspects of the Imatec 20/20(TR) system are set forth in
three United States patents which have been licensed by the Company from Dr.
Hanoch Shalit, the Company's President and Chief Executive Officer.
The Company has designed, built and tested a prototype of a device
incorporating the Imatec 20/20(TR) system which can be used with MRI, CT and
Ultrasound machines.
THE MEDICAL IMAGING MARKET
In 1995, U.S. sales of MRI, CT and Ultrasound machines were approximately
$1.59 billion, representing sales of approximately 9,775 units. In addition,
approximately $238 million was spent in 1994 in connection with the upgrading
and improving these medical imaging devices either to extend the life of the
machines or to add on technical improvements. At year end 1995, there were
approximately 3,680, 730 and 92,270 MRI, CT and Ultrasound machines,
respectively, operating in the United States. Based on industry statistics,
the U.S. market for medical imaging devices represents approximately 50% of
the worldwide market.
THE IMATEC 20/20(TR) SYSTEM
The Imatec 20/20(TR) system is designed to improve a reproduced image so
that it more closely resembles the original image. Presently, the image
reproduction process is a manual, subjective process. The individual taking
the image adjusts the imaging taking device (i.e. the camera) by adjusting
the light intensity, exposure time, etc. The adjusting of these variables is
based on the operator's subjective perceptions. In the medical imaging
process, however, a number of variables, in addition to the subjective
perceptions of the operator, influence the fidelity of the final image as
compared to the original image. Such variables include lighting conditions,
photographic materials used, particular equipment characteristics,
calibration, and equipment age. The Imatec 20/20(TR) system enables an
objective rather than subjective method of image reproduction that adjusts
for these variables.
When used in connection with an MRI, CT or Ultrasound machine, the Imatec
20/20(TR) system uses a photometer (an instrument that measures properties
relating to light, especially luminous intensity) to measure the image and
tone characteristics that appear on the screen of the medical imaging device
via a test pattern representing such image. Thereafter, a densitometer (an
instrument that measures the optical density of a film) measures the image
and tone characteristics of the same image as reproduced on film via a test
pattern that represents the image as it appears on the film. Thereafter, the
characteristic of the screen image and the film image are transferred to a
computer which calculates the distortion function between the two images and
the required correction function. This computed correction function is
automatically transferred to a digital signal processor system that modifies
the film image reproduction signal on a pixel-by-pixel basis to create an
image reproduced on the film that more closely resembles the image and tone
characteristics as set forth on the screen.
17
<PAGE>
This so-called closed loop system, which measures and compares the image
and tone characteristics set forth on the screen and the image and tone
characteristics reproduced on the film, adjusting for those variables that
influence the reproduced image, can take one of two forms. The Imatec
20/20(TR) system can be an add on to MRI, CT and Ultrasound machines. In such
instances, the operator of the medical images device will be required to make
adjustments each time a variable that influences the final picture is
altered, such as a change in lighting conditions or the changing of the film.
Alternatively, the Imatec 20/20(TR) system can also be incorporated inside
MRI, CT and Ultrasound machines, in which event the Imatec 20/20(TR) system
can automatically adjust for any change in these variables. The diagram below
illustrates the position of the Imatec 20/20(TR) system in the image
reproduction system in those instances where the Imatec 20/20(TR) system is
an add-on to an existing medical imaging device.
THE COMPANY'S BUSINESS STRATEGY
The Company's strategy is to (i) license the Imatec 20/20(TR) system to
manufacturers of medical imaging products such as scanners and cameras, (ii)
engage in marketing activities to facilitate the licensing of the Imatec
20/20(TR) system, and (ii) continue its research and development activities
with respect to the application of the Imatec 20/20(TR) system for additional
uses in the medical imaging field and for other imaging fields, such as
graphic arts, computers and video display. The precise scope and length of
any license granted by the Company will be dependent upon the overall nature
of the license agreement and the remuneration to be received by the Company.
The Company will simultaneously seek to license the Imatec 20/20(TR) system
both as an add-on device for new and existing MRI, CT and Ultrasound machines
and as an enhancement to be included inside new MRI, CT and Ultrasound
machines. The Company does not presently intend to manufacture, sell or
distribute any products incorporating the Imatec 20/20(TR) system, or provide
technical service in connection therewith. The Company will assist a licensee
in preparing a technical manual for any product that incorporates the
Company's Imatec 20/20(TR) system, but will not engage in providing the
actual technical assistance to end-users of any such product. In the event
that the Company is unable to effectively license the Imatec 20/20(TR) system
the Company may have to engage in manufacturing of products incorporating the
Imatec 20/20(TR) system. See "Risk Factors- Dependence on Third Parties; No
Manufacturing Capabilities; Limited Marketing Capabilities".
MANUFACTURING AND DISTRIBUTION
As noted above, the Company has no present intention to engage in the
manufacturing or distribution process. In the event that due to the Company's
inability to successfully license its technology the Company determined that
it was necessary to manufacture and distribute imaging products incorporating
the Company's technology, the Company would manufacture its products on a
contract manufacturing or original equipment manufacturer (OEM) basis and
have such products distributed by a network of independent regional
distributors in the medical device field. The Company presently has an
arrangement with an independent third party company that provides research
and development services to the Company from time to time. Such third party
also has pre-production and production capabilities. Consequently, since such
third party is already familiar with the Company's technologies, the Company
would engage such third party on an OEM basis, in the event that the Company
was required to manufacture products. The Company presently does not have any
relationship with any independent retail distributors in the medical device
field.
MARKETING
The Company intends to market its Imatec 20/20(TR) system in a number of
ways, all of which are intended to facilitate the licensing of the Imatec
20/20(TR) system. The Company will attend industry trade shows in the United
States where it believes it will gain additional exposure to potential
licensees for the Imatec 20/20(TR) system. The Company also will seek to
obtain awareness of the Imatec 20/20(TR) system through the publishing of
articles by Dr. Shalit, the first of which is expected to be a series of
articles commencing in August of 1996 in Medical Imaging, a trade magazine.
The Company also intends to gain exposure as well as keep current of emerging
and changing imaging standards by joining certain industry trade associations
and where feasible, having representatives of the Company serve on various
standards committees in the imaging field. The Company recently became a
member of the National Electronic Manufacturers Association ("NEMA") which is
an industry trade association for the medical imaging industry. In addition,
Dr. Shalit is currently a visiting member, and expects to become a full
member in the near future, of the Digital Imaging Communication in Medicine
Com-
18
<PAGE>
mittee ("DICOM"), a committee under the auspices of NEMA and the American
College of Radiology that is responsible for creating standards in the image
communication business. The Company also intends to engage in general
advertising in trade publications in order to gain recognition of the Company
and the Imatec 20/20(TR) system. The Company has hired a vice president of
marketing to coordinate all of the Company's marketing activities and intends
to hire additional marketing personnel and consultants subsequent to this
Offering.
RESEARCH AND DEVELOPMENT
In applying the Imatec 20/20(TR) system to other aspects of the medical
imaging field, as well as in connection with seeking application of the
Imatec 20/20(TR) system to other fields, the Company intends to engage
consultants and independent contractors from to time to conduct research and
development activities. The Company, in discreet instances, may acquire
certain technologies that the Company believes either enhance the Company's
Imatec 20/20(TR) system or further the application of the Imatec 20/20(TR)
system to other imaging fields, although it will only effect such
acquisitions in those instances where the Company believes that acquisition
of such technologies is more economical and efficient than engaging in the
research and development itself. The Company does not have any current
arrangements or understandings at the present time to acquire any such
technologies.
The Company incurred $17,881, $0 and $0 in research and development
activities in 1994, 1995 and the three months ended March 31, 1996,
respectively. The Company presently intends to expend no more than $500,000
on research and development during the last nine (9) months of 1996.
COMPETITION
The image enhancement field is subject to rapid and significant
technological change that may render the Company's Imatec 20/20(TR) system
obsolete or products that incorporate the Company's Imatec 20/20(TR) system
obsolete or incompatible with the machines they are intended to complement.
In addition, such rapid changes may impose additional, unforeseen costs on
the Company in that the Company may be required to modify its Imatec
20/20(TR) system to adapt to such changes. There can be no assurance that the
Company will be able to successfully modify or upgrade its Imatec 20/20(TR)
system as may be necessary in a timely fashion, or at all.
While the Company is not aware of any entities that build image
enhancement devices that compete with the Company's Imatec 20/20(TR) system,
there are a number of entities that are engaged in the research and
development of image enhancement products. These entities may in the future
develop technologies or products that compete with the Company's Imatec
20/20(TR) system. Potential competitors of the Company include independent
companies, universities and public and private research organizations, most
of which are well established and have substantially greater marketing,
financial, technological and other resources than the Company. In addition,
the medical imaging field in particular is dominated by large, well
established corporations. There can be no assurance that competitors will not
succeed in securing patents and/or developing technologies or products that
are more effective than the Company's Imatec 20/20(TR) system, as a result of
which the Company's Imatec 20/20(TR) system may become obsolete or
noncompetitive.
THE LICENSE AGREEMENT
The Company entered into a license agreement as of June 25, 1995 with Dr.
Hanoch Shalit, the Company's President and Chief Executive Officer (the
"License Agreement"). The License Agreement grants the Company the exclusive
right to make, use, sell and sublicense "Patentable Image Technology," which
is defined in the License Agreement as the three United States Patents and
certain foreign patent applications. Under the terms of the License
Agreement, Dr. Shalit received from the Company a one-time $350,000 payment
in January 1996 subsequent to the First Closing of the Bridge Financing. Dr.
Shalit is also entitled to receive a flat royalty fee of $140,000 per annum,
payable in monthly installments of $11,667, for so long as the Company and
any successor of the Company is in existence (the "Annual Royalty");
provided, however, that in the event that Dr. Shalit is no longer President,
Chief Executive Officer and Chairman of the Company for any reason
whatsoever, but the Company or any successor of the Company continues in
existence, the Annual Royalty shall automatically be increased to $250,000
per annum. Pursuant to the terms of the License Agreement, the Annual Royalty
shall increase by 5% every year as long as the Company or any successor of
the Company is in existence. The License Agreement also grants to the Company
the exclusive right as to inventions made by Dr. Shalit in the
19
<PAGE>
course of his employment under his employment agreement with the Company. The
Company's obligations to pay the Annual Royalty shall continue until the
expiration of the License Agreement. The term of the License Agreement
expires when the last licensed patent expires, whether in the United States
or abroad. Under the License Agreement, the Company is obligated to use its
reasonable best efforts to make, use, sell and sublicense to others the
Patentable Image Technology.
INTELLECTUAL PROPERTY
The Company presently intends to make all appropriate filings and
registrations, or take all other actions the Company believes to be
necessary, to obtain and protect all patents, trademarks, copyrights,
tradenames, trade dress and all other intellectual property rights, if any,
relating to the Company, although there can be no assurances that the Company
will be able to effectively do so. In the event the Company is able to fully
establish intellectual property rights with respect to the technology used by
the Company, of which there can be no assurance, third parties may attempt to
exercise alleged rights in any of their patents, trademarks, copyrights or
other intellectual property or appropriate any patents, trademarks,
copyrights, or other intellectual property rights obtained by the Company,
and the Company's failure or inability to adequately protect any of its
intellectual property rights, may have a material adverse effect on the
Company. In addition, there can be no assurance that third parties will not
be able to successfully assert a claim with regard to the Patents and/or the
Imatec 20/20(TR) system under their own intellectual property rights.
The Company also requires all employees to sign non-disclosure,
non-competition, confidentiality and invention assignment agreements.
Under the License Agreement, the Company has an exclusive, worldwide
license from Dr. Hanoch Shalit, the Company's founder, principal stockholder
and Chief Executive Officer, to make, use, sell and sublicense to others the
Patentable Image Technology.
Subsequent to this Offering, the Company will seek to broaden its patent
protection and the application of the Imatec 20/20(TR) system to other
industries. Typically, when seeking to apply the Imatec 20/20(TR) system to
other industries, the Company will first design a research prototype to test
the technology in the laboratory. Thereafter, a production prototype will be
constructed for testing at a beta, or third party, site. After successful
beta testing, the Company will then seek to market the product and/or license
the underlying technology.
FDA CLEARANCE
The FDA employs a rigorous system of regulations and requirements
governing the clearance processes for medical devices, requiring, among other
things, the presentation of substantial evidence, including clinical studies,
establishing the safety and efficacy of new medical devices. The principal
methods by which FDA clearance is obtained are pre-market approval, which is
for products that are not comparable to any other product in the market, or
filing a pre-market notification under Section 510(k) of the Federal Food,
Drug and Cosmetic Act which is for products that are similar to products that
have already received FDA clearance. Although both methods may require
clinical testing of the products in question under an approved protocol,
because PMA clearance relates to more unique products, the PMA procedure is
more complex and time consuming. Applicants under the 510(k) procedure must
prove that the products for which clearance is sought are substantially
equivalent to products on the market prior to the Medical Device Amendments
of 1976, or products approved thereafter pursuant to the 510(k). The review
period for a 510(k) application is approximately one hundred fifty (150) days
from the date of filing the application, although there can be no assurance
that the review period will not extend beyond such a period.
Under the PMA procedure, the applicant is required to conduct substantial
clinical testing to determine the safety, efficacy and potential hazards of
the product. The review period under a PMA application is one hundred eighty
(180) days from the date of filing, and the application is not automatically
deemed cleared if not rejected during that period. The preparation of a PMA
application is significantly more complex, expensive and time consuming than
the 510(k) procedure. Further, the FDA can request additional information,
which can prolong the clearance process.
In order to conduct human clinical studies for any medical procedure
proposed for the Company's products, the Company could also be required to
obtain an Investigational Device Exemption ("IDE") from the FDA,
20
<PAGE>
which would further increase the time before potential FDA clearance. In
order to obtain an IDE, the Company would be required to submit an
application to the FDA, including a complete description of the product, and
detailed medical protocols that would be used to evaluate the product. In the
event an application were found to be in order, an IDE would ordinarily be
granted promptly thereafter.
EMPLOYEES
As of June 20, 1996, the Company had 3 full-time employees, Dr. Hanoch
Shalit, who serves as the Company's President and Chief Executive Officer,
and Lawrence P. Kollender, who serves as the Company's Vice President of
Sales and Marketing and one administrative assistant. The Company also
employs 2 part-time employees, consisting of 1 computer programmer and 1
electronic engineer. The Company believes that its relations with its
employees are good.
PROPERTIES
On January 31, 1996, the Company entered into a three (3) year lease for
approximately 2,048 square feet for its principal executive offices at 150
East 58th Street, NY, NY 10155 pursuant to which the Company pays rent of
approximately $5,600 per month. Dr. Hanoch Shalit, the Company's President
and Chief Executive Officer, has personally guaranteed the payments to be
made under such lease.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a party.
21
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names and ages of the directors and executive officers of the Company
are set forth below.
<TABLE>
<CAPTION>
Name Age Position Held
---------------------- ----- -------------------------------------------
<S> <C> <C>
Dr. Hanoch Shalit .... 42 President, Chief Executive Officer, Chairman
of the Board of Directors and
Principal Accounting Officer
Steven Ai ............ 41 Director
Neal Factor .......... 44 Director
Lawrence P. Kollender . 55 Vice President -- Marketing and Sales
</TABLE>
The Company has agreed with Dr. Shalit that he shall be entitled to a
nominee on the Board of Directors until the expiration date of the last of
the three Patents. The Company has also agreed with the Underwriter that, for
a period of five years after the date of this Prospectus that it will use its
best efforts to cause one individual designated by the Underwriter and
acceptable to the Company to be elected to the Board of Directors, which
individual may be a director, officer, employee or affiliate of the
Underwriter. See "Underwriting." Directors serve until the next annual
meeting of stockholders and the election and qualification of their
successors. Directors will not receive any compensation for serving on the
Board of Directors. The officers are elected by the directors and serve at
the discretion of the Board of Directors. The Company presently intends to
retain a Chief Financial Officer upon the completion of this Offering.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
Dr. Hanoch Shalit founded the Company in November 1988 and has been its
Chief Executive Officer, President, and Chairman of the Board since
inception. From September 1982 until June 1987 Dr. Shalit was employed as a
senior chemist with Chemco Photo Products, a private imaging company. From
June 1987 until the beginning of November 1988, Dr. Shalit was employed by
the FONAR Corporation, a public imaging company where he was the President of
the Photographic Sciences Division in charge of production, sales and service
for the FONAR Corporation's photographic products. Dr. Shalit earned a B.S.
(Honors) in the Sciences of Photography from the Polytechnic of Central
London (now know as University of Westminster) in Great Britain in 1978 and a
PhD in Physics from the University of London in 1981.
Mr. Steven Ai has been a director of the Company since November 30, 1995.
Since 1992, Mr. Ai has been the President of City Mill Co., Ltd., a private
company located in Honolulu, Hawaii, which owns and operates a chain of
retail home product stores. Prior to 1992, Mr. Ai was a manager with the
public accounting firm of KPMG Peat Marwick.
Mr. Neal Factor, who has been a director of the Company since November 30,
1995, has maintained a private law practice in New York City principally in
the areas of corporate and commercial law since 1979. Mr. Factor has
represented the Company since inception and receives compensation from the
Company for his legal services.
Mr. Lawrence P. Kollender, has been the Company's Vice President --
Marketing and Sales since January 2, 1996. Since January 1995, Mr. Kollender
has also been the President of LPK Unlimited, a private consulting firm to
companies in the software, electronics and service industries. From 1989
through December 1994, Mr. Kollender was the director of international
defense programs at the Grumman Corporation, which was a public company until
it was acquired by the Northrop Corporation.
22
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company
to executive officers of the Company for the years ended December 31, 1993,
1994 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------------- ------- -------
Restricted
Name and Other Annual Stock LTIP All Other
Principal Position Year Salary($) Bonus($) Compensation $) Awards($) Options/SARs(#) Payouts($) Compensation ($)
- --------------------- ------ ----------- ---------- -------------- ---------- --------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Hanoch Shalit, 1995 $ 60,000(1) $ -0-(2) $ -0- $ -0- -0- $ -0- $ -0-
Chief Executive Officer, 1994 $ 24,258 $ -0- $ -0- $ -0- -0- $ -0- $ -0-
President, Director and 1993 $ 42,000 $ -0- $ -0- $ -0- -0- $ -0- $ -0-
Principal Accounting
Officer
</TABLE>
- ------
(1) Pursuant to his employment agreement, Dr. Shalit's salary is payable at
the rate of $60,000 per calendar year. However, for the fiscal year
ending 1995, Dr. Shalit received less than $60,000 because his employment
agreement did not become effective until July 1, 1995. See "Management --
Employment Agreements."
(2) Pursuant to his employment agreement, Dr. Shalit is entitled to receive a
bonus equal to $10,000 for every $1,000,000 of gross annual sales
received by the Company. See "Management -- Employment Agreements."
EMPLOYMENT AGREEMENTS
Effective July 1, 1995, the Company entered into a five-year employment
agreement with Dr. Hanoch Shalit. Under his employment agreement, Dr. Shalit
is to serve as the Company's President, Chief Executive Officer and Chairman
of the Board of Directors and receive an annual base salary of $60,000, which
shall increase at the rate of 5% per annum, plus benefits. Dr. Shalit is also
entitled to receive a bonus of $10,000 for every $1,000,000 of gross annual
sales received by the Company. In addition, Dr. Shalit's employment agreement
provides that, during the term of such employment agreement, he shall not
compete with the Company in the United States or Canada or disclose, without
the Company's consent, confidential information that has been or will be
disclosed to him by the Company. Dr. Shalit's employment with the Company
shall terminate upon his death or disability, the Company no longer being
involved in the imaging technology business, the bankruptcy of the Company or
the Company having been merged into or acquired by another company.
Furthermore, Dr. Shalit's employment may be terminated by the Company for
"cause," which is defined as either dishonesty detrimental to the best
interests of the Company or wilful disloyalty to the Company.
Effective January 3, 1996, the Company entered into a one-year employment
agreement with Mr. Lawrence P. Kollender. Under his employment agreement, Mr.
Kollender is to serve as the Company's Vice President of Marketing and Sales
and receive an annual base salary of $100,000, plus benefits. Mr. Kollender
is also entitled to receive a commission equal to 4% of the Company's annual
gross revenues in excess of $2.5 million. In addition, Mr. Kollender's
employment agreement provides that, during the term of such employment
agreement and for three years thereafter, he shall not compete with the
Company or disclose, without the Company's consent, confidential information
that has been or will be disclosed to him by the Company. Mr. Kollender's
employment agreement shall terminate if he suffers a disability, the Company
is no longer involved in the imaging technology business, or may be
terminated by the Company for any cause.
The Company is the sole beneficiary of a "key man" life insurance policy
on the life of Dr. Hanoch Shalit in the amount of $1 million.
There are no family relationships among any Directors or executive
officers.
23
DIRECTORS COMMITTEES
Subsequent to this Offering, the Company intends to seek to add at least
two (2) individuals to the Board of Directors to form an Audit Committee and
Compensation Committee. The Audit Committee will review the ..................
<PAGE>
engagement of the independent accountants, review and approve the scope of
the annual audit undertaken by the independent accountants and review the
independence of the accounting firm. The Audit Committee will also review the
audit and non-audit fees of the independent accountants and the adequacy of
the Company's internal control procedures. The Compensation Committee will
review executive compensation issues.
INDEMNIFICATION AGREEMENTS
The Company intends to enter into an Indemnification Agreement with each
of its Directors and any officer, employee, agent or fiduciary designated by
the Board of Directors (the "Indemnified Party") which provides that the
Company indemnify the Director or other party thereto to the fullest extent
permitted by applicable law. The agreement includes indemnification, to the
extent permitted by applicable law, against expenses, including reasonable
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by the Indemnified Party in connection with
any civil or criminal action or administrative proceeding arising out of the
Indemnified Party's performance of his duties as a Director or officer of the
Company. Such indemnification is available if the Indemnified Party acted in
good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Company, and, with respect to any criminal
action, had no reasonable cause to believe his conduct was unlawful.
Under the Indemnification Agreement, the entitlement of an Indemnified
Party to indemnification will be determined by a majority vote of a quorum of
disinterested Directors, or if such quorum is not obtainable, either by
independent counsel or by the stockholders of the Company, as determined by
such disinterested Directors. If a change of control of the Company has
occurred, the entitlement of such Indemnified Party shall be determined by
independent counsel to the Company, unless such Indemnified Party requests
that either the Board or the stockholders make such determination.
Each Indemnification Agreement will require the Company to advance
litigation expenses at the request of the Indemnified Party who is a party
thereto whether prior to or after final resolution of a proceeding, provided
that he undertakes to repay such advances if it is ultimately determined that
he is not entitled to indemnification for his expense. The advance of
litigation expenses will therefore be mandatory upon satisfaction of certain
conditions by the Indemnified Party.
Provided that it can do so at a reasonable expense, the Company intends to
obtain officers' and directors' liability insurance from the net proceeds
hereof allocated to working capital which insurance would provide for a
maximum of $10,000,000 of coverage, subject to a $100,000 corporate
reimbursement per occurrence payable by the Company. There can be no
assurance, however, that such insurance, or any similar coverage, will be
available to the Company, or if available, will be on terms and conditions
acceptable to the Company. Any payments made by the Company under an
Indemnification Agreement which are not covered by the insurance policy may
have an adverse impact on the Company's earnings. See "Description of
Securities -- Limitation on Liability of Directors."
STOCK OPTION PLAN
Incentive Stock Option Plan -- In February 1996, the Board of Directors of
the Company adopted and the stockholders of the Company subsequently
approved, the adoption of the Company's 1996 Stock Option Plan ("Stock Option
Plan"). The purpose of the Stock Option Plan is to enable the Company to
encourage key employees, officers, Directors and consultants to contribute to
the success of the Company by granting such individuals and Directors
nonqualified "stock options" within the meaning of Section 422 of The
Internal Revenue Code of 1986, as amended ("ISOs").
The Stock Option Plan will be administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients and vesting
of grants and the number of shares to be subject to such options.
The Stock Option Plan provides for the granting of options to purchase
Common Stock at an exercise price to be determined by the Board of Directors
or the Committee. Notwithstanding the foregoing, the Company has
24
<PAGE>
agreed with the Underwriter that for a period of 18 months after the date of
this Prospectus, the Company will not grant any stock option having an
exercise price less than the greater of the fair market value of the Common
Stock on the date of the grant or the initial public offering price per share
of Common Stock.
The total number of shares with respect to which options may be granted
under the Stock Option Plan is 500,000.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common
Stock, or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations.
The Stock Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Stock
Option Plan may not be amended to increase the number of shares subject to
the Stock Option Plan, change the class of persons eligible to receive
options under the Stock Option Plan or materially increase the benefits of
participants.
As of the date of this Prospectus, no options have been granted under the
Stock Option Plan. No determinations have been made regarding the persons to
whom options will be granted in the future, the number of shares which will
be subject to such options or the exercise prices to be fixed with respect to
any option.
25
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of June 20, 1996, with
respect to the beneficial ownership of shares of Common Stock by (i) each
person known by the Company to be the owner of more than 5% of the
outstanding shares of Common Stock, (ii) each officer, director and
director-nominee, and (iii) all officers and directors as a group.
<TABLE>
Percentage
Amount and Percentage of Shares
Nature of of Shares Owned
Name and Address of Beneficial Currently After the
Beneficial Owner Ownership(1)(2) Owned Offering
----------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Dr. Hanoch Shalit 919,825(3) 33.3% 24.5%(4)
c/o Imatec, Ltd.
150 E. 58th Street
New York, NY 10155
Lawrence P. Kollender -0- -0- -0-
c/o Imatec, Ltd.
150 E. 58th Street
New York, NY 10155
Carmello Cotrino 663,000 24.0% 17.6%
8 Homsted Circle
Marlboro, NJ 07746
Louis Raneri 171,000 6.2% 4.5%
1266 41st Street
Brooklyn, NY 11218
Thomas Dunn 171,000 6.2% 4.5%
600 Hylan Boulevard
Staten Island, NY
10305
Steven Ai -0- -0- -0-
c/o City Mill Co.,
Ltd.
600 Nimits Highway
Honolulu, HI 96817
Neal Factor -0- -0- -0-
35 W. 44th Street,
Suite 1111
New York, NY 10036
Officers and 919,825 33.3% 24.5%
directors as a group
(4 persons)
</TABLE>
- ------
(1) The shares of Common Stock owned by each person or by the group, and the
shares included in the total number of shares of Common Stock
outstanding, have been adjusted in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, to reflect the ownership of
shares issuable upon exercise of outstanding options, warrants or other
common stock equivalents which are exercisable within 60 days. As
provided in such Rule, such shares issuable to any holder are deemed
outstanding for the purpose of calculating such holder's beneficial
ownership but not any other holder's beneficial ownership.
(2) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of stock beneficially owned by them.
(3) The share ownership of Dr. Hanoch Shalit includes 12,615 shares of Common
Stock, consisting of 2,818 shares of Common Stock held by Richard Carey
and 9,797 shares of Common Stock held by Mr. Jim Jaeger, each a founding
stockholder of the Company, pursuant to an agreement dated November 9,
1993 among Dr. Shalit and Messrs. Carey and Jaeger in which Messrs. Carey
and Jaeger assigned the voting rights of such 12,615 shares of Common
Stock to Dr. Shalit. Accordingly, Dr. Shalit may be deemed to
beneficially own such 12,615 shares of Common Stock, although Dr. Shalit
is not entitled to receive any dividends with respect to such shares of
Common Stock and has no power of disposition over such shares of Common
Stock, or the right to any proceeds from any disposition of such shares
of Common Stock.
(4) Does not give effect to the registration and sale of 50,000 shares of
Common Stock by Dr. Shalit. See "Selling Security Holders."
26
<PAGE>
SELLING SECURITY HOLDERS
The registration statement, of which this Prospectus forms a part, also
relates to the registration of (i) 551,785 shares of Common stock and
4,000,000 Redeemable Warrants issued by the Company to the Bridge Selling
Security Holders who provided an aggregate of $4,000,000 in interim financing
to the Company in a financing that was consummated in April, 1996, (ii) an
aggregate of 2,210,000 shares of Common Stock owned by the Founding Selling
Security Holders. The Selling Security Holders' Securities are not being
underwritten by the Underwriter in connection with this Offering. Except with
respect to 150,000 shares of Common Stock being registered on behalf of
certain of the Founding Selling Security Holders, including 50,000 shares of
Common Stock owned by Dr. Hanoch Shalit, the Chief Executive Officer and
President of the Company, each of the Selling Security Holders have agreed
not to directly or indirectly offer, sell, transfer or otherwise encumber or
dispose of any of these securities for a period of eighteen (18) months after
the date of this Prospectus unless otherwise permitted by the Underwriter and
the Company. See "Principal Stockholders" and "Underwriting."
The sale of the Selling Security Holders' Securities by the Selling
Security Holders may be effected from time to time in transactions (which may
include block transactions by or for the account of the Selling Security
Holders) in the over-the-counter market or in negotiated transactions, or
through the writing of options on the Selling Security Holders' Securities, a
combination of such methods of sale, or otherwise. Sales may be made at fixed
prices which may be changed, at market prices prevailing at the time of sale,
or at negotiated prices.
The Selling Security Holders may effect such transactions by selling the
Selling Security Holders' Securities directly to purchasers, through
broker-dealers acting as agents for the Selling Security Holders or to
broker- dealers who may purchase shares as principals and thereafter sell the
Selling Security Holders' Securities from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals or both (which compensation as to a particular
broker-dealer may be in excess of customary commissions).
The Selling Security Holders and broker-dealers, if any, acting in
connection with such sales, might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit upon the resale of such securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
Sales of any shares of Common Stock or Class A Redeemable Warrants by the
Selling Security Holders, or even the existence of the right to exercise the
Class A Redeemable Warrants, may depress the price of the Common Stock or the
Class A Redeemable Warrants in any market that may develop for the
Securities.
The following table sets forth certain information with respect to Selling
Security Holders for whom the Company is registering shares of Common Stock
and Class A Redeemable Warrants for resale to the public. Other than Dr.
Hanoch Shalit, who is the President and Chief Executive Officer of the
Company, and Mr. David Ai whose son is a member of the Board of Directors of
the Company, none of the Selling Security Holders has had any position with,
held any office, or had any other material relationship with the Company.
Certain Selling Security Holders in the table below may not sell or
otherwise transfer their Securities for a period of 18 months from the date
of this Prospectus without the consent of the Underwriter. In the event such
Selling Security Holder received such consent, the sale shall be effected
through the Underwriter who shall be compensated in accordance with its
customary practices for such transactions. Unless otherwise indicated,
ownership refers to ownership of shares of Common Stock. See "Shares Eligible
for Future Sale" and "Underwriting."
27
<PAGE>
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Richard W. Ahrens*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
David Ai**
Common Stock .......................................... 55,250 55,250 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Lelio J. Andreoli*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Alfred Angrisani*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Jay Bernath*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants. .......................... 25,000 25,000 -0- -0-
Robert H. Binns*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Michael Bio*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
Cynthia Blum*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
John Bogin*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Edward C. Brookins*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Joel Brownstein**
Common Stock .......................................... 5,525 5,525 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Richard Carey**
Common Stock .......................................... 2,818 2,818 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Nancy Carrieri*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants. .......................... 25,000 25,000 -0- -0-
Nicole Cassino*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
John Catania*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Maria Cid*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Bruce Cohen*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Craig Cohen*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants. .......................... 50,000 50,000 -0- -0-
Carmello Cotrino*
Common Stock .......................................... 663,000 663,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Joseph DeAngelis*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Ronald and Emelia DeSena, JTWROS*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Janice DeSimone*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Brett Diamond*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Amelia DiDomenico*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
D.J.'s Company*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Thomas Dunn*
Common Stock .......................................... 171,000 171,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Boris Dyskin*
Common Stock .......................................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants ........................... 150,000 150,000 -0- -0-
Dolores Esposito*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Walter S. Farr*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Edward J. Farrell, Jr.*
Common Stock .......................................... 3,449 34,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Ivan Feng**
Common Stock .......................................... 22,100 22,100 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Robert A. Foise*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Richard Forte*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Marc Foscolo*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Ian Freeman*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Frank Fronda*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Melissa Galindez*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Kenneth Gantz*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Andrew P. Geiss*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Paul Geraci*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Angelo Giamboi*
Common Stock .......................................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants ........................... 75,000 75,000 -0- -0-
Barry J. Gordon*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Stacy Gozlan*
Common Stock .......................................... 6,897 3,449 -0- -0-
Class A Redeemable Warrants ........................... 50,000 25,000 -0- -0-
Richard Guerriero*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Douglas R. Hellstrom*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Logan L. Hurst*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Jim Jaeger**
Common Stock .......................................... 9,797 9,797 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Emma M. Job*
Common Stock .......................................... 3,449 34,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Paul E. Judd*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
Steven Kessler*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Marc H. Klee*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Daniel E. Koshland, Jr.*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Robert C. Lannert*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Donald L. Leonard*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Laura A. Lihach*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Angela LoPresto*
Common Stock .......................................... 103,449 103,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Frances LoPresto*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Carol Lundrigan*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Charles T. Maguire*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Louis Martelli*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
Kathleen F. & Arthur R. Medici, Joint Tenants with Right of
Survivorship*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Jeffrey Michelson*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Silvio Minici*
Common Stock .......................................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants ........................... 150,000 150,000 -0- -0-
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Al Moschetto*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Donald A. Nader*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Mohamed Omar Nawar*
Common Stock .......................................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants ........................... 75,000 75,000 -0- -0-
Arnold H. Neustadt and Francene Neustadt, JTWROS*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
New Vision*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
S. Edwin Noffel, IRA*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Ralph Notaro* ............................................
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Diane Paribello*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Joseph Perri*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
Arthur Pidgeon*
Common Stock .......................................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants ........................... 150,000 150,000 -0- -0-
Michael Pressberg*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Provence Business* Consultants, Inc.
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-
Michael Pugliese*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Louis Raneri*
Common Stock .......................................... 171,000 171,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Scott Roberts*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Louis C. Rose*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
James D. Sauer*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Jack Schnitzer*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Dr. Hanoch Shalit**
Common Stock .......................................... 919,825 919,825 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Allan Sherman*
Common Stock .......................................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants ........................... 75,000 75,000 -0- -0-
Stephen Silverberg*
Common Stock .......................................... 72,000 72,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
David Smith*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Anthony Stropoli*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Lorenzo Don Starling and Virginia Starling, Joint Tenants with
Right of Survivorship*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Paul and Teresa Tarantino, Joint Tenants with Right of
Survivorship*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
John M. Thompson*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
William M. Thompson*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Frank Tricarico*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Tri Ventures*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
Neil Vaccaro*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
James W. Venezia*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
</TABLE>
<PAGE>
33
<TABLE>
<CAPTION>
Amount of Amount of Percent of
Amount of Securities Securities Securities
Securities Being Owned After Owned After
Name Owned Registered Offering(1) Offering(1)
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Robert and Christine Vitamante, JTWROS*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Samir R. Wahby*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Donald R. Waldrip*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Frederick B. Winston*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
Yoram Yosifov**
Common Stock .......................................... 30,300 30,300 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-
Joseph and Jacqueline Zambito, Joint Tenants with Right of
Survivorship*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
</TABLE>
- ------
* Holders who have agreed not to sell or otherwise transfer their Securities
for 18 months from the date of this Prospectus without the consent of the
Underwriter.
** Holders who have agreed not to sell or otherwise transfer only a portion
of their Securities for 18 months from the date of this Prospectus without
the consent of the Underwriter.
(1) Assumes sale of all Securities registered hereby.
34
<PAGE>
CERTAIN TRANSACTIONS
Mr. Neal Factor, a director of the Company and an attorney who has
represented the Company since inception, charged the Company legal fees of
approximately $31,000 in 1995.
The Company entered into the License Agreement as of June 25, 1995 with
Dr. Hanoch Shalit, the Company's President and Chief Executive Officer. The
License Agreement grants the Company the exclusive right to make, use, sell
and sublicense "Patentable Image Technology," which is defined in the License
Agreement as the three United States Patents and certain foreign patent
applications. Under the terms of the License Agreement, Dr. Shalit received
from the Company a one-time $350,000 payment in January 1996 subsequent to
the First Closing of the Bridge Financing. Dr. Shalit is also entitled to
receive a flat royalty fee of $140,000 per annum, payable in monthly
installments of $11,667, for so long as the Company and any successor of the
Company is in existence (the "Annual Royalty"); provided, however, that in
the event that Dr. Shalit is no longer President, Chief Executive Officer and
Chairman of the Company for any reason whatsoever, but the Company or any
successor of the Company continues in existence, the Annual Royalty shall
automatically be increased to $250,000 per annum. Pursuant to the terms of
the License Agreement, the Annual Royalty shall increase by 5% every year as
long as the Company or any successor of the Company is in existence. The
License Agreement also grants to the Company the exclusive right as to
inventions made by Dr. Shalit in the course of his employment under his
employment agreement with the Company. The Company's obligations to pay the
Annual Royalty shall continue until the expiration of the License Agreement.
The term of the License Agreement expires when the last licensed patent
expires, whether in the United States or abroad. Under the License Agreement,
the Company is obligated to use its reasonable best efforts to make, use,
sell and sublicense to others the Patentable Image Technology.
Each of the transactions between the Company and Mr. Neal Factor and
between the Company and Dr. Hanoch Shalit was made on terms no less favorable
to the Company than those that were available from unaffiliated third
parties. All future transactions, including loans, between the Company and
its officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors on the Board of Directors,
and will be on terms no less favorable to the Company than those that could
be obtained from unaffiliated third parties.
DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of (i) 20,000,000 shares of
Common Stock, par value $.0001 per share, 2,761,785 of which are currently
issued and outstanding, and (ii) 2,000,000 shares of preferred stock, par
value $.0001 per share ("Preferred Stock"), none of which are currently
issued and outstanding. There will be 3,761,785 shares of Common Stock issued
and outstanding after giving effect to the sale of the Common Stock offered
hereby.
COMMON STOCK
Each share of Common Stock is entitled to one vote, either in person or by
proxy, on all matters that may be voted upon by the owners thereof at a
meeting of the stockholders, including the election of directors. The holders
of Common Stock (i) have equal, ratable rights to dividends from funds
legally available therefor, when as and if declared by the Board of Directors
of the Company; (ii) are entitled to share ratably in all of the assets of
the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii)
do not have pre-emptive or redemption provisions applicable thereto; and (iv)
are entitled to one non-cumulative vote per share on all matters on which
stockholders may vote at all meetings of stockholders.
All shares of Common Stock issued and outstanding are, and those offered
hereby, when issued, will be fully-paid and non-assessable, with no personal
liability attaching to the ownership thereof.
35
<PAGE>
REDEEMABLE WARRANTS
The Redeemable Warrants will be issued pursuant to a Warrant Agreement
(the "Warrant Agreement") between the Company and Continental Stock Transfer
& Trust Company, as Warrant Agent (the "Warrant Agent"). The following
discussion of certain terms and provisions of the Redeemable Warrants is
qualified in its entirety by reference to the detailed provisions of the
Redeemable Warrants and of the Warrant Agreement, the forms of which have
been filed as exhibits to the Registration Statement, of which this
Prospectus forms a part. See "Additional Information."
Each Class A Redeemable Warrant and Class B Redeemable Warrant entitles
the holder thereof to purchase one share of Common Stock at an exercise price
of $6.50 and $5.50 per share, respectively, at any time commencing on the
date of this Prospectus until _______, 1998 [24 months after the date of this
Prospectus] and ________, 2001 [60 months from the date of this Prospectus],
respectively, subject to adjustment in certain circumstances. Each Class A
Redeemable Warrant and each Class B Redeemable Warrant, commencing
___________________, 1997 [9 months after the date of this Prospectus] and
____, 1997 [12 months after the date of this Prospectus] respectively. Each
Class A Redeemable Warrant and each Class B Redeemable Warrant is redeemable
by the Company with the consent of the Underwriter and will be subject to
redemption at a redemption price of $.10 per Redeemable Warrant provided that
the average closing bid price of the Common Stock as reported by Nasdaq
equals or exceeds $7.50 and $9.00 per share, respectively, 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.
To exercise a Redeemable Warrant, the holder must send the certificate
evidencing the Redeemable Warrant (the "Warrant Certificate") to the Warrant
Agent, together with an election to exercise, setting forth the number of
shares to be purchased and payment by certified check or money order for the
total exercise price of the shares to be purchased. The Warrant Agent will
return a certificate evidencing the number of shares of Common Stock issued
upon exercise of the Redeemable Warrant.
The Redeemable Warrants contain anti-dilution provisions regarding certain
events, including but not limited to, stock dividends, stock splits, and
reclassifications. The holders of Redeemable Warrants, as such, have no right
to vote on matters submitted to the stockholders of the Company or to receive
dividends and are not entitled to share in the assets of the Company in the
event of liquidation, dissolution or the winding-up of the Company's affairs.
However, upon the exercise of the Redeemable Warrants and issuance of shares
of Common Stock to the holder, such shares of Common Stock shall have rights
identical to all other shares of Common Stock.
The Company is required to have a current Registration Statement on file
with the Commission and to effect appropriate qualifications under the laws
and regulations of the states in which the holders of the Redeemable Warrants
reside in order to comply with applicable laws in connection with such
exercise. The Company has agreed to register and to qualify such issuable
shares of Common Stock. There can be no assurance that the Company will be
able to cause such registration statement to become effective and remain
current or to effect appropriate qualification under applicable state
securities laws, the failure of which may result in the exercise of the
Redeemable Warrants and the resale or other disposition of Common Stock
issued upon such exercise becoming unlawful.
The exercise prices of the Redeemable Warrants bear no relation 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 thereby.
PREFERRED STOCK
The Company's Certificate of Incorporation provides for 2,000,000 shares
of Preferred Stock, whereby the Board of Directors of the Company shall have
the authority, without further action by the holders of the outstanding
Common Stock, to issue up to 2,000,000 shares of Preferred Stock from time to
time in one or more classes or series, to fix the number of shares
constituting any class or series and the stated value thereof, if different
from the par value, and to fix the terms of any such series or class,
including dividend rights, dividend rates, conversion or exchange rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price and the liquidation preference of such
class or series. Consequently, the issuance
36
<PAGE>
of Preferred Stock may be used as an "anti-takeover" device without further
action on the part of the stockholders. Issuance of Preferred Stock, which
may be accomplished through a public offering or a private placement to
parties favorable to current management, may dilute the voting power of
holders of Common Stock (such as by issuing Preferred Stock with super voting
rights) and may render more difficult the removal of current management, even
if such removal may be in the stockholders' best interests. Further, the
Company's stock option plans provide for the immediate acceleration of, and
removal of restrictions from, options and other awards under the plans upon a
"change of control" (as defined therein). Such provisions may also have the
result of discouraging acquisitions of the Company. See "Risk Factors --
Barriers to Takeover." The Company presently has no shares of Preferred Stock
outstanding and has no present intention to issue any Preferred Stock. The
designations, rights and preferences of any Preferred Stock would be set
forth in a Certificate of Designation which would be filed with the Secretary
of State of Delaware.
LIMITATION ON LIABILITY OF DIRECTORS
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence. By its terms and in
accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of the Company (i)
for breach of the director's duty of loyalty to the Company 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 (relating to unlawful payments or
dividends or unlawful stock repurchases or redemptions), (iv) for any
improper benefit or (v) for breaches of a director's responsibilities under
the Federal securities laws. The Company also intends to enter into an
Indemnification Agreement with each of its Directors and any officer,
employee, agent or fiduciary designated by the Board of Directors which
provides that the Company indemnify the Director or other parties thereto to
the fullest extent permitted by applicable law. See "Business --
Indemnification Agreements."
TRANSFER AGENT AND WARRANT AGENT
The transfer agent and registrar for the Common Stock and warrant agent
for the Redeemable Warrants is Continental Stock Transfer & Trust Company,
located at 2 Broadway, New York, New York 10004.
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this Offering, there will be 3,761,785 shares of Common
Stock outstanding, (3,911,785 shares of Common Stock if the Underwriter's
over-allotment option is exercised in full) all of which will be registered.
Except for 150,000 shares of Common Stock being registered on behalf of
certain of the Founding Selling Security Holders, including 50,000 shares for
Dr. Hanoch Shalit, the Chief Executive Officer President and Chairman of the
Board of Directors of the Company, all of the Selling Security Holders have
agreed not to directly or indirectly offer, sell, transfer or otherwise
encumber or dispose of any such shares for a period of eighteen (18) months
from the date of this Prospectus unless otherwise permitted by the
Underwriter.
Since all of the shares of Common Stock outstanding will be registered
upon completion of this Offering, none of the shares of Common Stock will be
"restricted securities" as that term is defined by Rule 144 of the Securities
Act, as amended. Ordinarily, under Rule 144, a person who is an affiliate of
the Company (as that term is defined in Rule 144) and has beneficially owned
restricted securities for a period of two (2) years may, every three (3)
months, sell in brokerage transactions an amount that does not exceed the
greater of (i) 1% of the outstanding class of such securities or (ii) the
average weekly trading volume of trading in such securities on all national
exchanges and/or reported through the automated quotation system of a
registered securities association during the four weeks prior to the filing
of a notice of sale by a securities holder. A person who is not an affiliate
of the Company who beneficially owns restricted securities is also subject to
the foregoing volume limitations but may, after the expiration of three (3)
years, sell unlimited amounts of such securities under certain circumstances.
Prior to this Offering, there has been no market for the Securities. The
Underwriter intends to make a market in the shares of Common Stock and
Redeemable Warrants after completion of this Offering. No predictions
37
<PAGE>
can be made as to the effect, if any, that the availability of shares for
sale will have on the market, if any, prevailing from time to time. Sales of
substantial amounts of the Common Stock that are subject to the prior
approval of the Underwriter may adversely affect the market price of the
Common Stock or the Redeemable Warrants offered hereby.
UNDERWRITING
A.S. Goldmen & Co., Inc. (the "Underwriter") has entered into an
Underwriting Agreement with the Company pursuant to which, and subject to the
terms and conditions thereof, it has agreed to purchase all of the shares of
Common Stock and Redeemable Warrants offered by the Company hereby.
The Underwriter has advised the Company that it proposes to offer the
shares of Common Stock and Redeemable Warrants to the public at the public
offering prices set forth on the cover page of this Prospectus and that the
Underwriter may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc (the "NASD") concessions of not in
excess of $ _______ per share of Common Stock and $_____ per Redeemable
Warrant, of which amount a sum not in excess of $ ______ per share of Common
Stock may in turn be reallowed by such dealers to other dealers. After the
commencement of the Offering, the public offering price, the concessions and
the reallowances may be changed. The Underwriter has informed the Company
that it does not expect sales to discretionary accounts by the Underwriter to
exceed 5% of the total number of securities offered by the Company hereby.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Act. The Company has agreed to
pay to the Underwriter a non-accountable expense allowance equal to 3%
percent of the gross proceeds derived from the sale of the shares of Common
Stock and Redeemable Warrants underwritten, $25,000 of which as been paid to
date.
The Underwriting Agreement provides that the Underwriter has a right of
first refusal for a period of three years from the date of this Prospectus
with respect to any sale of securities made by the Company, its affiliates or
subsidiaries. The Company has also agreed to retain the Underwriter as the
Company's financial consultant for a period of 24 months from the date of
this Prospectus and to pay the Underwriter $2,000 per month in connection
therewith, the total amount of which ($48,000) is due upon consummation of
the Offering. The Company has agreed that, at the request of the Underwriter,
for five years after the date of this Prospectus, that it will use its best
efforts to cause one individual designated by the Underwriter and acceptable
to the Company to be elected to the Company's Board of Directors, which
individual may be a director, officer, employee or affiliate of the
Underwriter. As of the date of this Prospectus, the Underwriter has not
determined if it will designate an individual to the Company's Board of
Directors.
Upon the exercise of any Redeemable Warrants more than one year after the
date of this Prospectus, which exercise was solicited by the Underwriter, and
to the extent not inconsistent with the guidelines of the NASD and the Rules
and Regulations of the Commission, the Company has agreed to pay the
Underwriter a commission of four percent of the aggregate exercise price of
such Redeemable Warrants. However, no compensation will be paid to the
Underwriter in connection with the exercise of the Redeemable Warrants if (a)
the market price of the Common Stock is lower than the exercise price, (b)
the Redeemable Warrants are held in a discretionary account, or (c) the
Redeemable Warrants are exercised in an unsolicited transaction where the
holder of the Redeemable Warrants has not stated in writing that the
transaction was solicited and has not designated in writing the Underwriter
as the Soliciting agent. Unless granted an exemption by the Commission from
Rule 10b-6 under the Securities Exchange Act of 1934, as amended, the
Underwriter and any soliciting broker-dealers are prohibited from engaging in
any market-making activities or solicited brokerage activities with regard to
the Company's securities during the periods prescribed by exemption (xi) to
Rule 10b-6 before the solicitation of the exercise of any Warrants until the
later of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that the Underwriter and any soliciting
broker-dealers may have to receive a fee for the exercise of the Redeemable
Warrants following such solicitation. As a result, the Underwriter and any
soliciting broker-dealers will be required to continue to provide a market
for the Company's Securities during certain periods while the Redeemable
Warrants are exercisable. If the Underwriter has engaged in any of the
activities prohibited by Rule 10b-6 during the periods described above, the
Underwriter undertakes to waive unconditionally its right to receive a
commission on the exercise of such Redeemable Warrants.
38
<PAGE>
Each director and officer of the Company, the majority of all present
holders of the shares of Common Stock, and all holders of any options,
warrants or other securities convertible, exercisable or exchangeable for
shares of Common Stock have agreed not to, directly or indirectly, offer,
sell, transfer, pledge, assign, hypothecate or otherwise encumber or dispose
of any of the Company's securities, whether or not presently owned, for a
period of eighteen (18) months after the date of this Prospectus without the
prior consent of the Company and the Underwriter. An appropriate legend shall
be marked on the back of stock certificates representing all such securities.
The Company has granted to the Underwriter an option exercisable during
the forty-five (45) day period commencing on the date of this Prospectus to
purchase from the Company, at the offering price less underwriting discount,
up to an aggregate of 100,000 additional shares of Common Stock and/or an
additional 600,000 Class A Redeemable Warrants and/or 600,000 Class B
Redeemable Warrants, for the sole purpose of covering over-allotments, if
any.
In connection with this Offering, the Company has agreed to sell to the
Underwriter or its designees, for nominal consideration, warrants to purchase
from the Company 100,000 shares of Common Stock, 400,000 Class A Redeemable
Warrants and 400,000 Class B Redeemable Warrants (the "Underwriter's
Warrants"). The Underwriter's Warrants are initially exercisable at a price
of $ ______ per share of Common Stock [120% of the initial offering price per
share of Common Stock] and $____ per Class A Redeemable Warrant [120% of the
initial offering price per Class A Redeemable Warrant] for a period of one
(1) year commencing one (1) year from the date of this Prospectus and $____
per Class B Redeemable Warrant [120% of the initial offering price per Class
B Redeemable Warrant] for a period of four (4) years commencing one (1) year
from the date of this Prospectus. The Underwriter's Warrants provide for
adjustment of the type of securities issuable upon exercise of the
Underwriter's Warrants to reflect certain subdivisions and combinations of
the Common Stock. The Underwriter's Warrants grant to the holders thereof
certain rights of registration for the securities issuable upon exercise of
the Underwriter's Warrants.
Prior to this Offering, there has been no public market for any of the
Company's securities. Accordingly, the offering prices of the Shares and the
Redeemable Warrants and the terms of the Redeemable Warrants were determined
by negotiation between the Company and the Underwriter. Factors considered in
determining such price and terms, in addition to prevailing market
conditions, included the 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 which were deemed
relevant.
The foregoing is a summary of certain terms of the Underwriting Agreement,
copies of which were filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part. Reference is
hereby made to such exhibit for a detailed description of the provisions
thereof as summarized above. See "Additional Information."
LEGAL MATTERS
The validity of the shares of Common Stock and Redeemable Warrants offered
hereby will be passed upon for the Company by Zukerman, Gore & Brandeis, New
York, New York. Certain matters regarding intellectual property rights shall
be passed upon for the Company by Wyatt, Gerber, Burke & Badie, LLP. Orrick,
Herrington & Sutcliffe, New York, New York has acted as counsel for the
Underwriter in connection with this Offering.
EXPERTS
The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been examined by Most Horowitz & Company,
LLP independent certified public accountants, whose reports thereon appear
elsewhere herein and in the Registration Statement. Such financial statements
have been included in reliance upon the reports of Most Horowitz & Company,
given upon their authority as experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
On March 14, 1996, the Company replaced its independent accountants,
Present, Cohen, Smallowitz & Glassman ("Present, Cohen") with Most Horowitz &
Company, LLP ("Most Horowitz") to act as its indepen-
39
<PAGE>
dent accountants from and after March 14, 1996. All of the financial
statements of the Company included in the prospectus and registration
statement of which this prospectus forms a part were examined by Most
Horowitz. None of Present, Cohen's reports for either of the past two years
contained an adverse opinion or disclaimer of opinion, or was modified as to
uncertainity, audit scope, or accounting principles. Further, during the
Company's two most recent fiscal years and any subsequent interim period
preceding the Company replacing Present, Cohen there were no disagreements
with Present, Cohen on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures.
The decision to replace Present, Cohen with Most Horowitz was approved by
the Company's Board of Directors and was made as a result of the Company's
desire to engage an accounting firm more experienced in auditing public
companies.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act
of 1933, as amended (the "Securities Act") with respect to the Securities
offered hereby. This Prospectus filed as a part of the Registration Statement
does not contain certain information set forth in or annexed as exhibits to
the Registration Statement certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
with respect to the Company and the Securities offered hereby, reference is
made to the Registration Statement and to the exhibits filed as part thereof,
which may be inspected at the office of the Commission without charge, or
copies thereof may be obtained therefrom upon payment of a fee prescribed by
the Commission. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete, and where the
contract or other document has been filed as an exhibit to the Registration
Statement, each statement is qualified in all respects by reference to the
applicable document filed with the Commission.
The Registration Statement and such exhibits and schedules may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and
at the Regional Offices of the Commission located at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1025, Washington, D.C. 20549, at prescribed rates.
40
<PAGE>
IMATEC, LTD
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
<S> <C>
INDEPENDENT AUDITORS' REPORT ............................................................... F-2
BALANCE SHEET -- December 31, 1994 and 1995 and March 31, 1996 ............................. F-3
STATEMENT OF OPERATIONS -- November 17, 1988 (Inception) to December 31, 1995 (Cumulative),
years ended December 31, 1994 and 1995 and three months ended March 31, 1995 and 1996
(Unaudited) ............................................................................... F-4
STATEMENT OF STOCKHOLDERS' (DEFICIT) -- November 17, 1988 (Inception) to December 31, 1995
and three months ended March 31, 1996 (Unaudited) ......................................... F-5
STATEMENT OF CASH FLOWS -- November 17, 1988 (Inception) to December 31, 1995 (Cumulative),
years ended December 31, 1994 and 1995 and three months ended March 31, 1995 and 1996
(Unaudited) ............................................................................... F-6
NOTES TO FINANCIAL STATEMENTS .............................................................. F-7 - F-10
</TABLE>
F-1
<PAGE>
April 29, 1996
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Imatec, Ltd.
New York, New York
We have audited the accompanying balance sheet of Imatec, Ltd. (A
Development Stage Enterprise) as of December 31, 1994 and 1995, and the
related statements of operations, stockholders' (deficit) and cash flows for
the years ended December 31, 1994 and 1995 and November 17, 1988 (Inception)
to December 31, 1995 (Cumulative). 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audit provides 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 Imatec, Ltd., as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for the periods then ended in conformity with generally accepted
accounting principles.
/s/ Most Horowitz & Company, LLP
-------------------------------------
Most Horowitz & Company, LLP
New York, New York
F-2
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31 March 31,
------------------------
1994 1995 1996
-------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash .................................................... $1,897 $ 31,151 $ 87,290
Marketable securities (Note 3) .......................... 1,350,852 663,519
Other current assets .................................... 9,715 7,208
-------- ------------ ------------
TOTAL CURRENT ASSETS ............................... 1,897 1,391,718 758,017
OFFICE EQUIPMENT (net of accumulated depreciation of $1,715) 37,937
DEFERRED DEBT ISSUANCE COSTS (Note 2) ..................... 240,838 185,797
PATENTS (Note 7) .......................................... 11,427 21,112
DEPOSIT ................................................... 17,920
OTHER ASSETS .............................................. 28,353
-------- ------------ ------------
TOTAL ASSETS ....................................... $1,897 $1,643,983 $1,049,136
======== ============ ============
</TABLE>
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
<TABLE>
<CAPTION>
December 31 March 31,
----------------------------
1994 1995 1996
----------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Accrued expenses (Note 7) ............................ $ 4,188 $ 412,735 112,104
BRIDGE NOTES PAYABLE (Note 2) ........................ 1,410,763 1,460,037
OTHER NOTES PAYABLE (Note 4) ......................... 50,000 50,000
----------- ------------- -------------
TOTAL LIABILITIES ............................... 4,188 1,873,498 1,622,141
----------- ------------- -------------
COMMITMENTS (Notes 7, 8 and 9)
STOCKHOLDERS' (DEFICIT) (Notes 2 and 9)
Preferred stock, $.0001 par value; authorized -- 2,000,000
shares; issued and outstanding -- none
Common stock, $.0001 par value; authorized -- 20,000,000
shares; issued and outstanding -- 1,105,000, 2,472,091
and 2,465,194 in 1994, 1995 and 1996, respectively . 111 247 246
Additional paid-in capital ........................... 615,113 1,038,920 1,026,947
Deficit accumulated during the development stage ..... (617,515) (1,268,682) (1,600,198)
----------- ------------- -------------
TOTAL STOCKHOLDERS' (DEFICIT) ................... (2,291) (229,515) (573,005)
----------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS
(DEFICIT) .................................... $ 1,897 $ 1,643,983 $ 1,049,136
=========== ============= =============
</TABLE>
See notes to financial statements
F-3
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
November 17,
Years Ended 1988
December 31, (Inception) Three months
---------------------------- to Ended March 31,
December 31, ---------------------------
1994 1995 1995(Cumulative) 1995 1996
------------ ------------ ---------------- ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
INCOME -- consulting fees ......... $ 1,960 $ 133,973
------------ --------------
EXPENSES
Royalties (Note 7) .............. 420,000 420,000 35,000
Research and development ........ 17,881 325,616
General and administrative ...... 99,243 164,028 598,959 7,376 123,334
------------ ------------ -------------- ----------- ------------
TOTAL EXPENSES ............. 117,124 584,028 1,344,575 7,376 158,334
------------ ------------ -------------- ----------- ------------
LOSS FROM OPERATIONS ....... (115,164) (584,028) (1,210,602) (7,376) (158,334)
INTEREST EXPENSE AND AMORTIZATION OF
DEBT ISSUANCE COSTS ............. (72,596) (72,596) (184,380)
INTEREST INCOME ................... 5,457 14,516 11,198
------------ ------------ -------------- ----------- ------------
NET LOSS ................... ($ 115,164) ($ 651,167) ($ 1,268,682) ($ 7,376) ($ 331,516)
============ ============ ============== =========== ============
AVERAGE NUMBER OF SHARES OUTSTANDING
(Note 2) ........................ 2,210,000 2,232,978 2,213,243 2,210,000 2,468,377
============ ============ ============== =========== ============
NET LOSS PER COMMON SHARE ......... ($.05) ($.29) ($.57) -- ($.13)
============ ============= ============== =========== ============
</TABLE>
See notes to financial statements
F-4
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' (DEFICIT)
NOVEMBER 17, 1988 (INCEPTION) TO MARCH 31, 1996
(NOTE 2)
<TABLE>
<CAPTION>
Deficit
Accumulated
Aditional During the
Common Stock (Note 9) Paid-In Development
----------------------- ------------ --------------
Shares Amount Capital Stage Total
----------- -------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Issuance of shares ..................... 1,105,000 $111 $ 889 $ 1,000
Contribution of shares ................. (82,875) (8) 8
Issuance of shares ..................... 55,250 5 499,995 500,000
Issuance of shares ..................... 27,625 3 (3)
Net loss for the period inception to December
31, 1993 .............................. ($ 502,351) (502,351)
----------- -------- ------------ -------------- ------------
Balance -- December 31, 1993 ......... 1,105,000 111 500,889 (502,351) (1,351)
Contribution of shares ................. (12,615) (1) 1
Issuance of shares ..................... 12,615 1 114,223 114,224
Net loss for the year ended December 31, 1994 (115,164) (115,164)
----------- -------- ------------ -------------- ------------
Balance -- December 31, 1994 ......... 1,105,000 111 615,113 (617,515) (2,291)
Issuance of shares ..................... 1,105,000 110 110
Issuance of shares under private
placement ............................. 262,091 26 524,156 524,182
Expenses of private placement .......... (100,349) (100,349)
Net loss for the year ended December 31, 1995 (651,167) (651,167)
----------- -------- ------------ -------------- ------------
Balance -- December 31, 1995 ......... 2,472,091 $247 $1,038,920 ($1,268,682) ($ 229,515)
Cancellation of shares of private placement
(net of expenses of $1,820) ........... (6,897) (1) (11,973) (11,974)
-------- ------------ -------------- ------------
Net loss for the three months ended March
31, 1996 (Unaudited) .................. (331,516) (331,516)
----------- -------- ------------ -------------- ------------
Balance -- March 31, 1996
(Unaudited) ..................... 2,465,194 $246 $1,026,947 ($1,600,198) ($ 573,005)
=========== ======== ============ ============== ============
</TABLE>
See notes to financial statements
F-5
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
November 17,
1988
Years Ended (Inception) to Three months ended
December 31, December 31, March 31,
----------------------------- ---------------- --------------------
1995
1994 1995 (Cumulative) 1995 1996
------------ ------------- ---------------- ----------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ............................................. ($ 115,164) ($ 651,167) ($ 1,268,682) ($ 7,376) ($331,516)
Adjustments to reconcile net loss to net cash used in
operating activities
Amortization of discount and debt issuance costs . 52,147 52,147 135,840
Depreciation and other amortization ............. 346 1,203 2,311
Increase (decrease) in cash flows from
Other current assets ......................... (9,715) (9,715) 2,507
Deposit ........................................ (17,920)
Other Assets ................................... (21,853)
Accrued expenses ............................. 1,948 408,547 412,735 1,435 (300,630)
---------- ------------- ---------------- ---------- ----------
NET CASH USED IN OPERATING
ACTIVITIES ................................. (113,216) (199,842) (812,312) (5,941) (531,261)
--------- ----------- ------------ ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities .......... 50,000 50,000 1,200,942
Investment in marketable securities .................. (1,400,852) (1,400,852) (513,609)
Increase in patents .................................. (11,773) (11,773) 10,000
Purchases of fixed assets ............................ (612) (39,933)
------------- --------------- ----------- ---------
NET CASH USED IN INVESTING
ACTIVITIES ................................. (1,362,625) (1,363,237) 637,400
------------- --------------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (refund) from private placement (net of expenses
of $358,389 and exchanges of notes payable of $125,000) 1,416,611 1,416,611 (50,000)
Proceeds from issuance of common stock ............... 94,224 110 615,334
Decrease in due to/from stockholder .................. 15,971 13,800
Proceeds from other notes payable .................... 175,000 175,000
Payments of organization costs ....................... (245)
------------ ------------- --------------- ----------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES .... 110,195 1,591,721 2,206,700 13,800 (50,000)
-------------------------------------------------------- ------------- --------------- ----------- ---------
INCREASE (DECREASE) IN CASH .................. (3,021) 29,254 31,151 7,859 56,139
CASH -- beginning ...................................... 4,918 1,897 1,897 31,151
------------ ------------- --------------- ----------- -----------
CASH -- ending ......................................... $ 1,897 $ 31,151 $ 31,151 $ 9,756 $87,290
============ ============= =============== =========== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes ........................... $ 812 $ 1,000 $ 3,744 -- $ 808
============ ============= =============== =========== ==========
Cash paid for interest ............................... -- $ 3,315 $ 3,315 -- $ 1,039
============ ============= =============== =========== =========
NONCASH TRANSACTIONS
In 1994, a loan payable was capitalized (Note 2).
</TABLE>
See notes to financial statements
F-6
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LINE OF BUSINESS
Imatec, Ltd. (Company) was incorporated on November 17, 1988 to develop,
market and license image reproduction and enhancement products. The Company
has been in the development stage since its inception.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
MARKETABLE SECURITIES
Marketable securities have been classified as available-for-sale and
recorded at fair value.
FIXED ASSETS
Office equipment was stated at cost and is being depreciated on the
straight-line method over the estimated useful lives of the assets of five to
seven years.
DEBT ISSUANCE COSTS AND DISCOUNTS
Debt issuance costs on the Bridge Notes (Note 2) have been capitalized and
are being amortized on the straight-line method over the term of the notes
payable.
Discounts on the Bridge Notes are being amortized on the interest method
over the term of the notes payable.
PATENTS
Patent costs incurred prior January 1, 1995 were charged to expense as
incurred as their realizability was uncertain and were included in research
and development expenses. Subsequently, patent costs were capitalized and are
being amortized over the lives of the patents.
RESEARCH AND DEVELOPMENT COSTS AND ROYALTY EXPENSES
Research and development costs and royalty expenses (Note 7) have been
charged to operations as incurred.
LOSS PER SHARE
Loss per share was computed based on the weighted average number of common
shares and common share equivalents outstanding during the year, as restated
for the stock split (Note 2). Warrants were not considered because they are
anti-dilutive. 1,105,000 shares issued in May 1995 have been treated as
outstanding for all periods in calculating loss per common share because such
shares were issued at prices below the proposed public offering price (Note
9)
Fully-dilutive loss per common share has not been presented because it was
anti-dilutive.
All shares and per share amounts have been retroactively restated to
reflect the reverse stock split, May 2, 1995, and the stock split, October
19, 1995.
2. CAPITALIZATION
ISSUANCE OF COMMON STOCK
On December 1, 1988, the Company issued 1,105,000 shares for $1,000. On
September 20, 1991, a stockholder contributed 82,875 shares to the Company
and the Company reissued 55,250 shares of common stock for $500,000 and
27,625 shares in exchange for assistance with raising equity. Also in 1991,
the stockholder gave 102,300 shares of common stock of the Company for
assistance with raising equity for the Company. The Company valued the 27,625
and 102,300 shares at $25,000 and $92,580, respectively, the values of the
consulting services and charged additional paid-in-capital.
F-7
<PAGE>
During 1994, a stockholder contributed 12,615 shares to the Company and
the Company reissued the shares for $114,224, including the capitalization of
a loan payable.
On May 30, 1995, the Company issued 1,105,000 shares of common stock in
exchange for $110.
REVERSE STOCK SPLIT
On May 2, 1995, the Company had a one-for-four reverse stock split. All
shares and per share amounts have been retroactively restated to reflect the
reverse stock split.
REINCORPORATION
On September 20, 1995, the Company reincorporated in Delaware, authorizing
20,000,000 shares of $.0001 par value common stock and 2,000,000 shares of
$.0001 par value preferred stock.
STOCK SPLIT
On October 19, 1995, the Company authorized a 22,100 for 1 stock split and
issued 2,210,000 shares of new common stock in exchange for 100 shares of old
common stock. All shares and per share amounts have been retroactively
restated to reflect the stock split.
PRIVATE PLACEMENT
On November 30, 1995 and April 12, 1996, the Company had closings under a
private placement. Under the private placement, the Company issued 10%
promissory notes in the aggregate principal amount of $1,900,000 and
$2,100,000 (Bridge Notes), 262,091 and 289,694 shares of common stock and
warrants to purchase 1,900,000 and 2,100,000 shares of common stock (Bridge
Warrants), respectively. The Company has allocated $2, per share, of the
proceeds of the private placement to the common stock, the value of the
shares at the dates of issuance.
In February, 1996, an investor in one unit of the first closing was
refunded $50,000, the shares and notes were canceled and then resold in the
second closing. The cancellation has been included net in the second closing
amounts.
The Company received net proceeds from the private placement of $1,517,834
and $1,811,635, respectively, after disbursements of:
<TABLE>
<CAPTION>
November 30 April 12
1995 1996
------------- ----------
<S> <C> <C>
Commission ....................... $190,000 $210,000
Non-accountable expense allowance . 57,000 63,000
Other expenses of placement agent . 10,166 15,365
Exchanges of notes payable ....... 125,000 50,000
------------- ----------
$382,166 $338,365
============= ==========
</TABLE>
In addition, the Company incurred additional expenses of $101,223. Total
expenses of the private placement have been allocated between the Bridge
Notes and common stock.
The Bridge Notes are payable upon the earlier of: (1) a public or other
private financing by the placement agent of $8,000,000, (2) any other public
or private placement of $4,500,000 or (3) 15 months from issuance.
Each Bridge Warrant is exercisable at $1, per warrant, commencing a year
from closing for a period of five years.
RESERVED SHARES
As of December 31, 1995 and March 31, 1996 (Unaudited), the Company has
reserved the following shares of common stock:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Bridge warrants ......... 4,050,000 4,050,000
Placement agent warrants . 4,000,000 4,000,000
Stock option plan ....... 500,000
----------- -----------
8,050,000 8,550,000
=========== ===========
</TABLE>
F-8
<PAGE>
3. MARKETABLE SECURITIES
As of December 31, 1995 and March 31, 1996 (Unaudited), the fair value of
marketable securities, which approximated unamortized cost, were as follows:
<TABLE>
<CAPTION>
1995 1996
----------
<S> <C> <C>
U.S. Treasury Bill ............... $ 494,800
U.S. Government Money Market Fund . 856,052 $663,519
------------ ----------
$1,350,852 $663,519
============ ==========
</TABLE>
4. OTHER NOTES PAYABLE
During August, September and October 1995, the Company borrowed, with
interest at 10 %, per annum, $175,000 from customers of the placement agent,
which were exchanged for units under the closings of the private placement
(Note 2).
5. INCOME TAXES
As of December 31, 1995 and 1994, the tax effects of timing differences
between financial statement and income tax reporting were as follows:
<TABLE>
<CAPTION>
December 31, March 31,
-------------------------- --------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Research and development expenses . $ 130,000 $ 130,000 $ 130,000 $130,000
Net operating loss carryforward .. 120,000 360,000 120,000 480,000
----------- ----------- ----------- -----------
250,000 490,000 250,000 610,000
----------- ----------- ----------- -----------
Valuation allowance .............. (250,000) (490,000) (250,000) 610,000
----------- ----------- ----------- -----------
-- -- -- --
=========== =========== =========== ===========
</TABLE>
As of December 31, 1995 and March 31, 1996 (Unaudited), the Company has
net operating loss carryforwards available to reduce future taxable income of
approximately $900,000, expiring through 2011 and $1,200,000, expiring
through 2012.
6. RELATED PARTY TRANSACTIONS
During 1995, the Company borrowed $21,152 from a stockholder/officer on
demand, without interest, and it was repaid in December 1995.
During the years ended December 31, 1994 and 1995 and the three months
ended March 31, 1996 (Unaudited), a director was paid attorney's fees of
$31,000, $1,000 and $10,406, respectively.
7. LICENSE AGREEMENT
On June 25, 1995, the Company was granted a license from a stockholder/
officer (President, Chief Executive Officer and Chairman of the Board) of the
Company to make, use, sell and otherwise exploit certain technologies under
patents, including future technologies. The Company is required to pay the
stockholder/officer a non-refundable advance royalty of $350,000, which was
paid in January 1996, and, commencing July 1, 1995, an annual royalty of
$140,000. If the stockholder/officer ceases to be employed by the Company,
the annual royalty increases to $250,000. The annual royalty shall increase
at the rate of 5%, per annum. The license agreement shall end when the last
patent expires.
8. EMPLOYMENT AGREEMENT
On July 1, 1995, the Company entered into an employment agreement with a
stockholder to be President, Chief Executive Officer and Chairman of the
Board of Directors expiring on the earlier of July 1, 2000, the Company being
no longer involved in the technology business or a bankruptcy, merger or
reorganization of the Company. Compensation under the agreement shall be
$60,000, per year, 5% annual increases and a bonus equal to 1% of annual
sales. In addition, the employee shall receive director's and officer's
insurance, an automobile lease up to $8,400, per year, disability insurance
for 60% of salary through age 65, Company paid disability of 40% of salary
for one year and a life insurance policy of $1,000,000.
F-9
<PAGE>
9. SUBSEQUENT EVENTS
EMPLOYMENT AGREEMENT (UNAUDITED)
Effective January 1, 1996, the Company entered into an employment
agreement with a vice president of marketing and sales expiring in one year.
The agreement provides for an annual compensation of $100,000, plus a
commission equal to 4% of revenues, as defined, in excess of $2,500,000.
LEASE
Effective February 1996, the Company entered into a noncancellable lease
for office space through January 1999. The lease requires minimum annual rent
ranging from $67,584 to $71,680 and additional rent for increases in real
estate taxes and operating expenses.
As of March 31, 1996 (Unaudited), the future minimum aggregate annual
payments under the lease were as follows:
<TABLE>
<CAPTION>
Year Ending
March 31,
-------------
<S> <C>
1997 $67,926
1998 69,976
1999 59,730
---------
$197,632
=========
</TABLE>
STOCK OPTION PLAN
In February, 1996, the Company adopted a nonqualified stock option plan
under which it may grant up to 500,000 shares of common stock. The Company
may not grant any options with a purchase price of less than fair market
value of the common stock as of the date of the grant. Through April 29,
1996, the Company had not granted any options under the Plan.
PROPOSED PUBLIC OFFERING (UNAUDITED)
The Company anticipates a public offering in July 1996 of 1,000,000 shares
of common stock, at $5, per share, 4,000,000 Class A redeemable warrants, at
$.25, per warrant, and 4,000,000 Class B redeemable warrants, at $1.00 per
warrant. Each warrantholder will be entitled to purchase one share of common
stock at $6.50, per share, and $5.50, per share, respectively, and will be
exercisable for periods of two years and five years, respectively, from the
date of the offering. The Class A and Class B warrants will be redeemable by
the Company, under certain circumstances, at $.10, per warrant, commencing
nine months and one year, respectively, from the date of offering. The
Company will also grant the underwriter an overallotment option for 45 days
from the date of the offering to purchase up to an additional 150,000 shares
of common stock, an additional 600,000 Class A warrants and 600,000 Class B
redeemable warrants.
The underwriter of the public offering will receive a discount of 10% and
a non-accountable expense allowance equal to 3% of the gross proceeds of the
public offering. The Company will also retain the underwriter as a financial
consultant for a period of two years for $48,000, payable upon closing of the
public offering. In addition, the Company has agreed to sell to the
underwriter, for nominal consideration, warrants to purchase, 100,000 shares
of common stock, 400,000 Class A redeemable warrants, and 400,000 Class B
redeemable warrants. The shares and warrants under the Underwriter's Warrants
will be exercisable at prices not yet determined for a period of five years
from the date the offering.
10. INTERIM FINANCIAL STATEMENT (UNAUDITED)
In the opinion of management, the interim Unaudited financial statements
as of March 31, 1995 and 1996, reflect all material adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of
the financial position, the results of operations and cash flows. Interim
results are not necessarily indicative of the results of the entire year.
F-10
<PAGE>
=============================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Underwriter.
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 information
contained herein is correct as of any date subsequent to the date hereof.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in
which the persons making such offer or solicitation are not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Prospectus Summary ................................................. 1
The Offering ...................................................... 3
Risk Factors ...................................................... 4
Use of Proceeds ................................................... 11
Dividend Policy ................................................... 11
Dilution .......................................................... 12
Capitalization .................................................... 13
Selected Financial Data ........................................... 14
Plan of Operations ................................................ 15
Business .......................................................... 17
Management ........................................................ 22
Principal Stockholders ............................................ 26
Selling Security Holders .......................................... 27
Certain Transactions .............................................. 35
Description of Securities ......................................... 35
Shares Available for Future Sale .................................. 35
Underwriting ...................................................... 37
Legal Matters ..................................................... 38
Experts ........................................................... 39
Change in Accountants ............................................. 39
Additional Information ............................................ 39
Index to Financial Statements ...................................... F-1
</TABLE>
Until _____, 1996, (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 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.
=============================================================================
<PAGE>
=============================================================================
IMATEC, LTD.
1,000,000 SHARES OF COMMON STOCK,
4,000,000 CLASS A REDEEMABLE WARRANTS
AND
4,000,000 CLASS B REDEEMABLE WARRANTS
------
PROSPECTUS
------
A.S. GOLDMEN & CO., INC.
------, 1996
=============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides for indemnification of
personal liability of the Directors of the Corporation to the fullest extent
permitted by paragraph "7" of Subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware.
Article VIII of the By-Laws of the Company ("By-Laws"), which is set forth
below in its entirety, provides for indemnification of officers, directors,
employees and agents substantially to the extent permitted under the Delaware
General Corporation Law.
Article VIII of the By-Laws provides as follows:
"ARTICLE VIII"
INDEMNIFICATION
The corporation shall indemnify, to the extent permitted by the General
Corporation Law of Delaware as amended from time to time, (a) each of its
present and former officers and directors, and (b) each of its present or
former officers, directors, agents or employees who are serving or have
served at the request of the corporation as an officer, director or partner
(or in any similar position) 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 in connection with any threatened, pending or completed
action, suit or proceeding, whether by or in the right of the corporation by
a third party or otherwise, to which such person is made a party or
threatened to be made a party by reason of such office in the corporation or
in another corporation, partnership, joint venture, trust or other
enterprise. Such indemnification shall inure to the benefit of the heirs,
executors and administrators of any indemnified person. To the extent
permitted by the General Corporation Law of Delaware, under general or
specific authority granted by the Board of Directors, (a) the corporation by
specific action of the Board of Directors may furnish such indemnification to
its agents and employees with respect to their activities on behalf of the
corporation; (b) the corporation by specific action of the Board of Directors
may furnish such indemnification to each present or former officer, director,
employee or agent of a constituent corporation absorbed in a consolidation or
merger with the corporation and to each officer, director, agent or employee
who is or was serving at the request of such constituent corporation as an
officer, director, agent or employee of another corporation, partnership,
joint venture, trust or other enterprise; and (c) the corporation may
purchase and maintain indemnification insurance on behalf of any of the
officers, directors, agents or employees whom it is required or permitted to
indemnify as provided in this Article.
ITEMS 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this Offering are as follows:
SEC filing fee ...................... $ 39,472.04
NASD filing fee ..................... 11,946.89
Accounting fees and expenses* ....... 50,000.00
Legal fees and expenses* ............ 150,000.00
Blue Sky fees and expenses* ......... 35,000.00
Printing and engraving* ............. 100,000.00
Transfer Agent's and Registrar fees* . 10,000.00
Miscellaneous expenses* ............. 103,581.07
------------
Total .......................... $500,000.00
- ------
* Estimated
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1994, the Company issued an aggregate of 12,615 shares of
Common Stock to two investors for aggregate gross proceeds of $114,244.00.
Such sale was made pursuant to Section 4(2) of the Securities Act.
In May 1995, the Company sold an aggregate of 1,105,000 shares of Common
Stock to four investors for aggregate gross proceeds of $110.50. Such sale
was made pursuant to Section 4(2) of the Securities Act.
In October 1995, the Company entered into a placement agent agreement with
the Underwriter, which was subsequently amended, to act as placement agent
with respect to a best efforts private placement for a minimum of $1,000,000
and a maximum of $4,000,000 of the Company's securities. On April 12, 1996,
the Company concluded the private placement pursuant to which it sold an
aggregate of 80 units for aggregate gross proceeds of $4,000,000. Each unit
consisted of (i) a $50,000 unsecured promissory note bearing interest at the
rate of 10% per annum, (ii) 6,897 shares of Common Stock, and (iii) 50,000
Common Stock purchase warrants exercisable at $1.00 per share. The private
placement was made pursuant to Section 4(2) of the Securities Act in
compliance with Rule 506 of Regulation D promulgated thereunder, and all of
the purchasers were accredited investors, and there was no general
solicitation or advertising with respect thereto.
<TABLE>
<CAPTION>
Item 27. Exhibits.
<S> <C>
* 1.1 Form of Underwriting Agreement by and between the Company and the Underwriter.
* 1.2 Form of Underwriter's Warrant Agreement, including form of Specimen Certificate
for Underwriter's Warrant.
*** 3.1 Certificate of Incorporation of the Company.
*** 3.2 By-Laws of the Company.
* 4.1 Form of Specimen certificate for shares of Common Stock.
* 4.2 Form of Redeemable Warrant Agreement by and between the Company and Continental
Stock Transfer & Trust Company, including a form of specimen certificate
for the Redeemable Warrants.
* 5 Opinion of Zukerman Gore & Brandeis, LLP.
*10.1 Form of Financial Advisory and Consulting Agreement by and between the Company
and the Underwriter.
***10.2 Employment Agreement by and between the Company and Dr. Hanoch Shalit.
**10.3 Form of Employment Agreement by and between the Company and Lawrence Kollender.
*10.4 License Agreement by and between the Company and Dr. Hanoch Shalit as amended.
*10.5 Form of Indemnification Agreement to be entered into with officers and directors.
***10.6 Lease for the Company's principal offices located at 150 E. 58th Street,
New York, NY 10155.
*10.7 Form of Stock Option Plan.
*16.1 Letter from Present, Cohen, Smallowitz & Glassman regarding change in certifying
accountants.
*24 Consent of Zukerman Gore & Brandeis, LLP contained in Exhibit 5.
*24.1 Consent of Most Horowitz & Company.
*24.2 Consent of Wyatt, Gerber, Burke & Badie, L.L.P.
</TABLE>
- ------
* Filed herewith.
** Previously filed as an exhibit to the Company's Registration Statement on
Form SB-2, Registration No. 333-3589, dated May 13, 1996.
*** Filed herewith and previously filed as an exhibit to the Company's
Registration Statement on Form SB-2, Registration No. 333-3589, dated May
13, 1996.
II-2
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned Registrant will provide to the Underwriter at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons
of the Registrant pursuant to the provisions referred to in Item 24 of this
Registration Statement 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, 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 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.
(c) The undersigned Registrant will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of a prospectus filed by the small business issuer under Rule 424(b)(1) or
(4) or 497(h) under the Securities Act as part of this Registration Statement
as of the time the Commission declared it effective.
(2) For any liability under the Securities Act, treat each post-effective
amendment that contains a form of prospectus as a new Registration Statement
for the securities offered in the Registration Statement, and that the
offering of the securities at that time as the initial bona fide offering of
those securities.
Undertakings Required by Regulation S-B, Item 512(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:
(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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
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 set forth 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 the 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.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and authorized
this Registration Statement to be signed on its behalf by the undersigned, in
the City of New York, State of New York on June 21, 1996.
IMATEC, LTD.
By: /s/ Hanoch Shalit
-------------------------------
Hanoch Shalit, President,
Chief Executive Officer,
Chairman of the Board of
Directors and Principal
Accounting Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
------------------------- --------------------------------------- ----------------
<S> <C> <C>
/s/ Dr. Hanoch Shalit
- ----------------------- President, Chief Executive Officer,
Dr. Hanoch Shalit Director and Principal Accounting Officer June 21, 1996
/s/ Steven Ai
- ------------------------ Director June 21, 1996
Steven Ai
/s/ Neal Factor
------------------------ Director June 21, 1996
Neal Factor
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
----------
<S> <C>
* 1.1 Form of Underwriting Agreement by and between the Company and the Underwriter.
* 1.2 Form of Underwriter's Warrant Agreement, including form of Specimen Certificate for Underwriter's Warrant.
*** 3.1 Certificate of Incorporation of the Company.
*** 3.2 By-Laws of the Company.
* 4.1 Form of Specimen certificate for shares of Common Stock.
* 4.2 Form of Redeemable Warrant Agreement by and between the Company and Continental Stock Transfer & Trust
Company, including a form of specimen certificate for the Redeemable Warrants.
* 5 Opinion of Zukerman Gore & Brandeis, LLP.
*10.1 Form of Financial Advisory and Consulting Agreement by and between the Company and the Underwriter.
***10.2 Employment Agreement by and between the Company and Dr. Hanoch Shalit.
**10.3 Form of Employment Agreement by and between the Company and Lawrence Kollender.
*10.4 License Agreement by and between the Company and Dr. Hanoch Shalit as amended.
*10.5 Form of Indemnification Agreement to be entered into with officers and directors.
***10.6 Lease for the Company's principal offices located at 150 E. 58th Street, New York, NY 10155.
*10.7 Form of Stock Option Plan.
*16.1 Letter from Present, Cohen, Smallowitz & Glassman regarding change in certifying accountants.
*24 Consent of Zukerman Gore & Brandeis, LLP contained in Exhibit 5.
*24.1 Consent of Most Horowitz & Company.
*24.2 Consent of Wyatt, Gerber, Burke & Badie, L.L.P.
</TABLE>
- ------
* Filed herewith.
** Previously filed as an exhibit to the Company's Registration Statement on
Form SB-2, Registration No. 333-3589, dated May 13, 1996.
*** Filed herewith and previously filed as an exhibit to the Company's
Registration Statement on Form SB-2, Registration No. 333-3589, dated May
13, 1996.
<PAGE>
EXHIBIT 1.1
1,000,000 Shares of Common Stock,
4,000,000 Class A Redeemable Warrants and
4,000,000 Class B Redeemable Warrants
IMATEC, LTD.
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 1996
A.S. GOLDMEN & CO., INC.
99 Wood Avenue South
Suite 902
Iselin, New Jersey 08830
Ladies and Gentlemen:
Imatec, Ltd., a Delaware corporation (the "Company"), confirms
its agreement with A.S. Goldmen & Co., Inc. (the "Underwriter"), with respect to
the sale by the Company and the purchase by the Underwriter of 1,000,000 shares
(the "Shares") of the Company's common stock, par value $.0001 per share (the
"Common Stock"), 4,000,000 redeemable warrants (the "Class A Redeemable
Warrants") and 4,000,000 Class B redeemable warrants (the "Class B Redeemable
Warrants), each exercisable to purchase one (1) additional share of Common
Stock. The Class A Redeemable Warrants and the Class B Redeemable Warrants are
collectively referred to as the "Redeemable Warrants." The Shares and Redeemable
Warrants will be separately tradeable upon issuance and are hereinafter referred
to as the "Firm Securities". Each Class A Redeemable Warrant is exercisable
commencing ________________, 1996 [the effective date of the Registration
Statement] until _____________, 1998 [24 months from the effective date of the
Registration Statement], unless previously redeemed by the Company, on thirty
(30) days written notice, at an initial exercise price equal to $6.50 per share,
subject to adjustment. With the consent of the Underwriter, the Class A
Redeemable Warrants may be redeemed by the Company at a redemption price of ten
cents ($.10) per Class A Redeemable Warrant at any time commencing
______________, 1997 [9 months after the effective date of the Registration
Statement] provided that the average closing bid price of the Common Stock
equals or exceeds $7.50 per share for any twenty (20) trading days within a
period of thirty (30) consecutive trading days ending on the fifth (5th) trading
day prior to the date of the notice of redemption. Each Class B Redeemable
Warrant is exercisable commencing ________________, 1996 [the effective date of
the Registration Statement] until _____________, 2001 [60 months from the
effective date of the Registration Statement], unless previously
<PAGE>
redeemed by the Company, on thirty (30) days written notice, at an initial
exercise price equal to $5.50 per share, subject to adjustment. With the consent
of the Underwriter, the Class B Redeemable Warrants may be redeemed by the
Company at a redemption price of ten cents ($.10) per Class B Redeemable Warrant
at any time commencing ______________, 1997 [12 months after the effective date
of the Registration Statement] provided that the average closing bid price of
the Common Stock equals or exceeds $9.00 per share for any twenty (20) trading
days within a period of thirty (30) consecutive trading days ending on the fifth
(5th) trading day prior to the date of the notice of redemption. Upon the
Underwriter's request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriter up to an additional 100,000
shares of Common Stock and/or up to an additional 400,000 Class A Redeemable
Warrants and/or up to an additional 400,000 Class B Redeemable Warrants for the
purpose of covering over-allotments, if any. Such 150,000 Shares and/or 600,000
Class A Redeemable Warrants and/or 600,000 Class B Redeemable Warrants are
hereinafter collectively referred to as the "Option Securities." The Company
also proposes to issue and sell to the Underwriter or its designees warrants
(the "Underwriter's Warrants"), pursuant to an underwriter's warrant agreement
(the "Underwriter's Warrant Agreement"), for the purchase of up to an additional
100,000 shares of Common Stock and/or up to an additional 400,000 Class A
Redeemable Warrants and/or up to an additional 400,000 Class B Redeemable
Warrants. The shares of Common Stock and the Redeemable Warrants issuable upon
exercise of the Underwriter's Warrants are hereinafter collectively referred to
as the "Underwriter's Securities." The shares of Common Stock issuable upon
exercise of the Redeemable Warrants (including the Redeemable Warrants issuable
upon exercise of the Underwriter's Warrants) are hereinafter referred to as the
"Warrant Shares." The Firm Securities, the Option Securities, the Underwriter's
Warrants, the Underwriter's Securities, and the Warrant Shares are hereinafter
collectively referred to as the "Securities" and are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants and agrees with, the Underwriter as of
the date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form SB-2 (Registration No. ________), including any related
preliminary prospectus or prospectuses (each a "Preliminary Prospectus"), for
the registration of the Securities, under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act. The Company will not file
any other amendment to such registration statement which the Underwriter shall
have objected to in writing after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time it becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein (including, but not
limited to, those documents or that information incorporated by reference
therein) and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A of the rules and
2
<PAGE>
regulations under the Act), is hereinafter called the "Registration Statement,"
and the form of prospectus in the form first filed with the Commission pursuant
to Rule 424(b) of the rules and regulations under the Act is hereinafter called
the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules
and regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each Preliminary Prospectus and the Registration
Statement, at the time of filing thereof, conformed with the requirements of the
Act and the Rules and Regulations, and none of the Preliminary Prospectus nor
the Registration Statement, at the time of filing thereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
this representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in the Preliminary Prospectus or the Registration Statement.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing
Date, if any, and during such longer period as the Prospectus may be required to
be delivered in connection with sales by the Underwriter or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; and, at and through such dates, neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto.
(d) The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company has been
duly organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly qualified
and licensed and in good standing as a foreign corporation in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations require such qualification or licensing. The Company has all
requisite power and authority (corporate and other), and has obtained any and
all necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as
3
<PAGE>
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and with all federal, state, local and
foreign laws, rules and regulations to which it is subject; and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company. The disclosure in the Registration
Statement concerning the effects of federal, state, local and foreign laws,
rules and regulations on the Company's business as currently conducted and as
contemplated are correct in all respects and do not omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Underwriter's Warrant Agreement and the Warrant Agreement (as defined in
Section 1(gg) of this Agreement) and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company on or
prior to the Closing Date and each Option Closing Date, if any, conform or, when
issued and paid for, will conform, in all respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holder of any security of the Company
or any similar contractual right granted by the Company. The Securities to be
sold by the Company hereunder and pursuant to the Underwriter's Warrant
Agreement and the Warrant Agreement are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof and
thereof, will be validly issued, fully paid and non-assessable and conform to
the descriptions thereof contained in the Prospectus; the holders thereof will
not be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Securities has
been duly and validly taken; and the certificates representing the Securities,
when delivered by the Company, will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof and the Underwriter's Warrant
Agreement of the Securities to be sold by the Company hereunder and thereunder
to the Underwriter, the Underwriter will acquire good and marketable title to
such Securities, free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
asserted against the Company or any affiliate (within the meaning of the Rules
and Regulations) of the Company.
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(f) The financial statements of the Company and the notes
thereto included in the Registration Statement, each Preliminary Prospectus and
the Prospectus fairly present the financial position, income, changes in
stockholders' equity and the results of operations of the Company at the
respective dates and for the respective periods to which they apply and the pro
forma financial information included in the Registration Statement and the
Prospectus presents fairly on a basis consistent with that of the audited
financial statements included therein, what the Company's pro forma
capitalization would have been for the respective dates to which they apply
after giving effect to the adjustments described therein. Such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Rules and Regulations, consistently applied throughout the
periods involved. There has been no adverse change or development involving a
material prospective change in the condition, financial or otherwise, or in the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company, whether or not
arising in the ordinary course of business, since the date of the financial
statements included in the Registration Statement and the Prospectus; and the
outstanding debt, the property, both tangible and intangible, and the business
of the Company conform in all respects to the descriptions thereof contained in
the Registration Statement and the Prospectus. The financial information set
forth in the Prospectus under the headings "Capitalization," "Selected Financial
Data" and "Plan of Operations" fairly presents, on the basis stated in the
Prospectus, the information set forth therein and such financial information has
been derived from or compiled on a basis consistent with that of the audited
financial statements included in the Prospectus.
(g) The Company (i) has paid all federal, state, local and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and amounts payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986, as amended (the "Code"), and has furnished all information returns
it is required to furnish pursuant to the Code, (ii) has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
any tax deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriter of the
Securities from the Company, (iii) the consummation by the Company of any of its
obligations under this Agreement or the Underwriter's Warrant Agreement, or (iv)
resales of the Securities in connection with the distribution contemplated
hereby.
(i) The Company maintains insurance policies, including, but
not limited to, general liability, property, personal and product liability
insurance, and surety bonds which insure the Company and its employees against
such losses and risks generally insured against by comparable businesses. The
Company (i) has not failed to give notice or present any insurance claim with
respect to any insurable matter under the appropriate insurance policy or surety
bond in a due and timely manner, (ii) does not have any disputes or claims
against any underwriter of such insurance policies or surety bonds, nor has the
Company failed to pay any premiums due and payable thereunder, or (iii) has not
failed to comply with all conditions contained in such insurance policies and
surety bonds. There are no facts or circumstances
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<PAGE>
under any such insurance policy or surety bond which would relieve any insurer
of its obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those pertaining to environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
which (i) questions the validity of the capital stock of the Company, this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement (as defined in Section 1(ee) of this Agreement) or of any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or
the Consulting Agreement, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized in all respects), or (iii)
might materially and adversely affect the condition, financial or otherwise, or
the earnings, business affairs, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this Agreement,
the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement and to consummate the transactions provided for in such agreements;
and each of this Agreement, the Underwriter's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement have each been duty and properly
authorized, executed and delivered by the Company. Each of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). None of the
Company's issue and sale of the Securities, execution or delivery of this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement and the Prospectus and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company,
(ii) any license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit agreement or
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which it
is or may be bound or to which its properties or assets (tangible or intangible)
are or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any
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<PAGE>
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any arbitrator, court, regulatory body, administrative agency,
government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, this Agreement, the Underwriter's Warrant Agreement and the Warrant
Agreement, the performance of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement and the
transactions contemplated hereby and thereby, except such as have been obtained
under the Act, state securities laws and the rules of the National Association
of Securities Dealers, Inc. (the "NASD") in connection with the Underwriter's
purchase and distribution of the Securities.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company, and
constitute legal, valid and binding agreements of the Company, enforceable
against the Company in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form SB-2; and there are no agreements, contracts or
other documents which are required by the Act to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required; and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of any class of its capital stock; and,
subsequent to such dates, and except as may otherwise be disclosed in the
Prospectus, there has not been any change in the capital stock, debt (long or
short term) or liabilities of the Company or any material change in the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
lease, deed of trust, voting trust agreement, shareholders' agreement, note,
loan or credit agreement or any other agreement
7
<PAGE>
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
is or may be bound or to which the property or assets (tangible or intangible)
of the Company is or may be subject.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and the Company is in
compliance with all federal, state, local and foreign laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company by the United States Department of Labor or any other governmental
agency responsible for the enforcement of any federal, state, local or foreign
laws, rules and regulations relating to employment. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company, or any
predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists or is imminent.
(q) The Company does not maintain, sponsor or contribute to
any program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan" or a "multiemployer plan," as such terms are
defined in Sections 3(2), 3(l) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("FMSA Plans"). The
Company does not maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code which could
subject the Company to any tax penalty on prohibited transactions and which has
not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multiemployer plan."
(r) Neither the Company, nor any of its employees, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations),
has taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act or otherwise, the stabilization or manipulation of the price of any
security of the Company, whether to facilitate the sale or resale of the
Securities or otherwise.
(s) None of the trademarks, trade names, service marks,
service names, copyrights, patents and patent applications, and none of the
licenses and rights to the foregoing, presently owned or held by the Company are
in dispute or are in conflict with the right of any other person or entity. The
Company (i) owns or has the right to use, free and clear of all liens,
8
<PAGE>
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, all trademarks, trade names,
service marks, service names, copyrights, patents and patent applications, and
licenses and rights with respect to the foregoing and all technology, used in
the conduct of its business as now conducted or proposed to be conducted without
infringing upon or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect to any of the
foregoing and (ii) is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner or licensee of,
or other claimant to, any trademark, trade name, service mark, service name,
copyright, patent or patent application. There is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or circumstances that
may give rise to the same) against the Company which challenges the exclusive
rights of the Company with respect to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications or licenses or
rights to the foregoing used in the conduct of its business, or which challenge
the right of the Company to use any technology presently used or contemplated to
be used in the conduct of its business.
(t) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
technology, designs, processes, works of authorship, computer programs and
technical data and information that are material to the development,
manufacture, operation and sale of all products and services sold or proposed to
be sold by the Company, free and clear of and without violating any right, lien,
or claim of others, including, without limitation, former employers of its
employees; provided, however, that the possibility exists that other persons or
entities, completely independent of the Company or its employees or agents,
could have developed trade secrets or items of technical information similar or
identical to those of the Company. The Company is not aware of any such
development of similar or identical trade secrets or technical information by
others.
(u) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, other than liens for taxes not
yet due and payable.
(v) Most Horowitz & Company, LLP, whose report is filed with
the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(w) Each holder of any any securities of the Company and each
director and officer of the Company has executed an agreement pursuant to which
he, she or it has agreed, for a period of eighteen (18) months following the
effective date of the Registration Statement, not to, directly or indirectly,
offer, offer to sell, sell, grant an option for the purchase or sale of,
transfer, assign, pledge, hypothecate or otherwise encumber (whether pursuant to
Rule 144 of the Rules and Regulations or otherwise) any securities issued or
issuable by the Company, whether or not owned by or registered in the name of
such persons, or dispose of any interest
9
<PAGE>
therein, without the prior written consent of the Company and the Underwriter
(collectively, the "Lock-Up Agreements"); provided, however, that the foregoing
restriction does not apply to the holders set forth on Schedule 1(w) attached
hereto. The Company will cause its transfer agent to mark an appropriate legend
on the face of stock certificates representing all of such securities and to
place "stop transfer" orders on the Company's stock ledgers. A list of those
persons and entities who have signed Lock-Up Agreements is also set forth in
Schedule 1(w).
(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriter's compensation, as determined by the NASD,
(y) The Securities have been approved for quotation on The
Nasdaq SmallCap Market ("Nasdaq").
(z) Neither the Company nor any of its directors, officers,
stockholders, employees, agents or any other person acting on behalf of the
Company has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or any official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any other person who was, is or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (i) might subject the
Company or any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (ii) if not
given in the past, might have had a material and adverse effect on the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company, or (iii) if not continued in the future, might
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(aa) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, and no affiliate or associate (as these
terms are defined in the Rules and Regulations) of any of the foregoing persons
or entities, has or has had, either directly or indirectly, (i) an interest in
any person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company is
a party or by which the Company may be bound. Except as set forth in the
Prospectus under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company and
any officer,
10
<PAGE>
director or any person listed in the "Principal Stockholders" section of the
Prospectus. or any affiliate or associate of any of the foregoing persons or
entities.
(bb) The minute books of the Company have been made available
to the Underwriter, contain a complete summary of all meetings and actions of
the directors and stockholders of the Company since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(cc) Except and to the extent described in the Prospectus, no
holder of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company has the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement. No person or entity holds any anti-dilution
rights with respect to any securities of the Company.
(dd) The Company has (i) entered into an employment agreement
with Dr. Hanoch Shalit in the form filed as Exhibit ___ to the Registration
Statement, and (ii) purchased key-man life insurance on the life of Dr. Hanoch
Shalit in the amount of $1,000,000, which policy names the Company as the sole
beneficiary thereof.
(ee) The Company has entered into a financial advisory and
consulting agreement, substantially in the form filed as Exhibit ___ to the
Registration Statement (the "Consulting Agreement") with the Underwriter. The
Consulting Agreement has been duly and validly authorized by the Company and,
assuming due execution by the parties thereto other than the Company,
constitutes a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting the enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as obligations to indemnify or contribute to
losses may be limited by applicable law).
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to Underwriter's Counsel (as defined in Section
4(d) herein), shall be deemed a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
(gg) The Company has entered into a warrant agreement,
substantially in the form filed as Exhibit ___ to the Registration Statement
(the "Warrant Agreement"), with Continental Stock Transfer & Trust Company, in
form and substance satisfactory to the Underwriter, with respect to the
Redeemable Warrants which provides, among other things, for the payment of
commissions contemplated by Section 4(y) hereof. The Warrant Agreement has been
duly and validly authorized by the Company and, assuming due execution by the
parties thereto other than the Company, constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance with its
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights
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<PAGE>
and the application of equitable principles in any action, legal or equitable,
and except as obligations to indemnify or contribute to losses may be limited by
applicable law).
(hh) Each of the 4,000,000 warrants issued by the Company in
its private placement which closed on April 12, 1996 has been automatically
converted into a Class A Redeemable Warrant, without any action by the holders
thereof, and all of such Class A Redeemable Warrants, as converted (and the
shares of Common Stock underlying such Class A Redeemable Warrants, as
converted), have been registered in the Registration Statement.
(ii) The Company has filed a Form 8-A with the Commission
providing for the registration under the Exchange Act of the Securities and such
Form 8-A has been declared effective by the Commission.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter, and the Underwriter
agrees to purchase from the Company, the Firm Securities at a price equal to
$____ per share of Common Stock [90% of the initial public offering price],
$____ per Class A Redeemable Warrant [90% of the initial public offering price]
and $____ per Class B Redeemable Warrant [90% of the initial public offering
price].
(b) In addition, on the basis of the representations,
warranties, covenants and agreement, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase all or any part of the Option Securities at a price
equal to $________ per share of Common Stock [90% of the initial public offering
price], $________ per Class A Redeemable Warrant [90% of the initial public
offering price] and $________ per Class B Redeemable Warrant [90% of the initial
public offering price]. The option granted hereby will expire forty five (45)
days after (i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A under the Rules and Regulations, or
(ii) the date of this Agreement if the Company has elected to rely upon Rule
430A under the Rules and Regulations, and may be exercised in whole or in part
from time to time only for the purpose of covering over-allotments which may be
made in connection with the offering and distribution of the Firm Securities
upon notice by the Underwriter to the Company setting forth the number of Option
Securities as to which the Underwriter is then exercising the option and the
time and date of payment and delivery for any such Option Securities. Any such
time and date of delivery (an "Option Closing Date") shall be determined by the
Underwriter, but shall not be later than seven (7) full business days after the
exercise of said option, nor in any event prior to the Closing Date, unless
otherwise agreed upon by the Underwriter and the Company. Nothing herein
contained shall obligate the Underwriter to exercise the option granted hereby.
No Option Securities shall be delivered unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Underwriter at 99 Wood Avenue South, Suite
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902, Iselin, New Jersey 08830, or at such other place as shall be agreed upon by
the Underwriter and the Company. Such delivery and payment shall be made at
10:00 a.m. (New York City time) on , 1996 or at such other time and date as
shall be agreed upon by the Underwriter and the Company but not less than three
(3) nor more than seven (7) full business days after the effective date of the
Registration Statement (such time and date of payment and delivery being herein
called the "Closing Date"). In addition, in the event that any or all of the
Option Securities are purchased by the Underwriter, payment of the purchase
price for, and delivery of certificates for, such Option Securities shall be
made at the above mentioned office of the Underwriter or at such other place as
shall be agreed upon by the Underwriter and the Company. Delivery of the
certificates for the Firm Securities and the Option Securities, if any, shall be
made to the Underwriter against payment by the Underwriter of the purchase price
for the Firm Securities and the Option Securities, if any, to the order of the
Company by New York Clearing House funds. Certificates for the Firm Securities
and the Option Securities, if any, shall be in definitive, fully registered
form, shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriter may request in writing at least two
(2) business days prior to the Closing Date or the relevant Option Closing Date,
as the case may be. The certificates for the Firm Securities and the Option
Securities, if any, shall be made available to the Underwriter at such offices
or such other place as the Underwriter may designate for inspection, checking
and packaging no later than 9:30 a.m. on the last business day prior to the
Closing Date or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriter or its designees the Underwriter's Warrants for an aggregate
purchase price of twenty dollars ($20.00), which warrants shall entitle the
holders thereof to purchase an aggregate of an additional 100,000 shares of
Common Stock and/or an additional 400,000 Class A Redeemable Warrants and/or
400,000 Class B Redeemable Warrants . The Underwriter's Warrants shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at a price equaling one hundred and
twenty percent (120%) of the initial public offering price of the shares of
Common Stock and the Redeemable Warrants. The Underwriter's Warrant Agreement
and the form of the certificates for the Underwriter's Warrant shall be
substantially in the form filed as Exhibit ___ to the Registration Statement.
Payment for the Underwriter's Warrants shall be made on the Closing Date.
3. Public Offering of the shares of Common Stock and the
Redeemable Warrants. As soon after the Registration Statement becomes effective
as the Underwriter deems advisable, the Underwriter shall make a public offering
of the Firm Securities and such of the Option Securities as the Underwriter may
determine (other than to residents of or in any jurisdiction in which
qualification of the shares of Common Stock and the Redeemable Warrants is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Underwriter may from time to time increase or
decrease the public offering price after distribution of the shares of Common
Stock and the Redeemable Warrants has been completed to such extent as the
Underwriter, in its sole discretion, deems advisable. The Underwriter may enter
into one or more agreements as the Underwriter, in its sole discretion, deems
advisable with one or more broker-dealers who shall act as dealers in connection
with such public offering.
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4. Covenants and Agreements of the Company. The Company
covenants and agrees with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or the Exchange Act before termination of the offering of the
Securities to the public by the Underwriter of which the Underwriter shall not
previously have been advised and furnished with a copy, or to which the
Underwriter shall have objected or which is not in compliance with the Act, the
Exchange Act and the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the same in
writing, (i) when the Registration Statement, as amended, becomes effective,
when any post-effective amendment to the Registration Statement becomes
effective and, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding the outcome of which may
result in the suspension of the effectiveness of the Registration Statement or
any order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution of any
proceedings for that purpose, (iii) of the issuance by the Commission or by any
state securities commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission, and (v) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If the
Commission or any state securities regulatory authority shall enter a stop order
or suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) with the Commission, or transmit the
Prospectus by a means reasonably calculated to result in filing the same with
the Commission, pursuant to Rule 424(b)(1) of the Rules and Regulations (or, if
applicable and if consented to by the Underwriter, pursuant to Rule 424(b)(4) of
the Rules and Regulations) within the time period specified in Rule 424(b)(1)
(or, if applicable and if consented to by the Underwriter, Rule 424(b)(4)).
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
in connection with the offering of any of the Securities which differs from the
corresponding prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) of the Rules and Regulations), and will
furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement
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to which the Underwriter or Orrick, Herrington & Sutcliffe, its counsel
("Underwriter's Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriter may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution contemplated hereby, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, the Exchange Act and the Rules
and Regulations so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the opinion of counsel
for the Company or Underwriter's Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading, or if it is necessary at any time to amend or supplement the
prospectus to comply with the Act, the Company will notify the Underwriter
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be satisfactory to Underwriter's Counsel, and the Company will
furnish to the Underwriter copies of such amendment or supplement as soon as
available and in such quantities as the Underwriter may request.
(g) As soon as practicable, but in any event not later than
forty five (45) days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (ninety (90) days in the event that
the end of such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the Underwriter,
an earnings statement which will be in the detail required by, and will
otherwise comply with, the provisions of Section 11(a) of the Act and Rule
158(a) of the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least twelve (12) consecutive
months after the effective date of the Registration Statement.
(h) During a period of seven years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements
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audited by independent public accountants) and unaudited quarterly reports of
earnings and will deliver to the Underwriter:
i) concurrently with furnishing such quarterly reports
to its stockholders statements of income of the Company for
such quarter in the form furnished to the Company's
stockholder and certified by the Company's principal financial
or accounting officer;
ii) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end
of the preceding fiscal year, together with statements of
operations, stockholders' equity and cash flows of the Company
for such fiscal year, accompanied by a copy of the report
thereon of the Company's independent certified public
accountants;
iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the NASD or any securities exchange;
v) every press release and every material news item or
article of interest to the financial community in respect of
the Company or its affairs which was released or prepared by
or on behalf of the Company; and
vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its
business which the Underwriter may request.
During such seven-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer and warrant agent
and, if necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for the Common
Stock and the Redeemable Warrants.
(j) The Company will furnish to the Underwriter, without
charge and at such place as the Underwriter may designate, copies of each
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (one of which will be signed and will include
all financial statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Underwriter may request.
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(k) On or before the effective date of the Registration
Statement, the Company shall provide the Underwriter with originally-executed
copies of duly executed, legally binding and enforceable Lock-Up Agreements
which are in form and substance satisfactory to the Underwriter. On or before
the Closing Date, the Company shall deliver instructions to its transfer agent
authorizing such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-Up Agreements and
to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company agrees that, for a period of thirty six (36)
months commencing with the effective date of the Registration Statement, and
except as contemplated by this Agreement, it will not, without the prior written
consent of the Underwriter, issue, sell, contract or offer to sell, grant an
option for the purchase or sale of, assign, transfer, pledge, distribute or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
option, right or warrant with respect to any shares of Common Stock or any type
of capital stock having voting or dividend rights on a parity with or superior
to the Common Stock, except for options to purchase up to an aggregate of
500,000 shares of Common Stock which have been or may be granted pursuant to the
Company's stock option plan.
(m) Neither the Company nor any of its officers, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to stabilize or
manipulate the price of any securities of the Company, or which might in the
future reasonably be expected to cause or result in the stabilization or
manipulation of the price of any such securities.
(n) The Company shall apply the net proceeds from the sale of
the Securities offered to the public in the manner set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
(o) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, any Form SR
required by Rule 463 under the Act) from time to time under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents will comply as to form and substance with the applicable requirements
under the Act, the Exchange Act and the Rules and Regulations.
(p) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date hereof, the Closing Date or the relevant Option Closing
Date, as the case may be) which have been read by the Company's independent
public accountants, as stated in their letters to be furnished pursuant to
Section 6(i) hereof.
(q) The Company shall cause the Securities to be quoted on
Nasdaq and, for a period of seven (7) years from the date hereof, use its best
efforts to maintain the Nasdaq quotation of the Securities to the extent
outstanding.
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(r) For a period of five (5) years from the Closing Date, the
Company shall furnish or cause to be furnished to the Underwriter and at the
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Common Stock and the Redeemable Warrants and (ii) a list of holders of all of
the Company's securities.
(s) For a period of five (5) years from the Closing Date, the
Company shall, at the Company's sole expense, (i) promptly provide the
Underwriter, upon any and all requests of the Underwriter, with a "blue sky
trading survey" for secondary sales of the Company's securities, prepared by
counsel to the Company, and (ii) take all necessary and appropriate actions to
further qualify the Company's securities in all jurisdictions of the United
States in order to permit secondary sales of such securities pursuant to the
"blue sky" laws of those jurisdictions, provided that such jurisdictions do not
require the Company to qualify as a foreign corporation.
(t) As soon as practicable, but in no event more than five (5)
business days before the effective date of the Registration Statement, the
Company agrees to file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities. As soon as practicable,
but in no event more than thirty (30) days after the effective date of the
Registration Statement, the Company agrees to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Moody's OTC Manual and to continue such inclusion for a period of not less than
seven (7) years.
(u) Without the prior written consent of the Underwriter, the
Company hereby agrees that it will not, for a period of thirty six (36) months
from the effective date of the Registration Statement, (i) adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan or arrangement permitting the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right (x) at an exercise price that is less than the greater of the initial
public offering price of the shares of Common Stock set forth herein and the
fair market value per share of Common Stock on the date of grant or sale or (y)
to any of its executive officers or directors or to any holder of five percent
(5%) or more of the Common Stock or any holder of five percent (5%) or more of
the Common Stock as the result of the exercise or conversion of equivalent
securities, including, but not limited to options, warrants or other contract
rights and securities convertible, directly or indirectly, into shares of Common
Stock (it being acknowledged that clause (y) does not apply to options to
purchase up to an aggregate of five hundred thousand (500,000) shares of Common
Stock which have been or may be granted pursuant to the Company's stock option
plan); (ii) permit the maximum number of shares of Common Stock or other
securities of the Company purchasable at any time pursuant to options, warrants
or other contract rights to exceed five hundred thousand (500,000) shares of
Common Stock; (iii) permit the payment for such securities with any form of
consideration other than cash; or (iv) permit the existence of stock
appreciation rights, phantom options or similar arrangements.
(v) Until the completion of the distribution of the Firm
Securities and, if applicable, the Option Securities to the public, the Company
shall not, without the prior written consent of the Underwriter, issue, directly
or indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the
18
<PAGE>
offering contemplated hereby, other than trade releases issued in the ordinary
course of the Company's business consistent with past practices with respect to
the Company's operations.
(w) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Underwriter's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Underwriter's Securities.
(x) For a period of five (5) years after the effective date of
the Registration Statement, the Company shall cause one (1) individual selected
by the Underwriter to be elected to the board of directors of the Company, if
requested by the Underwriter. In the event that the Underwriter shall not have
designated such individual at the time of any meeting of the Company's board of
directors or in the event that such individual has not been elected or is
unavailable to serve, the Company shall notify the Underwriter of each meeting
of its board of directors and, in such event, an individual selected by the
Underwriter shall be permitted to attend all meetings of the Company's board of
directors as a non-voting advisor and to receive all notices and other
correspondence and communications sent by the Company to the members of its
board of directors. Such board member or non-voting advisor shall receive no
more or less compensation than is paid to other non-officer directors of the
Company for attendance at meetings of the Company's board of directors and such
board member or non-voting advisor shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings, including, but not
limited to, food, lodging and transportation. The Company hereby agrees to
indemnify and hold such director or non-voting advisor harmless, to the maximum
extent permitted by law, against any and all actions, suits, proceedings,
inquiries, arbitrations, investigations, litigation, governmental or other
proceedings, domestic or foreign, and awards and judgments arising out of such
individual's service as a director or non-voting advisor and, in the event that
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, and/or in the event that the Company has
entered into an indemnification agreement with any of its officers or directors,
the Company agrees to include such director or non-voting advisor as an insured
under such insurance policy and/or to enter into an indemnification agreement
with such director or non-voting advisor which is at least as favorable to such
individual as any indemnification agreement that the Company has entered into
with any of its officers or directors. The rights and benefits of such
indemnification and the benefits of such insurance shall, to the maximum extent
possible, extend to the Underwriter insofar as it may be or may be alleged to be
responsible for such director or non-voting advisor. The Company agrees to
provide its outside directors with compensation as deemed appropriate and
customary for similar companies.
(y) Commencing nine (9) months from the date hereof, the
Company shall pay the Underwriter a commission equal to four percent (4%) of the
exercise price of the Class A Redeemable Warrants, payable upon exercise thereof
on the terms set forth in the Warrant Agreement; and Commencing one (1) year
from the date hereof, the Company shall pay the Underwriter a commission equal
to four percent (4%) of the exercise price of the Class B Redeemable Warrants,
payable upon exercise thereof on the terms set forth in the Warrant Agreement.
The Company will not solicit the exercise of the Redeemable Warrants other than
through the Underwriter.
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<PAGE>
(z) For a period of twenty four (24) months after the
effective date of the Registration Statement, the Company shall not restate,
amend or alter any term of any written employment, consulting or similar
agreement entered into between the Company and any officer, director or key
employee as of the effective date of the Registration Statement in a manner
which is more favorable to such officer, director or key employee, without the
prior written consent of the Underwriter. For a period of twenty four (24)
months from the effective date of the Registration Statement, neither the
Company nor any future subsidiary shall enter into an employment, consulting or
similar agreement with any individual with whom the Company has entered into an
employment, consulting or similar agreement as of the effective date of the
Registration Statement, without the prior written consent of the Underwriter.
(aa) For a period of five (5) years from the effective date of
the Registration Statement, the Company shall obtain and maintain such insurance
policies, including, but not limited to, general liability and property
insurance, and surety bonds which will insure or protect the Company and its
employees against such losses and risks generally insured or protected against
by comparable businesses.
(bb) For a period of five (5) years from the date hereof, the
Company will retain Most Horowitz & Company, LLP (or another accounting firm
acceptable to the Underwriter) as its independent certified public accountants
and, during such period, the Company will promptly submit to the Underwriter
copies of all accountant's management reports and similar correspondence between
the Company's accountants and the Company.
(cc) For a period of five (5) years from the effective date of
the Registration Statement, the Underwriter shall have a preferential right, on
the terms and subject to the conditions set forth in this Section 4(cc), to
purchase for its account, or to sell for the account of the Company, or of any
future subsidiaries thereof, or of any affiliates (within the meaning of the
Rules and Regulations) of the Company or any future subsidiaries thereof, any
securities issued or to be issued by the Company, or any future subsidiaries
thereof, with respect to which the Company, or any future subsidiaries thereof,
or any affiliates (as such term is defined in the Rules and Regulations) of the
Company or any future subsidiaries thereof, may seek a sale of such securities
and the Company will consult, and will cause any such future subsidiaries and
any such affiliates to consult, with the Underwriter with regard to any such
offering or placement and will offer, and will cause any of such future
subsidiaries and any of such affiliates to offer, to the Underwriter the
opportunity, on terms not more favorable to the Company, any such subsidiary or
any such affiliate than they can secure elsewhere, to purchase or sell any such
securities. If the Underwriter fails to accept in writing such proposal made by
the Company, any such subsidiaries or any such affiliates within thirty (30)
business days after receipt of a notice containing such proposal, then the
Underwriter shall have no further claim or right with respect to the proposal
contained in such notice. If, thereafter, such proposal is modified, the Company
shall again consult, and will cause any such subsidiaries or affiliates to
consult, with the Underwriter in connection with such modification and such
persons and entities shall in all respects have the same obligations and adopt
the same procedures with respect to such proposal as are provided hereinabove
with respect to the original, except that the thirty (30) business day period
provided hereinabove shall instead be fifteen (15) business days.
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5. Payment of Expenses.
(a) The Company hereby agrees to pay (such payment to be
made, at the discretion of the Underwriter, on the Closing Date and any Option
Closing Date (to the extent not paid on the Closing Date or a previous Option
Closing Date)) all expenses and fees (other than fees of Underwriter's Counsel)
incident to the performance of the obligations of the Company under this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement, including, without limitation, (i) the fees and expenses
of accountants and counsel for the Company, (ii) all costs and expenses incurred
in connection with the preparation, duplication, printing, (including mailing
and handling charges) filing, delivery and mailing (including the payment of
postage, overnight delivery or courier charges with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing (including the payment of postage, overnight
delivery or courier charges with respect thereto) and delivery of this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement, the
Consulting Agreement and agreements with selected dealers, and related
documents, including the cost of all copies thereof and of each Preliminary
Prospectus and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriter and such dealers as the Underwriter may
request, in such quantities as the Underwriter may request, (iii) the printing,
engraving, issuance and delivery of the Securities, (iv) the qualification of
the Securities under state or foreign securities or "blue sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) advertising costs and expenses, including, but not limited to costs and
expenses in connection with "road shows," information meetings and
presentations, bound volumes and prospectus memorabilia and "tombstone"
advertisement expenses, (vi) costs and expenses in connection with due diligence
investigations, including, but not limited to, the fees of any independent
counsel or consultants, (vii) fees and expenses of a transfer and warrant agent
and registrar for the Securities, (viii) applications for assignments of a
rating of the Securities by qualified rating agencies, (ix) the fees payable to
the Commission and the NASD, and (x) the fees and expenses incurred in
connection with the listing of the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 10(a) or Section 11 hereof,
the Company shall reimburse and indemnify the Underwriter for all of its actual
out-of-pocket expenses, including the fees and disbursements of Underwriter's
Counsel, less any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to Section 5(a) hereof, it will pay to the Underwriter
on the Closing Date by certified or bank cashier's check, or, at the election of
the Underwriter, by deduction from the proceeds of the offering of the Firm
Securities, a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities,
twenty five thousand dollars ($25,000) of which has been paid to date by the
Company. In the event the Underwriter elects to exercise the overallotment
option described
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in Section 2(b) hereof, the Company further agrees to pay to the Underwriter on
each Option Closing Date, by certified or bank cashier's check, or, at the
Underwriter's election, by deduction from the proceeds of the Option Securities
purchased on such Option Closing Date, a non-accountable expense allowance equal
to three percent (3%) of the gross proceeds received by the Company from the
sale of such Option Securities.
6. Conditions of the Underwriter's Obligations. The
obligations of the Underwriter hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date and each Option Closing
Date, as the case may be; the accuracy on and as of the Closing Date and each
Option Closing Date, if any, of the statements of officers of the Company made
pursuant to the provisions hereof; the performance by the Company on and as of
the Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder; and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 p.m., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Underwriter, and,
at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriter's Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the shares of
Common Stock and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period, and prior to the Closing Date
the Company shall have provided evidence satisfactory to the Underwriter of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's reasonable opinion, is material,
or omits to state a fact which, in the Underwriter's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances in which they were made not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Underwriter's reasonable opinion, is
material, or omits to state a fact which, in the Underwriter's reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received from Underwriter's Counsel such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and such
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other related matters as the Underwriter may request and Underwriter's Counsel
shall have received such papers and information as they may request in order to
enable them to pass upon such matters.
(d) At the time this Agreement is executed, the Underwriter
shall have received the favorable opinion of Zukerman, Gore & Brandeis, LLP,
counsel to the Company, dated the Closing Date, addressed to the Underwriter, in
form and substance satisfactory to Underwriter's Counsel, to the effect that:
i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (B) is duly
qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) has all
requisite power and authority (corporate and other) and has
obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and
from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus; to such counsel's knowledge, the Company is and
has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates,
franchises and permits obtained by it from governmental or
regulatory officials and agencies and all federal, state,
local and foreign laws, rules and regulations to which it is
subject; and, to such counsel's knowledge, the Company has not
received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order,
license, certificate, franchise or permit which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, business
affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company.
The disclosure in the Registration Statement concerning the
effects of federal, state, local and foreign laws, rules and
regulations on the Company's business as currently conducted
and as contemplated are correct in all material respects and
do not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;
ii) the Company does not own an interest in any
corporation, partnership, trust, joint venture, or other
business entity;
iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus
under "Capitalization" and the Company is not a party to or
bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, the
Underwriter's Warrant
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Agreement and the Warrant Agreement and as described in the
Prospectus. The Securities and all other securities issued or
issuable by the Company conform, or when issued and paid for,
will conform, in all respects to the descriptions thereof
contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of
rescission with respect thereto and are not subject to
personal liability by reason of being such holders; and none
of such securities were issued in violation, of the preemptive
rights of any holders of any security of the Company or any
similar contractual right granted by the Company. The
Securities to be sold by the Company hereunder and under the
Underwriter's Warrant Agreement and the Warrant Agreement are
not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms
hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the descriptions thereof
contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate
action required to be taken for the authorization, issue and
sale of the Securities has been duly and validly taken; and
the certificates representing the Securities are in due and
proper form. The Underwriter's Warrants constitute valid and
binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement of
the Securities to be sold by the Company hereunder and
thereunder, the Underwriter will acquire good and marketable
title to such Securities, free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever asserted against
the Company or any affiliate (within the meaning of the Rules
and Regulations) of the Company. No transfer tax is payable by
or on behalf of the Underwriter in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by
the Underwriter of the Securities from the Company, (C) the
consummation by the Company of any of its obligations under
this Agreement, the Underwriter's Warrant Agreement or the
Warrant Agreement, or (D) resales of the Securities in
connection with the distribution contemplated hereby;
iv) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has
been timely made in the appropriate form under Rule 430A, and
no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement or the Prospectus or
any part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending, threatened
or contemplated under the Act;
v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments
or supplements thereto (other than the
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financial statements and schedules and other financial and
statistical data included therein, as to which no opinion need
be rendered) comply as to form in all material respects with
the requirements of the Act and the Rules and Regulations;
vi) to such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act
to be described in the Registration Statement and the
Prospectus and filed as exhibits to the Registration Statement
(or required to be filed under the Exchange Act if upon such
filing they would be incorporated, in whole or in part, by
reference therein) other than those described in the
Registration Statement and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are
correct copies of the documents of which they purport to be
copies; (B) the descriptions in the Registration Statement and
the Prospectus and any supplement or amendment thereto of
agreements, contracts and other documents to which the Company
is a party or by which it is bound are accurate and fairly
represent the information required to be shown by Form SB-2;
(C) there is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental
proceeding (including, without limitation, those pertaining to
environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of,
the Company which (I) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement
are accurately summarized in all respects), or (II) questions
the validity of the capital stock of the Company or of this
Agreement, the Underwriter's Warrant Agreement, the Warrant
Agreement or the Consulting Agreement or of any action taken
or to be taken by the Company pursuant to or in connection
with any of the foregoing; (D) no statute or regulation or
legal or governmental proceeding required to be described in
the Prospectus is not described as required; and (E) there is
no action, suit or proceeding pending or threatened against or
affecting the Company before any court, arbitrator or
governmental body, agency or official (or any basis thereof
known to such counsel) in which there is a reasonable
possibility of an adverse decision which may result in a
material adverse change in the condition, financial or
otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operation, properties, business
or results of operations of the Company, which could adversely
affect the present or prospective ability of the Company to
perform its obligations under this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement or which in any manner draws into
question the validity or enforceability of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement;
vii) the Company has full legal right, power and
authority to enter into each of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement and to consummate the transactions
provided for herein and therein; and each of this Agreement,
the Underwriter's
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Warrant Agreement, the Warrant Agreement and the Consulting
Agreement has been duly authorized, executed and delivered by
the Company. Each of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement,
assuming due authorization, execution and delivery by each
other party thereto, constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of
creditors' rights and the application of equitable principles
in any action, legal or equitable, and except as obligations
to indemnify or contribute to losses may be limited by
applicable law). None of the Company's execution or delivery
of this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement and the Consulting Agreement, its
performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement and
the Prospectus and any amendments or supplements thereto,
conflicts with or will conflict with or results or will result
in any breach or violation of any of the terms or provisions
of, or constitutes or will constitute a default under, or
result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company
pursuant to the terms of (A) the certificate of incorporation
or bylaws of the Company, (B) any license, contract,
indenture, mortgage, lease, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which it is
or may be bound or to which its properties or assets (tangible
or intangible) are or may be subject, (C) any statute
applicable to the Company or (D) any judgment, decree, order,
rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction
over the Company or any of its activities or properties;
viii) no consent, approval, authorization or order of,
and no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body,
domestic or foreign (other than such as may be required under
"blue sky" laws and the rules of the NASD, as to which no
opinion need be rendered), is required in connection with the
issuance of the Securities pursuant to the Prospectus, the
Registration Statement, this Agreement, the Underwriter's
Warrant Agreement and the Warrant Agreement, or the
performance of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement
and the transactions contemplated hereby and thereby;
ix) the properties and business of the Company conform
to the description thereof contained in the Registration
Statement and the Prospectus;
26
<PAGE>
and the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or
leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable;
x) the Company is not in breach of, or in default
under, any term or provision of any license, contract,
indenture, mortgage, lease, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which it is
or may be bound or to which its property or assets (tangible
or intangible) are or may be subject; and the Company is not
in violation of any term or provision of (A) its certificate
of incorporation or by-laws, (B) any authorization, approval,
order, license, certificate, franchise or permit of any
governmental or regulatory official or body, or (C) any
judgement, decree, order, statute, rule or regulation to which
it is subject;
xi) the statements in the Prospectus under "Prospectus
Summary," "Business," "Management," "Principal Stockholders,"
"Certain Transactions," "Shares Eligible For Future Sale," and
"Description of Securities" have been reviewed by such
counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
xii) the Securities have been accepted for quotation
on Nasdaq;
xiii) the Company owns or has the right to use, free and
clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities
of any kind whatsoever, all trademarks, trade names, service
marks, service names, trade names, copyrights, patents and
patent applications, and licenses and rights with respect to
the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon
or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect
to the foregoing; and there is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or
governmental or other proceeding, domestic or foreign, pending
or threatened (or circumstances that may give rise to the
same) against the Company which challenges the exclusive
rights of the Company with respect to any trademarks, trade
names, service marks, service names, copyrights, patents or
patent applications, or licenses or rights to the foregoing,
used in the conduct of the its business;
xiv) the persons listed under the captions "Principal
Stockholders" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined
27
<PAGE>
in Rule 13d-3 under the Exchange Act) of the securities set
forth opposite their respective names thereunder as and to the
extent set forth therein;
xv) to such counsel's knowledge, neither the Company
nor any of its directors, officers, stockholders, employees,
agents or any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or
supplier, or any official or employee of any governmental
agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is or may be in
a position to help or hinder the business of the Company (or
assist it in connection with any actual or proposed
transaction) which (A) might subject the Company or any such
person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign),
(B) if not given in the past, might have had a material and
adverse effect on the condition, financial or otherwise, or
the earnings, business affairs, prospects, stockholders'
equity, value, operations, properties, business or results of
operations of the Company, or (C) if not continued in the
future, might materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs,
prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company;
xvi) except as disclosed in the Prospectus, no person,
corporation, trust, partnership, association or other entity
has the right to include and/or register any securities of the
Company in the Registration Statement, require the Company to
file any registration statement or, if filed, to include any
security in such registration statement;
xvii) there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for
services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or financial
consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances that may affect the
Underwriter's compensation, as determined by the NASD;
xviii) the minute books of the Company contain a complete
summary of all meetings and actions of the directors and
stockholders of the Company since the time of its
incorporation and reflect all transactions referred to in such
minutes accurately in all material respects;
xix) assuming due execution by the parties thereto, the
Lock-Up Agreements are legal, valid and binding obligations of
the parties thereto, enforceable against such parties and any
subsequent holder of the securities subject thereto in
accordance with their terms; and
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<PAGE>
xx) the Company (A) does not maintain, sponsor or
contribute to any ERISA Plans, (B) does not maintain or
contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C)
has never completely or partially withdrawn from a
"multiemployer plan," as defined in Section 3(37) of ERISA.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus and related matters and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement or the Prospectus, on the
basis of the foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment became
effective, or the Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, as of the date of the Preliminary Prospectus and the
Prospectus, and as of the date of such opinion, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (it being understood that
such counsel need express no opinion with respect to the financial statements
and schedules and other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
supplements or amendments thereto).
In rendering such opinion, such counsel may rely (a) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriter's
Counsel) of other counsel acceptable to Underwriter's Counsel, familiar with the
applicable laws; and (b) as to matters of fact, to the extent they deem proper,
on certificates and written statements of responsible officers of the Company
and certificates or other written statements of officers of departments of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriter's Counsel, if requested. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991) or any comparable state accord. The opinion
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Underwriter and
they are justified in relying thereon.
(e) At the Closing Date, the Underwriter shall have received
the favorable opinion of Wyatt, Gerber, Burke & Badie, L.L.P., patent counsel to
the Company, dated the Closing Date, addressed to the Underwriter, in form and
substance satisfactory to Underwriter's Counsel, to the effect that:
29
<PAGE>
i) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, the Company owns or has the right
to use, free and clear of all liens, encumbrances, pledges,
security interests, defects or other restrictions or equities
of any kind whatsoever,
(a) all patents and patent applications (including,
without limitation, the Patents),
(b) all trademarks and service marks (including,
without limitation, the Trademarks),
(c) all copyrights (including, without limitation,
the Copyrighted Material),
(d) all service and trade names, and
(e) all intellectual property licenses (including,
without limitation, the Licenses),
(f) all technology,
used in, contemplated to be use in or required for, the
conduct of the Company's business.
ii) To the best of our knowledge, after due inquiry, none of
the prior employers of Dr. Hanoch Shalit have any rights, by
ownership, license, shop right or otherwise, in any of Dr.
Shalit's patents, patent applications, trade secrets, know-how
or technology used or contemplated to be used by the Company.
iii) To the best of our knowledge, after due inquiry, each of
the Company and the Subsidiary possesses all material
intellectual property licenses or rights used in, or required
for, the conduct of its respective business (including, the
Licenses and without limitation, any such licenses or rights
described in the Prospectus as being owned, possessed or
licensed by the Company or any Subsidiary, as the case may
be), such licenses and rights are in full force and effect,
and the Company's and the Subsidiary's products, methods and
services do not infringe any unlicensed intellectual property
of any third parties.
iv) To the best of our knowledge, after due inquiry, there is
no claim, action, or opposition pending, threatened or
potential, which affects or could affect the rights of any of
the Company or the Subsidiary with respect to any trademarks,
service marks, copyrights, service names, trade names,
patents, patent applications or licenses used in, or required
for, the conduct of the Company's or the Subsidiary's
business, and all trademarks, service marks, copyrights,
service names, tradenames and patents, owned or licensed to
the Company or the Subsidiary, are valid.
30
<PAGE>
v) To the best of our knowledge, after due inquiry, there is
no intellectual property based claim or action, pending,
threatened or potential, which affects or could affect the
rights of any of the Company or the Subsidiary with respect to
any products, services, processes or licenses, including,
without limitation, the Licenses used in the conduct of the
Company's or the Subsidiary's business.
vi) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, none of the Company nor the
Subsidiary is under any obligation to pay royalties or fees to
any third party with respect to any material, technology or
intellectual properties developed, employed, licensed or used
by the Company or the Subsidiary.
vii) To the best of our knowledge, after due inquiry, the
statements in the Prospectus under the headings, "Risk Factors
- Intellectual Property Rights" and "Business - Intellectual
Property," are accurate in all material respects, fairly
represent the information disclosed therein and do not omit to
state any fact necessary to make the statements made therein
complete and accurate.
viii) To the best of our knowledge, after due inquiry, the
statements in the Registration Statement and Prospectus do not
contain any untrue statement of a material fact with respect
to the intellectual property position of any of the Company or
the Subsidiary, or omit to state any material fact relating to
the intellectual property position of any of the Company or
the Subsidiary which is required to be stated in the
Registration Statement and the Prospectus or is necessary to
make the statements therein not misleading.
At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received the favorable opinion of each of Zukerman, Gore
& Brandeis, LLP and Wyatt, Gerber, Burke & Badie, L.L.P., counsel to the
Company, dated the Closing Date or the relevant Option Closing Date, addressed
to the Underwriter and in form and substance satisfactory to Underwriter's
Counsel confirming, as of the Option Closing Date, the statements made by each
of Zukerman, Gore & Brandeis, LLP and Wyatt, Gerber, Burke & Badie, L.L.P., in
their opinions delivered at the time this Agreement is executed.
(f) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriter's Counsel shall have been furnished with such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
Section 6(c) hereof, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(g) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change or
development involving a prospective adverse change in the condition, financial
or otherwise, or the earnings, business affairs, stockholders' equity, value,
operations, properties, business or results of operations of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which
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<PAGE>
such matters are set forth in the Registration Statement and the Prospectus;
(ii) there shall have been no transaction, not in the ordinary course of
business, entered into by the Company from the latest date as of which the
financial condition of the Company is set forth in the Registration Statement
and the Prospectus; (iii) the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness; (iv) the
Company shall not have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there shall not have been any change in the capital
stock, debt (long or short term) or liabilities or obligations of the Company
(contingent or otherwise) from the latest dates as of which such matters are set
forth in the Registration Statement and the Prospectus; (v) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and the Prospectus; (vi) no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental or
other proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against the Company or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, stockholders' equity,
value, operations, properties, business or results of operations of the Company,
except as set forth in the Registration Statement and Prospectus; and (vii) no
stop order shall have been issued under the Act with respect to the Registration
Statement and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or the relevant Option
Closing Date, as the case may be, to the effect that each of such persons has
carefully examined the Registration Statement, the Prospectus and this
Agreement, and that:
i) The representations and warranties regarding the
Company in this Agreement are true and correct, as if made on
and as of the Closing Date or the Option Closing Date, as the
case may be, and the Company has complied with all agreements
and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the case may
be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued,
and no proceedings for that purpose have been instituted or
are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
iii) The Registration Statement and the Prospectus and,
if any, each amendment and each supplement thereto contain all
statements and information required to be included therein,
and none of the Registration Statement, the Prospectus or any
amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact
required to be stated therein
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<PAGE>
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and
neither the Preliminary Prospectus nor any supplement thereto
included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and
iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (A) the Company has not incurred any material
liabilities or obligations, direct or contingent; (B) the
Company has not paid or declared any dividends or other
distributions on its capital stock; (C) the Company has not
entered into any transactions not in the ordinary course of
business; (D) there has not been any change in the capital
stock or long-term debt or any increase in the short-term
borrowings (other than any increase in short-term borrowings
in the ordinary course of business) of the Company; (E) the
Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no
litigation which is pending or threatened (or circumstances
giving rise to same) against the Company or any affiliate
(within the meaning of the Rules and Regulations) of the
Company which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (G)
there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this Section 6(g)
are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriter will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter and
in form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter and Underwriter's Counsel, from Most Horowitz & Company, LLP:
i) confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the Rules and Regulations;
ii) stating that it is their opinion that the financial
statements of the Company included in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules
and Regulations and that the Underwriter may rely upon the
opinion of Most Horowitz & Company, LLP with respect to such
financial statements and supporting schedules included in the
Registration Statement;
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<PAGE>
iii) stating that, on the basis of a limited review
which included a reading of the latest unaudited interim
financial statements of the Company, a reading of the latest
available minutes of the stockholders and board of directors
and the various committees of the board of directors of the
Company, consultations with officers and other employees of
the Company responsible for financial and accounting matters
and other specified procedures and inquiries, nothing has come
to their attention which would lead them to believe that (A)
the pro forma financial information contained in the
Registration Statement and Prospectus does not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or is
not fairly presented in conformity with generally accepted
accounting principles applied on a basis consistent with that
of the audited financial statements of the Company or the
unaudited pro forma financial information included in the
Registration Statement, (B) the unaudited financial statements
and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements of the Company
included in the Registration Statement, or (C) at a specified
date nor more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in
the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity or net current assets or
net assets of the Company as compared with amounts shown in
the September 30, 1995 balance sheet included in the
Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such
change or decrease, and (D) during the period from September
30, 1995 to a specified date not more than five (5) days prior
to the effective date of the Registration Statement, there was
any decrease in net revenues, net earnings or net earnings per
share of Common Stock, in each case as compared with the
corresponding period beginning September 30, 1994, other than
as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount
of such decrease;
iv) setting forth, at a date not later than five (5)
days prior to the effective date of the Registration
Statement, the amount of liabilities of the Company (including
a break-down of commercial paper and notes payable to banks);
v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus, in each
case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings,
34
<PAGE>
inquiries and other appropriate procedures (which procedures
do not constitute an audit in accordance with generally
accepted auditing standards) set forth in the letter and found
them to be in agreement,
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may
request.
(k) At the Closing Date and each Option Closing Date, if any,
the Underwriter shall have received from Zukerman, Gore & Brandeis, LLP a
letter, dated as of the Closing Date or the relevant Option Closing Date, as the
case may be, to the effect that (i) they reaffirm the statements made in the
letter furnished pursuant to Section 6(i) hereof, (ii) if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further effect
that they have carried out procedures as specified in clause (v) of Section 6(i)
hereof with respect to certain amounts, percentages and financial information as
specified by the Underwriter and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(l) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Underwriter the appropriate number of
Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to Section 4(e) hereof shall
have been issued on either the Closing Date or the Option Closing Date, if any,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(n) On or before the effective date of the Registration
Statement, the Company shall have executed and delivered to the Underwriter the
Underwriter's Warrant Agreement, substantially in the form filed as Exhibit ___
to the Registration Statement. On or before the Closing Date, the Company shall
have executed and delivered to the Underwriter the Underwriter's Warrants in
such denominations and to such designees as shall have been provided to the
Company.
(o) On or before Closing Date, the Securities shall have been
duly approved for quotation on Nasdaq, subject to official notice of issuance.
(p) On or before Closing Date, there shall have been delivered
to the Underwriter all of the Lock-Up Agreements, in form and substance
satisfactory to Underwriter's Counsel.
(q) On or before the effective date of the Registration
Statement, the Company shall have executed and delivered to the Underwriter the
Consulting Agreement in substantially the form filed as Exhibit ___ to the
Registration Statement and the indemnification letter attached to the Consulting
Agreement. On or before the Closing Date, the Company shall have paid the
Underwriter $48,000, representing payment in full of all amounts due pursuant to
Section 7 of such Consulting Agreement.
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<PAGE>
(r) On or before the effective date of the Registration
Statement, the Company and American Stock Transfer and Trust Company shall have
executed and delivered to the Underwriter the Warrant Agreement, substantially
in the form filed as Exhibit ___ to the Registration Statement.
(s) At least two (2) full business days prior to the date
hereof, the Closing Date and each Option Closing Date, if any, the Company shall
have delivered to the Underwriter the unaudited interim financial statements
required to be so delivered pursuant to Section 4(p) of this Agreement.
If any condition to the Underwriter's obligations hereunder to
be fulfilled prior to or at the Closing Date or at any Option Closing Date, as
the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless the
Underwriter (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriter), and each person, if any, who controls the Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
(A) any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section 7, collectively referred to as
"applications") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, the NASD, Nasdaq or any securities exchange;
(B) the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in light of the circumstances in which they were
made); or (C) any breach of any representation, warranty, covenant or agreement
of the Company contained herein or in any certificate by or on behalf of the
Company or any of its officers delivered pursuant hereto, unless, in the case of
clause (A) or (B) above, such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be. The
36
<PAGE>
indemnity agreement in this Section 7(a) shall be in addition to any liability
which the Company may have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to the Underwriter by the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or the Prospectus directly
relating to the transactions effected by the Underwriter in connection with the
offering contemplated hereby. The Company acknowledges that the statements with
respect to the Underwriter and the public offering of the Securities set forth
under the heading "Underwriting" and the stabilization legend in the Prospectus
have been furnished by the Underwriter expressly for use therein and constitute
the only information furnished in writing by or on behalf of the Underwriter for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus. The indemnity agreement in this Section 7(b) shall be in addition to
any liability which the Underwriter may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 (except to the extent that it
has been prejudiced in any material respect by such failure) or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it or they may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, an indemnified party shall have the right to employ its own counsel
in any such case but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in connection
with the defense of such action at the expense of the indemnifying party, (ii)
the indemnifying parties shall not have employed counsel reasonably satisfactory
to such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to one
or all of the indemnifying parties (in which event the indemnifying parties
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional
37
<PAGE>
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified, on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (A) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
a contributing party and the Underwriter is the indemnified party, the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other, shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities (before deducting expenses) bear to the
total underwriting discounts received by the Underwriter hereunder, in each case
as set forth in the table on the cover page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to in the first (1st) sentence of this Section 7(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this
38
<PAGE>
Section 7(d), the Underwriter shall not be required to contribute any amount in
excess of the underwriting discount applicable to the Securities purchased by
the Underwriter hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(d), each person, if any, who
controls the Company or the Underwriter within the meaning of the Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company or the Underwriter, as the case may be, subject in each case to this
Section 7(d). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action against such party in respect to which a
claim for contribution may be made against another party or parties under this
Section 7(d), notify such party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have hereunder or otherwise than under this Section 7(d), or to the extent
that such party or parties were not adversely affected by such omission.
Notwithstanding anything in this Section 7 to the contrary, no party will be
liable for contribution with respect to the settlement of any action or claim
effected without its written consent. The contribution agreement set forth above
shall be in addition to any liabilities which any indemnifying party may have at
common law or otherwise.
8. Representations, Warranties, Covenants and Agreements to
Survive Delivery. All representations, warranties, covenants and agreements of
the Company contained in this Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall be deemed to be
representations, warranties, covenants and agreements at the Closing Date and
each Option Closing Date, if any, and such representations, warranties,
covenants and agreements of the Company, and the respective indemnity and
contribution agreements contained in Section 7 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Underwriter, the Company or any of their agents, and shall survive
the termination of this Agreement or the issuance and delivery of the Securities
to the Underwriter.
9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in its discretion, shall release the Securities
for sale to the public; provided, however, that the provisions of Sections 5, 7
and 10 of this Agreement shall at all times be effective. For purposes of this
Section 9, the Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to Section 10(b) hereof, the Underwriter shall
have the right to terminate this Agreement: (i) if any domestic or international
event or act or occurrence has materially adversely disrupted, or in the
Underwriter's opinion will in the immediate future
39
<PAGE>
materially adversely disrupt, the financial markets; or (ii) if any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
NASD, the Boston Stock Exchange, the Commission or any governmental authority
having jurisdiction over such matters; or (iv) if trading of any of the
securities of the Company shall have been suspended, or if any of the securities
of the Company shall have been delisted, on any exchange or in any
over-the-counter market; or (v) if the United States shall have become involved
in a war or major hostilities, or if there shall have been an escalation in an
existing war or major hostilities, or a national emergency shall have been
declared in the United States; or (vi) if a banking moratorium shall have been
declared by any state or federal authority; or (vii) if a moratorium in foreign
exchange trading shall have been declared; or (viii) if the Company shall have
sustained a material or substantial loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in the Underwriter's opinion, make
it inadvisable to proceed with the delivery of the Securities; or (ix) if there
shall have been such a material adverse change in the conditions or prospects of
the Company, or if there shall have been such a material adverse change in the
general market, political or economic conditions, in the United States or
elsewhere, as in the Underwriter's judgment would make it inadvisable to proceed
with the offering, sale and/or delivery of the Securities; or (x) if Catherine
Winchester shall no longer serve the Company in her present capacities.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, 10(a) or 11 hereof or if this
Agreement shall not be carried out within the time specified herein, or within
any extension thereof granted by the Underwriter, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition of
this Agreement to be performed or satisfied by it (including, without
limitation, pursuant to Section 6, Section 10(a) or Section 11 hereof), then the
Company shall promptly reimburse and indemnify the Underwriter for all of its
actual out-of-pocket expenses, including the fees and disbursements of
Underwriter's Counsel, less amounts previously paid pursuant to Section 5(c)
hereof. In addition, in any of such events the Company shall remain liable for
all "blue sky" counsel fees and expenses and "blue sky" filing fees.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement (including, without limitation,
pursuant to Sections 6, 10 and 11 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be in
any way be affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the Underwriter
may, at its option, by notice from the Underwriter to the Company, terminate the
Underwriter's obligation to purchase Option Securities from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to Section 5. Section 7 and Section 10 hereof. No action taken pursuant
to this Section 11 shall relieve the Company from liability, if any, in respect
of such default.
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12. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at A.S. Goldmen & Co., Inc., 99 Wood Avenue South, Suite 902,
Iselin, New Jersey 08830, Attention: Mr. Stuart Winkler, with a copy to Orrick,
Herrington & Sutcliffe, 666 Fifth Avenue, New York, New York 10103, Attention:
Lawrence B. Fisher, Esq. Notices to the Company shall be directed to the Company
at Imatec, Ltd., 150 E. 58th Street, New York, New York, 10155, Attention: Dr.
Hanoch Shalit, with a copy to Zukerman, Gore & Brandeis, LLP, 900 Third Avenue,
8th Floor, New York, New York, 10022, Attention: Clifford A. Brandeis, Esq.
13. Parties. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriter shall be deemed to be
a successor by reason merely of such purchase.
14. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
16. Entire Agreement; Amendments. This Agreement, the
Underwriter's Warrant Agreement and the Consulting Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by the
Underwriter and the Company.
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If the foregoing correctly sets forth the understanding
between the Underwriter and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
IMATEC, LTD.
By: _________________________
Name: Dr. Hanoch Shalit
Title: President
Confirmed and accepted as of
the date first above written.
A.S. GOLDMEN & CO., INC.
By: ______________________________
Name: Stuart Winkler
Title: Vice President
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SCHEDULE 1(w)
-------------
(See Section 1(w) of the Underwriting Agreement)
Number of Shares
Name of Securityholder: Subject to Lockup Agreement:
- ----------------------- ----------------------------
43
<PAGE>
EXHIBIT 1.2
- -------------------------------------------------------------------------------
IMATEC, LTD.
AND
A.S. GOLDMEN & CO., INC.
-----------------
UNDERWRITER'S
WARRANT AGREEMENT
Dated as of ____________, 1996
- -------------------------------------------------------------------------------
<PAGE>
UNDERWRITER'S WARRANT AGREEMENT, dated as of ___________, 1996
[the effective date of the Registration Statement], by and between IMATEC,
LTD., a Delaware corporation (the "Company"), and A.S. GOLDMEN & CO., INC. (the
"Underwriter").
W I T N E S S T H:
WHEREAS, the Company proposes to issue to the Underwriter
and/or its designees (the "Holder(s)") warrants (the "Warrants") to purchase up
to an aggregate 100,000 shares of common stock, par value $.0001 per share, of
the Company (the "Common Stock") and/or up to an aggregate 400,000 Class A
redeemable warrants (the "Class A Redeemable Warrants"), and/or up to an
aggregate 400,000 Class B redeemable warrants (the "Class B Redeemable
Warrants") (the Class A Warrants and the Class B Warrants are collectively
referred to as the "Redeemable Warrants") each entitling the holder thereof to
purchase one share of Common Stock; (the shares of Common Stock and the
Redeemable Warrants purchasable pursuant to this Agreement are hereinafter
collectively referred to as the "Securities");
WHEREAS, the Underwriter has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement"), of even date herewith,
between the Underwriter and the Company, to act as the underwriter in connection
with the Company's proposed initial public offering of up to 1,000,000 shares of
Common Stock, up to 4,000,000 Class A Redeemable Warrants and up to 4,000,000
Class B Redeemable Warrants at an initial public
2
<PAGE>
offering price of $____ per share of Common Stock, $____ per Class A Redeemable
Warrant and $____ per Class B Redeemable Warrant (the "Initial Public
Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriter and/or its designees in
consideration for, and as part of the Underwriter's compensation in connection
with, the Underwriter acting as the underwriter pursuant to the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises, the payment
by the Underwriter to the Company of twenty dollars ($20.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Holder(s) is hereby granted the right to
purchase, at any time from ______________, 1997 [the 1st anniversary of the
effective date of the Registration Statement] until 5:30 p.m., New York time, on
______________, 2001 [the day before the 5th anniversary of the effective date
of the Registration Statement], up to an aggregate 100,000 shares of Common
Stock and/or up to an aggregate 400,000 Class A Redeemable Warrants and/or up to
400,000 Class B Redeemable Warrants at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $____ per share of Common Stock
[120% of the initial public offering price per share of Common Stock], $____ per
Class A Redeemable Warrant [120% of the initial public offering price per Class
A Redeemable Warrant] and $___ per Class B Redeemable Warrant [120% of the
initial public offering price per Class B Redeemable Warrant], subject to the
terms and conditions of this Agreement. Each Class A Redeemable Warrant is
initially exercisable to purchase
3
<PAGE>
one additional share of Common Stock at an initial exercise price of $____ [110%
of the initial public offering price] per share from the date hereof until 5:30
p.m., New York time, on ___________, 1998 [the day before the 2nd anniversary of
the effective date of the Registration Statement], at which time the Class A
Redeemable Warrants, unless the exercise period of the then outstanding Class A
Redeemable Warrants has been extended, shall expire. Each Class B Redeemable
Warrant is initially exercisable to purchase one additional share of Common
Stock at an initial exercise price of $____ [130% of the initial public offering
price] per share from the date hereof until 5:30 p.m., New York time, on
___________, 2001 [the day before the 5th anniversary of the effective date of
the Registration Statement], at which time the Class B Redeemable Warrants,
unless the exercise period of the then outstanding Class B Redeemable Warrants
has been extended, shall expire. Except as set forth in Section 1 and Section
6.1 hereof, the Redeemable Warrants issuable upon exercise of the Warrants are
in all respects identical to the Redeemable Warrants being purchased by the
Underwriter for resale to the public pursuant to the terms and provisions of the
Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") representing the right to purchase Warrants delivered
and to be delivered pursuant to this Agreement shall be in the form set forth in
Exhibit A attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. Exercise of Warrant.
ss.3.1 Method of Exercise. The Warrants initially are
exercisable at an initial exercise price per share of Common Stock, per Class A
Redeemable Warrant and per Class
4
<PAGE>
B Redeemable Warrant set forth in Section 6 hereof, payable by certified or
official bank check in New York Clearing House funds, subject to adjustment as
provided in Section 8 hereof. Upon surrender of a Warrant Certificate with the
annexed Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as defined in Section 6.2 hereof) for the shares of Common Stock
and/or Redeemable Warrants purchased at the Company's principal offices
(presently located at 150 East 58th Street, New York, New York 10155) the
registered Holder of a Warrant Certificate shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased and/or a
certificate or certificates for the Redeemable Warrants so purchased. The
purchase rights represented by each Warrant Certificate are exercisable at the
option of the Holder(s) thereof, in whole or in part (but not as to fractional
shares of the Common Stock and the Redeemable Warrants underlying the warrants).
Warrants may be exercised to purchase all or a part of the shares of Common
Stock represented by a Warrant Certificate, all or a part of the Redeemable
Warrants represented by a Warrant Certificate, or all or a part of the shares of
Common Stock, together with an equal or unequal number of the Redeemable
Warrants, represented by a Warrant Certificate. In the case of the purchase of
less than all the Securities purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Securities purchasable thereunder.
ss.3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner
5
<PAGE>
specified in Section 3.1 hereof. The number of shares of Common Stock to be
issued pursuant to this Section 3.2 shall be equal to the difference between (a)
the number of shares of Common Stock in respect of which the Warrants are
exercised and (b) a fraction, the numerator of which shall be number of shares
of Common Stock in respect of which the Warrants are exercised multiplied by the
Exercise Price and the denominator of which shall be the Market Price (as
defined in Section 3.3 hereof) of the Common Stock. The number of Redeemable
Warrants to be issued pursuant to this Section 3.2 shall be equal to the
difference between (a) the number of Redeemable Warrants in respect of which the
Warrants are exercised and (b) a fraction, the numerator of which shall be the
number of Redeemable Warrants in respect of which the Warrants are exercised
multiplied by the Exercise Price and the denominator of which shall be the
Market Price (as defined in Section 3.3 hereof) of the Redeemable Warrants.
Solely for the purposes of this paragraph, Market Price shall be calculated
either (i) on the date which the form of election attached hereto is deemed to
have been sent to the Company pursuant to Section 14 hereof ("Notice Date") or
(ii) as the average of the Market Prices for each of the five trading days
preceding the Notice Date, whichever of (i) or (ii) is greater.
ss.3.3 Definition of Market Price. As used herein, the phrase
"Market Price" at any date shall be deemed to be (i) when referring to the
Common Stock, the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq Small Cap Market ("Nasdaq Small Cap"), or, if the
Common Stock is not listed or admitted to trading on any securities exchange or
quoted by Nasdaq Small Cap, the
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closing bid price as furnished by the National Association of Securities
Dealers, Inc. (the "NASD") through Nasdaq or a similar organization if Nasdaq is
no longer reporting such information, or if the Common Stock is not quoted on
Nasdaq or a similar organization, as determined in good faith by a resolution of
the Board of Directors of the Company, based on the best information available
to it, or (ii) when referring to a Redeemable Warrant, the last reported sale
price, or, in case no such reported sale takes place on such day, the average of
the last reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on which the
Redeemable Warrants are listed or admitted to trading or by Nasdaq Small Cap,
or, if the Redeemable Warrants are not listed or admitted to trading on any
national securities exchange or quoted by Nasdaq Small Cap, the closing bid
price as furnished by the NASD through Nasdaq or a similar organization if
Nasdaq is no longer reporting such information, or if the Redeemable Warrants
are not quoted on Nasdaq or a similar organization, or if the Redeemable
Warrants held by the public are no longer outstanding, the Market Price of a
Redeemable Warrant shall equal the difference between the Market Price of the
Common Stock and the Exercise Price of a Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the Warrants
and payment of the Exercise Price therefor, the issuance of certificates for
shares of Common Stock and/or Redeemable Warrants or other securities underlying
such Warrants, and upon the exercise of the Redeemable Warrants, the issuance of
certificates for shares of Common Stock or other securities underlying such
Redeemable Warrants shall be made forthwith (and in any event such issuance
shall be made within five (5) business days thereafter), without any other
charge to the Holder(s) thereof including, without limitation, any tax which may
be
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payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Sections 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder(s) thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder requesting such a transfer and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting such a transfer shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
shares of Common Stock, the Redeemable Warrants and the other securities for
which such Warrant Certificates are exercisable, and the shares of Common Stock
or other securities underlying the Redeemable Warrants, shall be executed on
behalf of the Company by the manual or facsimile signature of the then Chairman
or Vice Chairman of the Board of Directors or the Chief Executive Officer,
President or Vice President of the Company, under its corporate seal, and
attested to by the manual or facsimile signature of the then Secretary or
Assistant Secretary of the Company. Warrant Certificates shall be dated the date
of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5. Restriction on Transfer of Warrants. Each Holder of a
Warrant Certificate, by his, her or its acceptance thereof, covenants and agrees
that the Warrants are being acquired as an investment and not with a view to the
distribution thereof and that the
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Warrants may not be sold, transferred, assigned, pledged or hypothecated for a
period of one (1) year from the date hereof, except to officers of the
Underwriter.
6. Exercise Price.
ss.6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the initial exercise price of each
Warrant shall be $__________ per share of Common Stock [120% of the initial
public offering price per share of Common Stock], $____ per Class A Redeemable
Warrant [120% of the initial public offering price per Class A Redeemable
Warrant] and $__________ per Class B Redeemable Warrant [120% of the initial
public offering price per Class B Redeemable Warrant]. The adjusted exercise
price shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Section 8 hereof.
ss.6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
ss.7.1 Registration Under the Securities Act of 1933. (a) The
Warrants, the shares of Common Stock and Redeemable Warrants or other securities
issuable upon exercise of the Warrants and the shares of Common Stock or other
securities issuable upon exercise of the Redeemable Warrants have not been
registered under the Securities Act of 1933, as amended (the "Act"). The
Warrants, and, upon exercise in part or in whole of the Warrants, certificates
representing the shares of Common Stock and the Redeemable Warrants or other
securities underlying the Warrants, and, upon exercise in whole or in part of
the Redeemable Warrants, certificates representing the shares of Common Stock or
other securities underlying
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the Redeemable Warrants (all of the foregoing hereinafter collectively referred
to as the "Warrant Securities") shall bear a legend substantially similar to the
following:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except pursuant to (i)
an effective registration statement under the Act, (ii) to the
extent applicable, Rule 144 under the Act (or any similar rule
under the Act relating to the disposition of securities), or
(iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an
exemption from registration under the Act is available.
ss.7.2 Piggyback Registration. If, at any time commencing
after the datehereof and expiring on _____________, 2003 [the day before the 7th
anniversary of the date of the closing of the subject public offering], the
Company proposes to register any of its securities under the Act (other than in
connection with a merger or pursuant to Form S-8, S-4 or comparable registration
statement) it will give written notice by registered mail, at least thirty (30)
business days prior to the filing of each such registration statement, to the
Underwriter and to all Holder(s) of the Warrants and/or the Warrant Securities
of its intention to do so. If the Underwriter or other Holder(s) of the Warrants
and/or the Warrant Securities notify the Company within twenty (20) business
days after receipt of any such notice of its or their desire to include any of
such securities in such proposed registration statement, the Company shall
afford the Underwriter and such Holder(s) of the Warrants and/or Warrant
Securities the opportunity to have any such Warrants and/or Warrant Securities
registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.2 (irrespective of whether a written request
for inclusion of any securities shall have been
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made) to elect not to file any such proposed registration statement, or to
withdraw the same after the filing but prior to the effective date thereof.
ss.7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring
__________, 2001 [the day before the 5th anniversary of the closing of the
subject public offering], the Holder(s) of the Warrants and/or any Warrant
Securities representing a "Majority" (calculated in accordance with Section
7.4(m) hereof) of such securities shall have the right (which right is in
addition to the registration rights under Section 7.2 hereof), exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Underwriter and Holder(s), in order to comply with the provisions of the Act, so
as to permit a public offering and sale of their respective Warrants and Warrant
Securities for nine (9) consecutive months by such Holder(s) and any other
Holder(s) of the Warrants and/or Warrant Securities who notify the Company
within ten (10) days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 7.3 (whether such request is made
pursuant to Section 7.3(a) or Section 7.3(c) hereof) by any Holder(s) to all
other registered Holder(s) of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2
and Section 7.3(a), at any time commencing after the date hereof and expiring
____________, 2001 [the day
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before the 5th anniversary of the closing of the subject public offering], any
Holder(s) of Warrants and/or Warrant Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file with the Commission, on one occasion, a registration statement so as to
permit a public offering and sale for nine (9) consecutive months by any such
Holder(s) of its or their Warrants and/or Warrant Securities; provided, however,
that the provisions of Section 7.4(b) hereof shall not apply to any such
registration request and all costs incident thereto shall be at the expense of
the Holder(s) making such request.
(d) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrants
and the Warrant Securities within the time period specified in Section 7.4(a)
hereof pursuant to the written notice specified in Section 7.3(a) hereof of the
Holder(s) of a Majority of the Warrants and/or the Warrant Securities, the
Company, at its option (and with written notice of the election to such effect
of all Holder(s) of the Warrants and/or the Warrant Securities), may repurchase
(i) any and all Securities at the higher of the Market Price per share of Common
Stock and per Redeemable Warrant, determined as of (x) the date of the notice
sent pursuant to Section 7.3(a) hereof or (y) the expiration of the period
specified in Section 7.4(a) hereof and (ii) the other securities, if any,
issuable upon exercise of the Warrants and the Redeemable Warrants at a price
agreed upon by the Company and a Majority of the Holder(s) of the Warrants and
all such other securities. If the Company elects the repurchase option, the
repurchase shall be in immediately available funds and shall close within two
(2) days after the later of (i) the expiration of the period specified in
Section 7.4(a) hereof or (ii) the delivery of the written notice of election
specified in this Section 7.3(d).
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ss.7.4 Covenants of the Company With Respect to Registration.
In connection with any registration under Section 7.2 or Section 7.3 hereof, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within thirty (30) days of receipt of any demand there
or, shall use its best efforts to have any registration statements declared
effective at the earliest possible time, and shall furnish each Holder(s)
desiring to sell Warrants and/or Warrant Securities such number of prospectuses
as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions or
other charges of any broker-dealer acting on behalf of Holder(s)), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. If the
Company shall fail to comply with the provisions of Section 7.4(a), the Company
shall, in addition to any other equitable or other relief available to the
Holder(s), be liable for any and all incidental or special damages sustained by
the Holder(s) requesting registration of its or their Warrants and/or Warrant
Securities.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrants and the Warrant Securities
included in a registration statement for offering and sale under the securities
or blue sky laws of such states as reasonably are requested by the Holder(s),
provided that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
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(d) The Company shall indemnify the Holder(s) of the Warrants
and the Warrant Securities to be sold pursuant to any registration statement and
each person, if any, who controls such Holder(s) within the meaning of Section
15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise arising from such registration
statement but only to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement pursuant to which the
Company has agreed to indemnify the Underwriter.
(e) The Holder(s) of the Warrants and Warrant Securities to be
sold pursuant to a registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or
otherwise arising from information furnished by or on behalf of such Holder(s),
or their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement pursuant to which the
Underwriter has agreed to indemnify the Company.
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(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise its or their Warrants or Redeemable Warrants
prior to the initial filing of any registration statement or the effectiveness
thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrants and the Warrant Securities to be included in
any registration statement filed pursuant to Section 7.3 hereof, or permit any
other registration statement to be or remain effective during the effectiveness
of a registration statement filed pursuant to Section 7.3 hereof, without the
prior written consent of the Holder(s) of the Warrants and the Warrant
Securities representing a Majority of such securities.
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder(s) and underwriter(s), of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), and (ii) a "cold comfort"
letter dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
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(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within fifteen
(15) months thereafter, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings statement (which need
not be audited) complying with Section 11(a) of the Act and covering a period of
at least twelve (12) consecutive months beginning after the effective date of
the registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and the managing underwriters copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission with respect to the
registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or the rules of the NASD.
Such investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder(s) shall reasonably request.
(k) The Company shall enter into an underwriting agreement
with the managing underwriters selected for such underwriting by Holder(s) of a
Majority of the Warrants and the Warrant Securities requested to be included in
such underwriting. Such agreement shall be satisfactory in form and substance to
the Company, a Majority of such Holder(s) and such managing underwriters, and
shall contain such representations, warranties and covenants by the Company and
such other terms as are customarily contained in
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agreements of that type used by the managing underwriters. The Holder(s) shall
be parties to any underwriting agreement relating to an underwritten sale of
their Warrants and/or Warrant Securities and may, at their option, require that
any or all the representations, warranties and covenants of the Company to or
for the benefit of such underwriters shall also be made to and for the benefit
of such Holder(s). Such Holder(s) shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holder(s) and their intended
methods of distribution.
(l) In addition to the Warrants and the Warrant Securities,
upon the written request therefor by Holder(s) of the Warrants and the Warrant
Securities representing a Majority of such securities, the Company shall include
in the registration statement any other securities of the Company held by such
Holder(s) as of the date of filing of such registration statement, including,
without limitation, restricted shares of Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holder(s) of Warrants or Warrant Securities shall mean in
excess of fifty percent (50%) of the then outstanding Warrants or Warrant
Securities (assuming the exercise of all the Warrants) that (i) are not held by
the Company, an affiliate, officer, creditor, employee or agent thereof or any
of their respective affiliates, members of their family or persons acting as
nominees or in conjunction therewith or (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under the Act.
8. Adjustments to Exercise Price and Number of Shares.
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ss.8.1 Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price for the Common Stock shall forthwith be proportionately decreased
in the case of subdivision or increased in the case of combination. The
provisions of this Section 8.1 shall be applicable to successive subdivisions
and combinations.
ss.8.2 Stock Dividends and Distributions. In case the Company
shall pay a dividend in, or make a contribution of, shares of Common Stock or of
any capital stock of the Company convertible into Common Stock, the Exercise
Price for the Common Stock shall forthwith be proportionately decreased. An
adjustment made pursuant to this Section 8.2 shall be made as of the record date
for the subject stock dividend or distribution.
ss.8.3 Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price for the Common Stock pursuant to the provisions of Section
8.1 or Section 8.2 hereof, the number of shares of Common Stock issuable upon
the exercise of the Warrants at the adjusted exercise price for the Common Stock
shall be adjusted to the nearest full amount by multiplying a number equal to
the Exercise Price in effect immediately prior to such adjustment by the number
of shares of Common Stock issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
ss.8.4 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (a) the class of stock designated
as Common Stock in the charter of the Company, as in effect on the date hereof,
or (b) any other class of stock resulting from any change or reclassification of
such Common Stock consisting solely of a
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change or changes in par value, or from par value to no par value, or from no
par value to par value.
ss.8.5 Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company with, or merger of the Company
into, another corporation other than a consolidation or merger which does not
result in any reclassification or change of the outstanding shares of Common
Stock or other securities issuable upon exercise of the Warrants), or in the
case of any sale or conveyance to another person or entity of the property of
the Company as an entirety or substantially as an entirety, then, as a condition
of such consolidation, merger, sale or conveyance, the Company, or such
successor or purchasing entity, as the case may be, shall execute and deliver to
the Holder(s) a supplemental warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger by a holder of the number
of shares of Common Stock of the Company for which such Warrant might have been
exercised immediately prior to such consolidation, merger, sale or conveyance.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this Section 8.5 shall similarly apply to successive consolidations, mergers,
sales or conveyances.
ss.8.6 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than two cents ($.02) per share of Common Stock; provided,
however, that in such case any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at
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the time of and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to at least two cents
($.02) per share of Common Stock.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder(s) at the principal executive office of the Company,
for a new Warrant Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Securities in such
denominations as shall be designated by the Holder(s) thereof at the time of
such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock, Redeemable Warrants or other securities underlying the Warrants upon the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock, Redeemable Warrants or other
securities underlying the Warrants.
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11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants and
the Redeemable Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company shall at all times reserve and
keep available, solely for the purpose of issuance Upon the exercise of the
Warrants and the Redeemable Warrants, any other securities underlying the
Warrants and the Redeemable Warrants. The Company covenants and agrees that,
upon exercise of the Warrants and payment of the Exercise Price for the shares
of Common Stock or other securities underlying the Warrants, all shares of
Common Stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable, not subject to the preemptive or
similar rights of any shareholder and free from all taxes, liens and charges
with respect to the issuance thereof. The Company further covenants and agrees
that, upon exercise of the Redeemable Warrants underlying the Warrants and
payment of the exercise price for the shares of Common Stock or other securities
underlying the Redeemable Warrants, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid, non-assessable, not subject to the preemptive or similar rights of any
shareholder and free from all taxes, liens and charges with respect to the
issuance thereof. As long as the Warrants shall be outstanding, the Company
shall use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants and the Redeemable Warrants and all Redeemable Warrants
underlying the Warrants to be listed (subject to official notice of issuance) on
all securities exchanges on which the Common Stock or the Redeemable
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Warrants issued in the Initial Public Offering may then be listed and/or quoted
on the Nasdaq Stock Market.
12. Notices to Warrant Holder(s). Nothing contained in this
Agreement shall be construed as conferring upon the Holder(s) the right to vote
or to consent or to receive notice as a shareholder in respect of any meetings
of shareholders for the election of Directors or any other matter, or as having
any rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution payable otherwise than
in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its property,
assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event to the Holder(s) at least fifteen (15) days prior to the date
fixed as a record date or the date
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of closing the transfer books for the determination of the shareholders entitled
to receive such dividend, distribution, additional shares, convertible or
exchangeable securities, options, rights, warrants or subscription rights, or
entitled to vote on such proposed dissolution, liquidation, winding up or sale.
Such notice shall specify such record date or the date of closing the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any additional
shares or any convertible or exchangeable securities, options, rights, warrants
or subscription rights, or any proposed dissolution, liquidation, winding up or
sale.
13. Redeemable Warrants.
The form of the certificate representing Redeemable Warrants
(and the form of election to purchase shares of Common Stock upon the exercise
of Redeemable Warrants and the form of assignment printed on the reverse
thereof) shall be as set forth in Exhibit A and Exhibit B to that certain
Warrant Agreement, of even date herewith, between the Company and Continental
Stock Transfer & Trust Company, as warrant agent (the "Redeemable Warrant
Agreement"). Each Class A Redeemable Warrant issuable upon exercise of the
Warrants shall evidence the right to initially purchase one fully paid and
non-assessable share of Common Stock at an initial purchase price of $_____
[130% of the initial public offering price per share of Common Stock] per share
from the date of issuance of such Class A Redeemable Warrant until 5:30 p.m. New
York time on ________________, 2001 [the day before the 5th anniversary of the
effective date of the Registration Statement], at which time the Redeemable
Warrants, unless the exercise period has been extended, shall expire. Each Class
B Redeemable Warrant issuable upon exercise of the Warrants shall evidence the
right
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to initially purchase one fully paid and non-assessable share of Common Stock at
an initial purchase price of $_____ [110% of the initial public offering price
per share of Common Stock] per share from the date of issuance of such Class B
Redeemable Warrant until 5:30 p.m. New York time on ______________ __, 1998 [the
day before the 2nd anniversary of the effective date of the Registration
Statement], at which time the Redeemable Warrants, unless the exercise period
has been extended, shall expire. The exercise price of the Redeemable Warrants
and the number of shares of Common Stock issuable upon the exercise of the
Redeemable Warrants are subject to adjustment, whether or not the Warrants have
been exercised and the Redeemable Warrants have been issued, in the manner and
upon the occurrence of the events set forth in Section 8 of the Redeemable
Warrant Agreement, which is hereby incorporated herein by reference and made a
part hereof as if set forth in its entirety herein. Subject to the provisions of
this Agreement and upon issuance of the Redeemable Warrants underlying he
Warrants, each registered holder of a Redeemable Warrant shall have the right to
purchase from the Company (and the Company shall issue to such registered
holders) up to the number of fully paid and non-assessable shares of Common
Stock underlying a Redeemable Warrant (subject to adjustment as provided herein
and in the Redeemable Warrant Agreement), free and clear of all preemptive
rights of shareholders, provided that such registered holder complies with the
terms governing the exercise of the Redeemable Warrants, as set forth in the
Redeemable Warrant Agreement, and pays the applicable exercise price, determined
in accordance with the terms of the Redeemable Warrant Agreement. Upon exercise
of the Redeemable Warrants, the Company shall forthwith issue to the registered
holder of any such Redeemable Warrant, in his name or in such name as may be
directed by him, certificates for the number of shares of Common
24
<PAGE>
Stock so purchased. Except as otherwise provided in Section 1 and Section 6.1
hereof, the Redeemable Warrants underlying the Warrants shall be governed in all
respects by the terms of the Redeemable Warrant Agreement. The Redeemable
Warrants shall be transferable in the manner provided in the Redeemable Warrant
Agreement, and upon any such transfer, a new Redeemable Warrant Certificate
shall be issued promptly to the transferee. The Company covenants to, and agrees
with, the Underwriter and the Holder(s) that, without the prior written consent
of the Underwriter and the Holder(s) of a Majority of the Warrants and the
Warrant Securities, the Redeemable Warrant Agreement will not be modified
amended, cancelled, altered or superseded, and that the Company will send to the
Underwriter and each Holder(s), irrespective of whether or not the Warrants have
been exercised, any and all notices required by the Redeemable Warrant Agreement
to be sent to holders of the Redeemable Warrants.
14. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder(s) of the Warrants,
to the address of such Holder(s) as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in
Section 3.1 hereof or to such other address as the Company may
designate by notice to the Holder(s).
15. Supplements and Amendments. The Company and the
Underwriter may from time to time supplement or amend this Agreement without the
approval of any Holder
25
<PAGE>
of a Warrant Certificate (other than the Underwriter) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Underwriter may deem necessary or desirable and which the Company and
the Underwriter deem shall not adversely affect the interests of the Holder(s)
of Warrant Certificates.
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holder(s) and their respective successors, assigns and representatives.
17. Termination. This Agreement shall terminate at the close
of business on ____________, 2003 [the day before the 7th anniversary hereof].
Notwithstanding the foregoing, the indemnification provisions of Section 7 shall
survive such termination until the close of business on _______________, 2009
[the day before the 13th anniversary hereof].
18. Governing Law; Submission to Jurisdiction. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of the State of New York without giving
effect to the rules of such State governing the conflicts of laws.
The Company, the Underwriter and the Holder(s) hereby agree
that any action, proceeding or claim arising out of, or relating in any way to,
this Agreement shall be brought and enforced in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holder(s)
26
<PAGE>
hereby irrevocably waive any objection to such exclusive jurisdiction or
inconvenient forum. Any process or summons to be served upon any of the Company,
the Underwriter and the Holder(s) (at the option of the party bringing such
action, proceeding or claim) may be served by transmitting a copy thereof, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the address set forth in Section 14 hereof. Such mailing shall be
deemed personal service and shall be legal and binding upon the party so served
in any action, proceeding or claim. The Company, the Underwriter and the
Holder(s) agree that the prevailing party(ies) in any such action or proceeding
shall be entitled to recover from the other party(ies) all of its/their
reasonable legal costs and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.
19. Entire Agreement; Modification. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) and the Redeemable Warrant Agreement contain the entire understanding
between the parties hereto with respect to the subject matter hereof and may not
be modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended to be, nor
should they be construed as, a part of this Agreement and shall be given no
substantive effect.
27
<PAGE>
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or entity other than the Company and
the Underwriter and any other registered Holder(s) of the Warrant Certificates
or Warrant Securities any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company and the Underwriter and any other Holder(s) of the Warrant Certificates
or Warrant Securities.
23. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] IMATEC, LTD.
By:_____________________________
Name: Dr. Hanoch Shalit
Title: Chief Executive Officer
Attest:
___________________________
A.S. GOLDMEN & CO., INC.
By:____________________________
Name: Stuart Winkler
Title: Vice President
28
<PAGE>
EXHIBIT A
---------
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, __________________, 2001
No. W-__
WARRANT CERTIFICATE
This Warrant Certificate certifies that ______________, or
registered assigns, is the registered holder of Warrants to purchase initially,
at any time from ______________, 1997 [the 1st anniversary of the effective date
of the Registration Statement] until 5:30 p.m. New York time on
_________________, 2001 [the day before the 5th anniversary of the effective
date of the Registration Statement] ("Expiration Date"), up to 100,000
fully-paid and non-assessable shares of common stock, par value $.0001 per share
(the "Common Stock"), of IMATEC, LTD., a Delaware corporation (the "Company"),
and/or up to an aggregate 400,000 Class A redeemable warrants (the "Class A
Redeemable Warrants"), and/or up to an aggregate 400,000 Class B redeemable
warrants (the "Class B Redeemable Warrants") (the Class A Warrants and the Class
B Warrants are collectively referred to as the "Redeemable Warrants"), the
shares of Common Stock and the Redeemable Warrants are referred to herein
individually as a "Security" and collectively as the "Securities") (each
Redeemable Warrant initially entitling the holder thereof to purchase one
fully-paid and non-assessable share of Common Stock), at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $____
per share of Common Stock [140% of the initial public offering price per share
of Common Stock], $____ per Class A Redeemable Warrant [120% of the initial
public offering price per Class A Redeemable Warrant] and $____ per Class B
Redeemable Warrant [120% of the initial public offering price per Class B
Redeemable Warrant], upon surrender of this Warrant Certificate and payment of
the
A-1
<PAGE>
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the warrant agreement dated as of _____________, 1996 [the
effective date of the Registration Statement], by and between the Company and
A.S. Goldmen & Co., Inc. (the "Warrant Agreement"). Payment of the Exercise
Price shall be made by certified or official bank check in New York Clearing
House Funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon shall, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
warrant certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate the right to purchase a like number of Securities shall be issued to
the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided herein and in the Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with such
transfer.
Upon the purchase of less than all of the Securities
purchasable pursuant to this Warrant Certificate, the Company shall forthwith
issue to the holder hereof a new Warrant Certificate representing the right to
purchase the remaining Securities.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of _______________________, 1996
IMATEC, LTD.
[SEAL] By:______________________________
Name: Dr. Hanoch Shalit
Title: Chief Executive Officer
Attest:
- -----------------------------
A-3
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase:
[ ] ______________________ shares of Common Stock;
[ ] ______________________ Class A Redeemable Warrants;
[ ] ______________________ Class B Redeemable Warrants;
[ ] ______________________ shares of Common Stock together with an equal
number of Redeemable Warrants; or
CHECK APPROPRIATE BOX
_____________ and herewith tenders in payment for such
Securities a certified or official bank check payable in New York Clearing House
Funds to the order of Imatec, Ltd. in the amount of $_____, all in accordance
with the terms hereof. The undersigned requests that certificates for such
securities be registered in the name of
_______________________________________________________________________________
whose address is
_______________________________________________________________________________
and that such certificates be delivered to
_______________________________________________________________________________
whose address is
_______________________________________________________________________________
Dated: Signature _______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
-----------------------------------------
(Insert Social Security or Other Identifying Number of
Holder(s))
A-4
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase:
[ ] ______________________ shares of Common Stock;
[ ] ______________________ Class A Redeemable Warrants;
[ ] ______________________ Class B Redeemable Warrants;
[ ] ______________________ shares of Common Stock together with an equal
number of Redeemable Warrants; or
CHECK APPROPRIATE BOX
in accordance with the terms of Section 3.2 of the
Underwriter's Warrant Agreement, dated as of _____________, 1996, by and between
Imatec, Ltd. and A.S. Goldmen & Co., Inc. The undersigned requests that
certificates for such securities be registered in the name of
_______________________________________________________________________________
whose address is
_______________________________________________________________________________
and that such certificates be delivered to
_______________________________________________________________________________
whose address is
_______________________________________________________________________________
Dated: Signature _______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
-------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder(s))
A-5
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________ here sells, assigns and transfers unto
_______________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature _______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
------------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder(s))
A-6
<PAGE>
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "IMATEC, LTD.", FILED IN THE OFFICE ON THE TWENTIETH DAY OF
SEPTEMBER, A.D. 1995, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
[SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
----------------------------------------
Edward J. Freel, Secretary of State
2541134 8100 [SEAL OF SECRETARY'S OFFICE AUTHENTICATION: 7647534
OF THE STATE OF DELAWARE] DATE: 09-21-95
<PAGE>
CERTIFICATE OF INCORPORATION
OF
IMATEC, LTD.
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the Corporation is Imatec, Ltd.
SECOND: The registered office of the Corporation in the State of Delaware
is to be located at 32 Loockerman Square, Suite L-100, Dover, Delaware 19901.
The registered office is in the county of Kent. The name of its registered agent
at that address is The Prentice-Hall Corporation System, Inc.
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 Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Twenty-Two Million (22,000,000), Twenty Million
(20,000,000) of which shall be shares of common stock, the par value of each
such share is $.0001, and Two Million (2,000,000) shares of which shall be
shares of preferred stock, the par value of each such share is $.0001, all of
which preferred stock may be issued by the Board of Directors from time to time
in one or more series with such voting rights, terms of redemption, redemption
prices, liquidation preferences, and such other rights, designations and
preferences as may be determined from time to time by the Board of Directors all
without any further vote or action on the part of stockholders.
FIFTH: The name and the mailing address of the sole incorporator is:
Name Mailing Address
---- ---------------
Nancy Udolf, Esq. Zukerman Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
SIXTH: Elections of directors need not be by ballot unless the by-laws of
the Corporation shall so provide.
SEVENTH: In furtherance and not in limitation of the powers conferred upon
the Board of Directors by law, the Board of Directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of the Corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the Board of Directors.
EIGHTH: 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 stockholders or 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.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this certificate in the manner now or hereafter
prescribed by law, and all rights and powers conferred herein on shareholders,
directors and officers are granted subject to this reservation.
TENTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall 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 person.
ELEVENTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of
subsection b of Section 102 of the General Corporation Law of Delaware, as the
same may be amended and supplemented.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of September,
1995.
/s/ Nancy Udolf
----------------------------
Nancy Udolf, Esq.
<PAGE>
BY-LAWS
of
Imatec, Ltd.
(A Delaware Corporation)
ARTICLE I
Stockholders
Section 1. Place of Meetings. Meetings of stockholders 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.
Section 2. Annual Meetings. Annual meetings of stockholders will be held at
such time as shall be designated from time to time by the Board of Directors. At
each annual meeting the stockholders shall elect a Board of Directors by
plurality vote and transact such other business as may properly be brought
before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
called by the Board of Directors, the President or any two officers of the
corporation.
Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and hour of the meeting shall be given by
or at the direction of the Board of Directors or such other person or persons
calling such meeting to each stockholder entitled to vote at the meeting at
least ten, but not more than sixty, days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is called.
Section 5. Quorum; Adjournments of Meetings. The holder(s) of a majority
of the issued and outstanding shares of the capital stock of the corporation
entitled to vote at a meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at such meeting; but, if
there be less than a quorum, the holders of a majority of the stock so present
or represented may adjourn the meeting to another time, or place, from time to
time until a quorum shall be present, whereupon the meeting may be held, as
adjourned, without further notice, except as required by law, and any business
may be transacted thereat which might have been transacted at the meeting as
originally called.
Section 6. Voting. At any meeting of the stockholders every registered
owner of shares entitled to vote may vote in person or by proxy and, except as
otherwise provided by statute, in the Certificate of Incorporation or these
By-Laws, shall have one vote for each such share standing in his name on the
books of the corporation. Except as otherwise required by statute, the
Certificate of Incorporation or these By-Laws, all corporate action, other than
the election of directors, to be taken by vote of the stockholders shall be
authorized by a majority of the votes cast at such meeting by the holders of
shares entitled to vote thereon, a quorum being present.
Section 7. Inspectors of Election. The Board of Directors, or, if the Board
shall not have made the appointment, the Chairman presiding at any meeting of
stockholders, shall have the power to appoint one or more persons to act as
inspectors of election at the meeting or any adjournment thereof, but no
candidate for the office of director shall be appointed as an inspector at any
meeting for the election of directors.
Section 8. Chairman of Meetings. The Chairman of the Board, or if none, the
President, shall preside at all meetings of the stockholders. In the absence of
such officer, a majority of the members of the Board of Directors present in
person at such meeting may appoint any other officer or director to act as
Chairman of the meeting.
Section 9. Secretary of Meetings. The Secretary of the corporation shall
act as secretary of all meetings of the stockholders. In the absence of the
Secretary, the Chairman of the meeting shall appoint any other person to act as
secretary of the meeting.
ARTICLE II
Board of Directors
Section 1. Number of Directors. The number of directors which shall
constitute the Board of Directors shall be not less than one (1) nor more than
ten (10). The Board of Directors shall initially consist of one (1) member;
provided, however, that the number of directors may from time to time be
increased or decreased by the Board of Directors or by the stockholders.
Section 2. Vacancies. Whenever any vacancy shall occur in the Board of
Directors by reason of death, resignation, increase in the number of directors
or otherwise, it may be filled only by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director, for the
balance of the term, or, if the Board has not filled such vacancy or if there
are no remaining directors, it may be filled by the stockholders.
Section 3. First Meeting. The first meeting of each newly elected Board of
Directors, of which no notice shall be necessary, shall be held immediately
following the annual meeting of stockholders or any adjournment thereof at the
place the annual meeting of stockholders was held at which such directors were
elected, or at such other place as a majority of the members of the newly
elected Board who are then present shall determine, for the election or
appointment of officers for the ensuing year and the transaction of such other
business as may be brought before such meeting.
Section 4. Regular Meetings. Regular meetings of the Board of Directors,
other than the first meeting, may be held without notice at such times and
places as the Board of Directors may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of Directors may
be called by order of the Chairman, the President or any two directors. Notice
of the time and place of each special meeting shall be given by or at the
direction of the person or persons calling the meeting or by telephoning,
telegraphing or delivering personally the same at least twenty-four hours before
the meeting to each director. Except as otherwise specified in the notice
thereof, or as required by statute, the certificate of Incorporation or these
By-Laws, any and all business may be transacted at any special meeting.
Section 6. Place of Conference Call Meeting. Any meeting at which one or
more of the members of the Board of Directors or of a committee designated by
the Board of Directors shall participate by means of conference telephone or
similar communications equipment shall be deemed to have been held at the place
designated for such meeting, provided that at least one member is at such place
while participating in the meeting.
Section 7. Organization. Every meeting of the Board of Directors shall be
presided over by the Chairman of the Board or the President. In the absence of
any of such officers, a presiding officer shall be chosen by a majority of the
directors present. The Secretary of the corporation shall act as secretary of
the meeting, but, in his absence, the presiding officer may appoint any person
to act as secretary of the meeting.
Section 8. Quorum; Vote. A majority of the directors then in office (but in
no event less than two-thirds of the total number of directors) shall constitute
a quorum for the transaction of business, but less than a quorum may adjourn any
meeting to another time or place from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, all matters coming before any meeting of the
Board of Directors shall be decided by the vote of a majority of the directors
present at the meeting, a quorum being present.
Section 9. Removal of Directors. Any one or more of the directors shall be
subject to removal with or without cause at any time by the stockholders.
Section 10. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the Board, designate one or more committees,
each committee to consist of one or more directors of the corporation. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member 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 of 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 be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an Agreement of Merger or Consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-laws of the corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. 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. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required.
ARTICLE III
Notices
Section 1. General. 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 notice to such director or stockholder, at his address as it appears
on the records of the corporation, with postage thereon prepaid, and such notice
<PAGE>
shall be deemed to be given at the time when the same shall be deposited in the
United States mail or with an overnight courier service. Notice to directors may
also be given personally or by telephone, telegram, telex or facsimile.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provision 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 IV
Officers
Section 1. General. The Board of Directors shall elect the officers of the
corporation, which shall include a President, a secretary and a treasurer and
such other or additional officers (including, without limitation, a Chairman of
the Board, one or more Managing Directors, one or more Vice-Chairmen of the
Board, a Chief Executive Officer, a Chief Operating Officer, Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers) as
the Board of Directors may designate.
Section 2. Term of Office; Removal and Vacancy. Each officer shall hold his
office until the meeting of the Board of Directors following the next annual
meeting of stockholders and until his successor has been elected and qualified,
or until his earlier resignation or removal. Any officer of agent shall be
subject to removal with or without cause at any time by the Board of Directors.
Vacancies in any office, whether occurring by death, resignation, removal or
otherwise, may be filled by the Board of Directors.
Section 3. Powers and Duties. Each of the officers of the corporation
shall, unless otherwise ordered by the Board of Directors, have such powers and
duties as generally pertain to their respective offices as well as such powers
and duties as from time to time may be conferred upon him by the Board of
Directors. Unless otherwise ordered by the Board of Directors after the adoption
of these By-Laws, the Chairman, or if none, the President, shall be the chief
executive officer of the corporation.
Section 4. Power to Vote Stock. Unless otherwise ordered by the Board of
Directors, either the Chairman or President shall have full power and authority
on behalf of the corporation to attend and to vote at any meeting of
stockholders of any corporation in which the corporation may hold stock, and may
exercise on behalf of the corporation any and all of the rights and powers
incident to the ownership of such stock at any such meeting and shall have power
and authority to execute and deliver proxies, waivers and consents on behalf of
the corporation in connection with the exercise by the corporation of the rights
and powers incident to the ownership of such stock. The Board of Directors, from
time to time, may confer like powers upon any other person or persons.
ARTICLE V
Capital Stock
Section 1. Certificates of Stock. Certificates representing shares of stock
of the corporation shall be in such form complying with the statute as the Board
of Directors may from time to time prescribe and shall be signed by the Chairman
of the Board, or a Vice-Chairman of the Board or the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary.
Section 2. Transfer of Stock. Shares of capital stock of the corporation
shall be transferable on the books of the corporation only by the holder of
record thereof, in person or by duly authorized attorney, upon surrender and
cancellation of certificates for a like number of shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed, and
with such proof of the authenticity of the signature and of authority to
transfer, and of payment of transfer taxes, as the corporation or its agents may
require.
Section 3. Ownership of Stock. The corporation shall be entitled to treat
the holder of record of any share or shares of stock as the owner thereof in
fact 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
expressly provided by law.
ARTICLE VI
Miscellaneous
Section 1. Corporate Seal. The seal of the corporation shall be circular in
form and shall contain the name of the corporation and the year and State of
incorporation.
Section 2. Fiscal Year. The Board of Directors shall have power to fix, and
from time to time to change, the fiscal year of the corporation.
<PAGE>
ARTICLE VII
Amendment
The Board of Directors shall have the power to adopt, amend or repeal the
By-Laws of the corporation subject to the power of the stockholders to amend or
repeal the By-Laws made or altered by the Board of Directors.
ARTICLE VIII
Indemnification
The corporation shall indemnify, to the extent permitted by the General
Corporation Law of Delaware as amended from time to time, (a) each of its
present and former officers and directors, and (b) each of its present or former
officers, directors, agents or employees who are serving or have served at the
request of the corporation as an officer, director or partner (or in any similar
position) 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 in connection with
any threatened, pending or completed action, suit or proceeding, whether by or
in the right of the corporation by a third party or otherwise, to which such
person is made a party or threatened to be made a party by reason of such office
in the corporation or in another corporation, partnership, joint venture, trust
or other enterprise. Such indemnification shall inure to the benefit of the
heirs, executors and administrators of any indemnified person. To the extent
permitted by the General Corporation Law of Delaware, under general or specific
authority granted by the Board of Directors, (a) the corporation by specific
action of the Board of Directors may furnish such indemnification to its agents
and employees with respect to their activities on behalf of the corporation; (b)
the corporation by specific action of the Board of Directors may furnish such
indemnification to each present or former officer, director, employee or agent
of a constituent corporation absorbed in a consolidation or merger with the
corporation and to each officer, director, agent or employee who is or was
serving at the request of such constituent corporation as an officer, director,
agent or employee of an other corporation, partnership, joint venture, trust or
other enterprise; and (c) the corporation may purchase and maintain
indemnification insurance on behalf of any of the officers, directors, agents or
employees whom it is required or permitted to indemnify as provided in this
Article.
<PAGE>
NUMBER SHARES
IMATEC, LTD.
INCORPORATED UNDER THE LAWS CUSIP 000000 00 0
OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE
OF $.0001 PER SHARE OF
IMATEC, LTD.
transferable on the books of the Corporation by the holder hereof in person
or by his duly authorized Attorney upon surrender of this certificate properly
endorsed.
This certificate is not valid unless countersigned by the Transfer Agent
WITNESS the facsimile seal of the Corporation and the facsimile signature
of its duly authorized officers.
Dated:
/s/ xxxxxxxxxxxxxxxxx /s/ xxxxxxxxxxxxxxx
- ------------------------- ------------------------------------
SECRETARY PRESIDENT
IMATEC, LTD.
CORPORATE SEAL
1995 DELAWARE
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, N.J. Transfer Agent
By
Authorized Officer
<PAGE>
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
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:
TEN COM - as tenants in common UNIF GIFT MIN ACT- _____Custodian________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to Minors
right of survivorship and Act__________________________
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,___________________ hereby sell, assign and tranfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
|-------------------------------------|
|-------------------------------------|
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated ________________________________
_____________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME 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>
EXHIBIT 4.2
================================================================================
IMATEC, LTD.
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
----------------
WARRANT AGREEMENT
Dated as of ______________, 1996
================================================================================
<PAGE>
WARRANT AGREEMENT, dated this ___ day of ________ 1996 [the effective
date of the Registration Statement], by and between IMATEC, LTD., a Delaware
corporation (the "Company"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a
New York corporation.
WITNESSETH:
WHEREAS, in connection with (i) the offering to the public of up to
1,000,000 shares (the "Shares") of the Company's common stock, par value $.0001
per share, and up to 4,000,000 Class A redeemable warrants (the "Class A
Warrants"), each Class A Warrant entitling the holder thereof to purchase one
additional Share and 4,000,000 Class B redeemable warrants (the "Class B
Warrants"), each Class B Warrant entitling the holder thereof to purchase one
additional Share (the Class A Warrants and the Class B Warrants collectively
referred to as the "Warrants"), (ii) the sale by certain selling security
holders of the Company (the "Selling Security Holders") of 4,000,000 Class A
Redeemable Warrants (and the 4,000,000 Shares underlying such Class A Warrants),
(iii) the over-allotment option granted to A.S. Goldmen & Co., Inc., the
underwriter (the "Underwriter") in the public offering referred to above, to
purchase up to an additional 150,000 Shares and/or an additional 600,000 Class A
Warrants and/or an additional 600,000 Class B Warrants (the "Over-Allotment
Option"), and (iv) the sale to the Underwriter or its designees of warrants (the
"Underwriter's Warrants") to purchase up to 100,000 Shares and/or 400,000 Class
A Warrants and/or 400,000 Class B Warrants, the Company will issue up to
14,800,000 Warrants (subject to increase as provided herein and in the
Underwriter's Warrant Agreement (as such term is defined in Section 1(u)
hereof));
<PAGE>
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent (as defined in Section
1(x) hereof) to act on behalf of the Company, and the Warrant Agent is willing
to so act, in connection with the issuance, registration, transfer and exchange
of certificates representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the
Underwriter, the holders of certificates representing the Warrants and the
Warrant Agent, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Change of Shares" shall have the meaning assigned to such
term in Section 8(a)(i) of this Agreement.
(c) "Commission" shall mean the Securities and Exchange
Commission.
(d) "Common Stock" shall mean stock of the Company of any
class, whether now or hereafter authorized, which has the right to participate
in the voting and in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
(e) "Company" shall have the meaning assigned to such term in
the first (1st) paragraph of this Agreement.
2
<PAGE>
(f) "Corporate Office" shall mean the office of the Warrant
Agent at which at any particular time its principal business in New York, New
York, shall be administered, which office is located on the date hereof at 2
Broadway, New York, New York 10004.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder (as
defined in Section 1(o) hereof) thereof or his attorney duly authorized in
writing, and (ii) payment in cash or by check made payable to the Warrant Agent
for the account of the Company of an amount in lawful money of the United States
of America equal to the applicable Purchase Price (as defined in Section 1(l)
hereof).
(i) "Initial Warrant Exercise Date" shall mean __________,
1996 [the effective date of the Registration Statement].
(j) "Initial Warrant Redemption Date" shall mean __________,
1997 [the date nine (9) months after the effective date of the Registration
Statement] for the Class A Warrants and shall mean __________________, 1998 [the
date twenty-four (24) months after the effective date] for the Class B Warrants.
(k) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(l) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8 hereof, __________ dollars ($__________) per
Share [130% of the initial public offering price per Share of Common Stock] for
the Class A Warrants, and shall
3
<PAGE>
mean ______________ dollars ($___________) per Share [110% of the initial public
offering price per Share of Common Stock] for the Class B Warrants.
(m) "Over-Allotment Option" shall have the meaning assigned to
such term in the first (1st) WHEREAS clause of this Agreement.
(n) "Redemption Date" shall mean the date (which may not occur
before the Initial Warrant Redemption Date) fixed for the redemption of the
Warrants in accordance with the terms hereof.
(o) "Registered Holder" shall mean the person in whose name
any certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6(b) hereof.
(p) "Selling Security Holders" shall have the meaning assigned
to such term in the first (1st) WHEREAS clause of this Agreement.
(q) "Shares" shall have the meaning assigned to such term in
the first (1st) WHEREAS clause of this Agreement,
(r) "Subsidiary" or "Subsidiaries" shall mean any corporation
or corporations, as the case may be, of which stock having ordinary power to
elect a majority of the board of directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(s) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, New York, New York, or its authorized successor.
4
<PAGE>
(t) "Underwriter" shall have the meaning assigned to such term
in the first (1st) WHEREAS clause of this Agreement.
(u) "Underwriter's Warrant Agreement" shall mean the agreement
dated as of _______________, 1996 [the effective date of the Registration
Statement] between the Company and the Underwriter relating to and governing the
terms and provisions of the Underwriter's Warrants.
(v) "Underwriter's Warrants" shall have the meaning assigned
to such term in the first (1st) WHEREAS clause of this Agreement.
(w) "Underwriting Agreement" shall mean the underwriting
agreement dated _______________, 1996 [the effective date of the Registration
Statement] between the Company and the Underwriter relating to the purchase for
resale to the public of 1,000,000 Shares, 4,000,000 Class A Redeemable Warrants
4,000,000 Class B Redeemable Warrants (without giving effect to the
Over-Allotment Option).
(x) "Warrant Agent" shall mean Continental Stock Transfer &
Trust Company, New York, New York or its authorized successor.
(y) "Warrant Certificate" shall mean a certificate
representing the Class A Warrants substantially in the form annexed hereto as
Exhibit A and shall mean a certificate representing the Class B Warrants
substantially in the form annexed hereto as Exhibit B.
(z) "Warrant Expiration Date" shall mean, unless the Warrants
are redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (New
York time) on __________, 1998 [the day before the 2nd anniversary of the
effective date of the Registration Statement] for the Class A Warrants, and
shall mean, 5:00 p.m. (New York time) on _____________, 2001 [the day before the
5th anniversary of the effective date of
5
<PAGE>
the Registration Statement] for the Class B Warrants, or, if such date shall in
the State of New York be a holiday or a day on which banks are authorized to
close, then 5:00 p.m. (New York time) on the next following day which in the
State of New York is not a holiday or a day on which banks are authorized to
close, subject to the Company's right, prior to the Warrant Expiration Date,
with the consent of the Underwriter, to extend such Warrant Expiration Date on
five (5) business days prior written notice to the Registered Holders.
(aa) "Warrants" shall have the meaning assigned to such term
in the first (1st) WHEREAS clause of this Agreement.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one (1) share of Common Stock upon the exercise thereof, subject
to modification and adjustment as provided in Section 8 hereof.
(b) Upon execution of this Agreement, Warrant Certificates
representing 8,000,000 Class A Warrants and 4,000,000 Class B Warrants to
purchase up to an aggregate of 12,000,000 shares of Common Stock (subject to
modification and adjustment as provided in Section 8 hereof), including
4,000,000 Class A Warrants in the names of the Selling Security Holders, shall
be executed by the Company and delivered to the Warrant Agent.
(c) Upon exercise of the Over-Allotment Option, in whole or in
part, Warrant Certificates representing up to 600,000 Class A Warrants and/or up
to 600,000 Class B Warrants to purchase up to an aggregate of 1,200,000 shares
of Common Stock
6
<PAGE>
(subject to modification and adjustment as provided in Section 8 hereof) shall
be executed by the Company and delivered to the Warrant Agent.
(d) Upon exercise of the Underwriter's Warrants, Warrant
Certificates representing up to 400,000 Class A Warrants and/or 400,000 Class B
Warrants to purchase up to an aggregate of 800,000 shares of Common Stock
(subject to modification and adjustment as provided in Section 8 hereof and in
the Underwriter's Warrant Agreement), shall be countersigned, issued and
delivered by the Warrant Agent upon written order of the Company signed by its
Chairman of the Board, President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary.
(e) From time to time, up to each of the Warrant Expiration
Dates, the Warrant Agent shall countersign and deliver Warrant Certificates in
required denominations of one or whole number multiples thereof to the person
entitled thereto in connection with any transfer or exchange permitted under
this Agreement. No Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant Certificates issued upon
any transfer or exchange of Warrants, (iii) Warrant Certificates issued in
replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7 hereof, (iv) Warrant Certificates issued pursuant to the
Underwriter's Warrant Agreement (including Warrants in excess of the 400,000
Class A Warrants and 400,000 Class B Warrants issued as a result of the
antidilution provisions contained in the Underwriter's Warrant Agreement), and
(v) at the option of the Company, Warrant Certificates in such form as may be
approved by its Board of Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock purchasable upon the
exercise of a Warrant or the redemption price therefor.
7
<PAGE>
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A and Exhibit B (the provisions of which are
hereby incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant Certificates shall
be dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen or destroyed Warrant
Certificates).
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though the officer of
the Company who signed such Warrant Certificates had not ceased to hold such
office.
8
<PAGE>
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof) and in the applicable Warrant Certificate. A Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, together
with payment in cash or by check made payable to the Warrant Agent for the
account of the Company of an amount in lawful money of the United States of
America equal to the applicable Purchase Price, have been received by the
Warrant Agent. The person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder of such securities
as of the close of business on the Exercise Date. As soon as practicable on or
after the Exercise Date and in any event within five (5) business days after
such date, the Warrant Agent, on behalf of the Company, shall cause to be issued
to the person or persons entitled to receive the same a Common Stock certificate
or certificates for the shares of Common Stock deliverable upon such exercise,
and the Warrant Agent shall deliver the same to the person or persons entitled
thereto. Upon the exercise of any Warrants, the Warrant Agent shall promptly
notify the Company in writing of such fact and of the number of securities
delivered upon such exercise and, subject to Section 4(b) hereof, shall cause
all payments in cash or by check made payable to the order of the Company in
respect of the Purchase Price to be deposited promptly in the Company's bank
account or delivered to the Company.
9
<PAGE>
(b) At any time upon the exercise of any Warrants after
__________, 1997 [the 1st anniversary of the effective date of the Registration
Statement], the Warrant Agent shall, on a daily basis, within two (2) business
days after any such exercise, notify the Underwriter or its successors or
assigns of the exercise of any such Warrants and shall, on a weekly basis
(subject to collection of funds constituting the tendered Purchase Price, but in
no event later than five (5) business days after the last day of the calendar
week in which such funds were tendered), remit to the Underwriter or its
successors or assigns an amount equal to four percent (4%) of the Purchase Price
of such Warrants being then exercised unless the Underwriter or its successors
or assigns shall have notified the Warrant Agent that the payment of such amount
with respect to any such Warrant is violative of the rules and regulations
promulgated under the Exchange Act, the rules and regulations of the NASD or
applicable state securities or "blue sky" laws, or the Warrants are those
underlying the Underwriter's Warrants, in any of which events the Warrant Agent
shall have to pay such amount to the Company; provided, however, that the
Warrant Agent shall not be obligated to pay any amounts pursuant to this Section
4(b) during any week that such amounts payable are less than one thousand
dollars ($1,000) and the Warrant Agent's obligation to make such payments shall
be suspended until the amount payable aggregates one thousand dollars ($1,000),
and provided further, that, in any event, any such payment (regardless of
amount) shall be made not less frequently than monthly.
(c) The Company shall not be obligated to issue any fractional
share interests or fractional warrant interests upon the exercise of any Warrant
or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction
10
<PAGE>
equal to or greater than one-half (1/2) shall be rounded up to the next full
share or Warrant, as the case may be. Any fraction less than one-half shall be
eliminated.
SECTION 5. Reservation of Shares, Listing, Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that, upon exercise of the Warrants and payment of the
Purchase Price for the shares of Common Stock underlying the Warrants, all
shares of Common Stock which shall be issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable, free from all preemptive or
similar rights, and free from all taxes, liens and charges with respect to the
issuance thereof, and that upon issuance such shares shall be listed or quoted
on each securities exchange, if any, on which the other shares of outstanding
Common Stock are then listed or quoted, or if not then so listed or quoted on
each place (whether the Nasdaq Stock Market, Inc., the NASD Over-the-Counter
Bulletin Board, the National Quotation Bulletin Board "Pink Sheets" or
otherwise) on which the other shares of outstanding Common Stock are listed or
quoted.
(b) The Company covenants that if any securities reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post-effective amendment to a registration statement, use its best efforts to
cause the same to become effective, keep such registration statement
11
<PAGE>
current while any of the Warrants are outstanding and deliver a prospectus which
complies with Section 10(a)(3) of the Act, to the Registered Holder exercising
the Warrant (except, if in the opinion of counsel to the Company, such
registration is not required under the federal securities law or if the Company
receives a letter from the staff of the Commission stating that it would not
take any enforcement action if such registration is not effected). The Company
will use its best efforts to obtain appropriate approvals or registrations under
the state "blue sky" securities laws of all states in which Registered Holders
reside. Warrants may not be exercised by, nor may shares of Common Stock be
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in
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part. Warrant Certificates to be so exchanged shall be surrendered to the
Warrant Agent at its Corporate Office, and the Company shall execute and the
Warrant's Agent shall countersign, issue and deliver in exchange therefor the
Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
assignment form, as the case may be, on the reverse thereof shall be duly
endorsed or be accompanied by a written instrument or instruments of
subscription or assignment, in form satisfactory to the Company and the Warrant
Agent, duly executed by the Registered Holder thereof or his attorney duly
authorized in writing.
(d) No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates. However, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange shall be promptly cancelled by the Warrant Agent.
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(f) Prior to due presentment for registration or transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal number of Warrants. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares of Common
Stock Deliverable.
(a) (i) Except as hereinafter provided, in the event the
Company shall, at any time or from time to time after the date hereof, sell any
shares of Common Stock for a consideration per share less than the Purchase
Price or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price for the Warrants (whether
or not the
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same shall be issued and outstanding) in effect immediately prior to such Change
of Shares shall be changed to a price (including any applicable fraction of a
cent to the nearest cent) determined by dividing (A) the sum of (x) the total
number of shares of Common Stock outstanding immediately prior to such Change of
Shares, multiplied by the Purchase Price in effect immediately prior to such
Change of Shares, and (y) the consideration, if any, received by the Company
upon such sale, issuance, subdivision or combination by (B) the total number of
shares of Common Stock outstanding immediately after such Change of Shares;
provided, however, that in no event shall the Purchase Price be adjusted
pursuant to this computation to an amount in excess of the Purchase Price in
effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a)(i) the following provisions shall be applicable:
(A) In case of the issuance or sale of shares of
Common Stock (or of other securities deemed hereunder to involve the issuance or
sale of shares of Common Stock) for a consideration part or all of which shall
be cash, the amount of the cash portion of the consideration therefor deemed to
have been received by the Company shall be (i) the subscription price, if shares
of Common Stock are offered by the Company for subscription, or (ii) the public
offering price (before deducting therefrom any compensation paid or discount
allowed in the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services, or any expenses incurred in connection
therewith), if such securities are sold to underwriters or dealers for public
offering without a subscription offering, or (iii) the gross amount of cash
actually received by the Company for such securities, in any other case.
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(B) In case of the issuance or sale (otherwise than
as a dividend or other distribution on any stock of the Company, and otherwise
than on the exercise of options, rights or warrants or the conversion or
exchange of convertible or exchangeable securities) of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be other
than cash, the amount of the consideration therefor other than cash deemed to
have been received by the Company shall be the value of such consideration as
determined in good faith by the Board of Directors of the Company on the basis
of a record of values of similar property or services.
(C) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(D) The reclassification of securities of the Company
other than shares of Common Stock into securities including shares of Common
Stock shall be deemed to involve the issuance of such shares of Common Stock for
a consideration other than cash immediately prior to the close of business on
the date fixed for the determination of security holders entitled to receive
such shares, and the value of the consideration allocable to such shares of
Common Stock shall be determined as provided in subsection (B) of this Section
8(a)(i).
(E) The number of shares of Common Stock at any one
time outstanding shall be deemed to include the aggregate maximum number of
shares issuable
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(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
(ii) Upon each adjustment of the Purchase Price pursuant to
this Section 8, the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be the number derived by multiplying the number
of shares of Common Stock purchasable immediately prior to such adjustment by
the Purchase Price in effect prior to such adjustment and dividing the product
so obtained by the applicable adjusted Purchase Price.
(b) In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share (determined as provided in Section
8(a)(i) hereof and as provided below) less than the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, or without consideration (including the
issuance of any such securities by way of dividend or other distribution), the
Purchase Price for the Warrants (whether or not the same shall be issued and
outstanding) in effect immediately prior to the issuance of such options, rights
or warrants, or such convertible or exchangeable securities, as the case may be,
shall be reduced to a price determined by making the computation in accordance
with the provisions of Section 8(a)(i) hereof, provided that:
(A) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable or that may become issuable under such
options, rights or warrants (assuming exercise in full even if not then
currently exercisable or currently exercisable in full) shall be deemed to be
issued and outstanding at the time such options,
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rights or warrants were issued, for a consideration equal to the minimum
purchase price per share provided for in such options, rights or warrants at the
time of issuance, plus the consideration, if any, received by the Company for
such options, rights or warrants; provided, however, that upon the expiration or
other termination of such options, rights or warrants, if any thereof shall not
have been exercised, the number of shares of Common Stock deemed to be issued
and outstanding pursuant to this subsection (A) (and for the purposes of
subsection (E) of Section 8(a)(i) hereof) shall be reduced by the number of
shares as to which options, warrants and/or rights shall have expired, and such
number of shares shall no longer be deemed to be issued and outstanding, and the
Purchase Price then in effect shall forthwith be readjusted and thereafter be
the price that it would have been had adjustment been made on the basis of the
issuance only of the shares actually issued plus the shares remaining issuable
upon the exercise of those options, rights or warrants as to which the exercise
rights shall not have expired or terminated unexercised.
(B) The aggregate maximum number of shares of Common
Stock issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(B) (and for the purposes of
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subsection (E) of Section 8(a)(i) hereof) shall be reduced by the number of
shares as to which the conversion or exchange rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding, and the Purchase Price then in effect shall forthwith
be readjusted and thereafter be the price that it would have been had adjustment
been made on the basis of the issuance only of the shares actually issued plus
the shares remaining issuable upon conversion or exchange of those convertible
or exchangeable securities as to which the conversion or exchange rights shall
not have expired or terminated unexercised.
(C) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in subsection
(A) of this Section 8(b), or in the price per share or ratio at which the
securities referred to in subsection (B) of this Section 8(b) are convertible or
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, to the extent not theretofore exercised, shall be deemed to
have expired or terminated on the date when such price change became effective
in respect of shares not theretofore issued pursuant to the exercise or
conversion or exchange thereof, and the Company shall be deemed to have issued
upon such date new options, rights or warrants or convertible or exchangeable
securities.
(c) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a Subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification or
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change of the then outstanding shares of Common Stock or other capital stock
issuable upon exercise of the Warrants), or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, then, as a condition of such reclassification,
change, consolidation, merger, sale or conveyance, the Company, or such
successor or purchasing corporation, as the case may be, shall make lawful and
adequate provision whereby the Registered Holder of each Warrant then
outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of the Warrant Agent
a statement signed by its Chairman of the Board, President or a Vice President
and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary evidencing such provision. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Sections 8(a) and 8(b) hereof. The above provisions
of this Section 8(c) shall similarly apply to successive reclassifications and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the
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Purchase Price per share and the number of shares purchasable thereunder were
expressed in the Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to
this Section 8, the Company will promptly prepare a certificate signed by the
Chairman of the Board, President, or a Vice President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant, after such
adjustment, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Warrant
Agent and cause a brief summary thereof to be sent by ordinary first class mail
to each Registered Holder at his last address as it shall appear on the registry
books of the Warrant Agent. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity thereof except as to
the holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or an Assistant Secretary of the Company that such notice
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(f) No adjustment of the Purchase Price shall be made as a
result of or in connection with (A) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof, (B) the
issuance or sale of shares of Common Stock upon the exercise of any "incentive
stock options" (as such term is defined in the Internal Revenue Code of 1986, as
amended), whether or not such options were outstanding on the date
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hereof, or (C) the issuance or sale of shares of Common Stock if the amount of
said adjustment shall be less than ten cents ($.10); provided, however, that in
such case, any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time of and together with the next
subsequent adjustment that shall amount, together with any adjustment so carried
forward, to at least ten cents ($.10). In addition, Registered Holders shall not
be entitled to cash dividends paid by the Company prior to the exercise of any
Warrant or Warrants held by them.
SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date for the
Class A Warrants and the Initial Warrant Redemption Date for the Class B
Warrants, the Company may (but only with the prior written consent of the
Underwriter), on thirty (30) days' prior written notice, redeem all of the Class
A Warrants and all of the Class B Warrants, respectively, at a redemption price
of ten cents ($.10) per Warrant; provided, however, that before any such call
for redemption of Warrants can take place, the (i) closing bid price for the
Common Stock, as reported by the National Association of Securities Dealers
Automated Quotation System, or (ii) if not so quoted, as reported by any other
recognized quotation system on which the Common Stock is quoted, shall have for
any twenty (20) trading days within a period of thirty (30) consecutive trading
days ending on the fifth (5th) trading day prior to the date on which the notice
contemplated by Sections 9(b) and 9(c) hereof is given, equalled or exceeded
__________ dollars ($__________) [150% of the initial public offering price per
share of Common Stock] per share of Common Stock with respect to the Class A
Warrants and ______________ dollars ($___________) [180% of the initial public
offering price per share of Common Stock per share of Common Stock] with respect
to the Class B
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Warrants (each subject to adjustment in the event of any stock splits or other
similar events as provided in Section 8 hereof).
(b) In case the Company shall exercise its right to redeem all
of the Class A Warrants and/or all Class B Warrants, it shall give or cause to
be given notice to the Registered Holders of the Warrants, by mailing to such
Registered Holders a notice of redemption, first class, postage prepaid, at
their last address as shall appear on the records of the Warrant Agent. Any
notice mailed in the manner provided herein shall be conclusively presumed to
have been duly given whether or not the Registered Holder receives such notice.
Not less than five (5) business days prior to the mailing to the Registered
Holders of the Warrants of the notice of redemption, the Company shall deliver
or cause to be delivered to the Underwriter or its successors or assigns a
similar notice telephonically and confirmed in writing, together with a list of
the Registered Holders (including their respective addresses and number of
Warrants beneficially owned by them) to whom such notice of redemption has been
or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificates shall be delivered and the redemption price shall be
paid, (iv) that the Underwriter or its successors or assigns is the Company's
exclusive warrant solicitation agent and shall receive the commission
contemplated by Section 4(b) hereof, and (v) that the right to exercise the
Warrant shall terminate at 5:00 p.m. (New York time) on the business day
immediately preceding the date fixed for redemption. The date fixed for the
redemption of the Warrants shall be the "Redemption Date" for purposes of this
Agreement. No failure to mail such notice nor any
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<PAGE>
defect therein or in the mailing thereof shall affect the validity of the
proceedings for such redemption except as to a holder (A) to whom notice was not
mailed or (B) whose notice was defective. An affidavit of the Warrant Agent or
the Secretary or Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The redemption price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
(e) The Company shall indemnify the Underwriter and each
person, if any, who controls the Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise arising
out of the registration statement or prospectus referred to in Section 5(b)
hereof to the same extent and with the same effect (including the provisions
regarding contribution) as the provisions pursuant to which the Company has
agreed to indemnify the Underwriter contained in Section 7 of the Underwriting
Agreement.
(f) Five (5) business days prior to the Redemption Date, the
Company shall furnish to the Underwriter (i) an opinion of counsel to the
Company, dated such date and addressed to the Underwriter, and (ii) a "cold
comfort" letter dated such date addressed to the Underwriter, signed by the
independent public accountants who have issued a report on the Company's
financial statements included in the registration statement referred to in
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Section 5(b) hereof, in each case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities, including, without limitation,
those matters covered in Sections 6(d) and (i) of the Underwriting Agreement.
(g) The Company shall as soon as practicable after the
Redemption Date, and in any event within fifteen (15) months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying with
Section 11(a) of the Act and covering a period of at least twelve (12)
consecutive months beginning after the Redemption Date.
(h) The Company shall deliver within five (5) business days
prior to the Redemption Date copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement referred to in Section 5(b) hereof and permit the Underwriter to do
such investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or the rules of the NASD.
Such investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as the Underwriter shall reasonably request.
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SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and the Underwriter, and its duties shall
be determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustment, or with
respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of fact contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or the Underwriter) and
shall incur no liability or
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responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board of Directors, President or any Vice
President (unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and hold it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving thirty (30) days' prior written notice to the Company. At least
fifteen (15) days prior to the date such resignation is to become effective, the
Warrant Agent shall cause a copy of such notice of resignation to be mailed to
the Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation the Company shall appoint in writing a new warrant agent. If
the Company shall fail to make such appointment within a period of thirty (30)
days after it has
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been notified in writing of such resignation by the resigning Warrant Agent,
then the Registered Holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than ten million dollars
($10,000,000) or a stock transfer company doing business in New York, New York.
After acceptance in writing of such appointment by the new warrant agent is
received by the Company, such new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the warrant agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date of
any such appointment, the Company shall file notice thereof with the resigning
Warrant Agent and shall forthwith cause a copy of such notice to be mailed to
the Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
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cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and
any of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two (2)
years from the date of exercise any Warrant Certificate received by it upon such
exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement (a) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained, or (b) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates; provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders holding not less than
sixty-six and two-thirds percent (66-2/3%) of the Warrants then outstanding;
provided, further, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, and no change that increases the
Purchase Price of any Warrant, other than such changes as are specifically set
forth in this Agreement as originally executed, shall be made without the
consent in writing of each Registered Holders affected by such change. In
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addition, this Agreement may not be modified, amended or supplemented without
the prior written consent of the Underwriter or its successors or assigns, other
than to cure any ambiguity or to correct any defective or inconsistent provision
or manifest mistake or error herein contained or to make any such change that
the Warrant Agent and the Company deem necessary or desirable and which shall
not adversely affect the interests of the Underwriter or its successors or
assigns.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission, if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company at Imatec, Ltd., 150 East 58th Street, New York, New
York 10155, Attention: Dr. Hanoch Shalit, President, or at such other address as
may have been furnished to the Warrant Agent in writing by the Company; and if
to the Warrant Agent, at its Corporate Office. Copies of any notice delivered
pursuant to this Agreement shall be delivered to A.S. Goldmen & Co., Inc., 99
Wood Avenue South, Suite 902, Iselin, New Jersey 08830, Attention: Stuart
Winkler, Vice President, or at such other address as may have been furnished to
the Company and the Warrant Agent in writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws
rules or principals.
30
<PAGE>
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. The Underwriter is, and shall at
all times irrevocably be deemed to be, a third-party beneficiary of this
Agreement, with full power, authority and standing to enforce the rights granted
to it hereunder.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
IMATEC, LTD. CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
As Warrant Agent
By: ______________________ By: ___________________________
Name: Dr. Hanoch Shalit Name:
Title: President Title:
31
<PAGE>
EXHIBIT A
---------
No. W __________ VOID AFTER ____________________, 1998
_________ WARRANTS
CLASS A REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
IMATEC, LTD.
CUSIP______
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Class A Redeemable Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and non-assessable share of Common Stock,
$.0001 par value per share, of Imatec, Ltd., a Delaware corporation (the
"Company"), at any time from _____________, 1996 [the effective date of the
Registration Statement] and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $ [130% of the initial public offering price per
share], subject to adjustment (the "Purchase Price"), in lawful money of the
United States of America in cash or by check made payable to the Warrant Agent
for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated __________, 1996
[the effective date of the Registration Statement], by and between the Company
and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant
A-1
<PAGE>
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
__________, 1998 [the day before the 2nd anniversary of the effective date of
the Registration Statement]. If such date shall in the State of New York be a
holiday or a day on which banks are authorized to close, then the Expiration
Date shall mean 5:00 p.m. (New York time) the next following day which in the
State of New York is not a holiday or a day on which banks are authorized to
close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, to
keep such registration statement current, if required under the Act, while any
of the Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this Warrant.
This Warrant shall not be exercisable by a Registered Holder in any state where
such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time commencing __________, 1997 [nine months from the effective
date of the Registration Statement], provided that the closing bid price for the
Company's Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System (or, if not so quoted, as reported by any
other recognized quotation system on which the price of the Common Stock is
quoted), shall have, for any twenty (20) trading days within a period of thirty
(30) consecutive trading days ending on the fifth (5th) trading day prior to the
date on which the Notice of Redemption (as defined below) is given, equalled or
exceeded
A-2
<PAGE>
$__________ [150% of the initial public offering price per share of Common
Stock] per share (subject to adjustment in the event of any stock splits or
other similar events). Notice of redemption (the "Notice of Redemption") shall
be given not later than the thirtieth (30th) day before the date fixed for
redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
this Warrant except to receive the $.10 per Warrant upon surrender of this
Certificate.
Under certain circumstances, A.S. Goldmen & Co., Inc. shall be entitled
to receive an aggregate of four percent of the Purchase Price of the Warrants
represented hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ___________, 1996
IMATEC, LTD.
[SEAL]
By: ________________________________
Name: Dr. Hanoch Shalit
Title: President
By: ________________________________
Name: Richard Kalin
COUNTERSIGNED: Title: Director
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By: _________________________
Authorized Officer
A-3
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
______________________________
(please print or type name and address)
and be delivered to
______________________________
______________________________
______________________________
______________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was
solicited by A.S. Goldmen & Co., Inc.
unless the following box is
checked [ ]
2. The exercise of this Warrant was
solicited by
--------------------------- [ ]
A-4
<PAGE>
3. If the exercise of this Warrant was
not solicited, please check the
following box [ ]
Dated: ______________________ X_________________________________
__________________________________
__________________________________
Address
__________________________________
Social Security or Taxpayer
Identification Number
__________________________________
Signature Guaranteed
__________________________________
A-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________, hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the books
of the Company, with full power of substitution in the premises.
Dated: _______________________ X__________________________
___________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
A-6
<PAGE>
EXHIBIT B
---------
No. W ___________ VOID AFTER ____________________, 1998
_________ WARRANTS
CLASS B REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
IMATEC, LTD.
CUSIP ____
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Class B Redeemable Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and non-assessable share of Common Stock,
$.0001 par value per share, of Imatec, Ltd., a Delaware corporation (the
"Company"), at any time from _____________, 1996 [the effective date of the
Registration Statement] and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $ [110% of the initial public offering price per
share], subject to adjustment (the "Purchase Price"), in lawful money of the
United States of America in cash or by check made payable to the Warrant Agent
for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated __________, 1996
[the effective date of the Registration Statement], by and between the Company
and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant
B-1
<PAGE>
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
__________, 2001 [the day before the 5th anniversary of the effective date of
the Registration Statement]. If such date shall in the State of New York be a
holiday or a day on which banks are authorized to close, then the Expiration
Date shall mean 5:00 p.m. (New York time) the next following day which in the
State of New York is not a holiday or a day on which banks are authorized to
close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, to
keep such registration statement current, if required under the Act, while any
of the Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this Warrant.
This Warrant shall not be exercisable by a Registered Holder in any state where
such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time commencing __________, 1997 [twelve (12) months from the
effective date of the Registration Statement], provided that the closing bid
price for the Company's Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System (or, if not so quoted, as reported
by any other recognized quotation system on which the price of the Common Stock
is quoted), shall have, for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth (5th) trading day prior
to the date on which the Notice of Redemption (as defined below) is given,
equalled or
B-2
<PAGE>
exceeded $__________ [180% of the initial public offering price per share of
Common Stock] per share (subject to adjustment in the event of any stock splits
or other similar events). Notice of redemption (the "Notice of Redemption")
shall be given not later than the thirtieth (30th) day before the date fixed for
redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
this Warrant except to receive the $.10 per Warrant upon surrender of this
Certificate.
Under certain circumstances, A.S. Goldmen & Co., Inc. shall be entitled
to receive an aggregate of four percent of the Purchase Price of the Warrants
represented hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ___________, 1996
IMATEC, LTD.
[SEAL]
By: ________________________________
Name: Dr. Hanoch Shalit
Title: President
By: ________________________________
Name: Richard Kalin
COUNTERSIGNED: Title: Director
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By: _________________________
Authorized Officer
B-3
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
______________________________
(please print or type name and address)
and be delivered to
______________________________
______________________________
______________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was
solicited by A.S. Goldmen & Co., Inc.
unless the following box is
checked [ ]
2. The exercise of this Warrant was
solicited by
--------------------------- [ ]
B-4
<PAGE>
3. If the exercise of this Warrant was
not solicited, please check the
following box |_|
Dated: ______________________ X_________________________________
__________________________________
__________________________________
Address
__________________________________
Social Security or Taxpayer
Identification Number
__________________________________
Signature Guaranteed
__________________________________
B-5
<PAGE>
ASSIGNMENT
----------
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________, hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the books
of the Company, with full power of substitution in the premises.
Dated: _______________________ X__________________________
___________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
B-6
<PAGE>
ZUKERMAN GORE & BRANDEIS, LLP
900 THIRD AVENUE
NEW YORK, NY 10022
(212) 223-6700
June 20, 1996
Board of Directors
Imatec, Ltd.
150 E. 58th Street
New York, NY 10155
Re: Imatec, Ltd.;
Registration Statement on Form SB-2
-----------------------------------
Gentlemen:
We have acted as counsel for Imatec, Ltd., a Delaware corporation (the
"Company") in connection with the preparation and filing by the Company of a
registration statement on Form SB-2, File No. 333-3589, and the prospectus that
forms a part thereof (the "Registration Statement" and "Prospectus,"
respectively) under the Securities Act of 1933, as amended, relating to the
public offering of (i) 1,000,000 shares of common stock, par value $.0001 per
share (the "Common Stock"), (ii) 8,000,000 Class A redeemable common stock
purchase warrants (the "Class A Redeemable Warrants"), including 4,000,000 Class
A Redeemable Warrants being registered for offer and sale on behalf of certain
selling stockholders of the Company (the "Selling Stockholders"), (iii)
4,000,000 Class B redeemable common stock purchase warrants (the "Class B
Redeemable Warrants"), and (iv) 2,210,000 shares of Common Stock on behalf of
certain Selling Stockholders. All of the Class A Redeemable Warrants, including
the Class A Redeemable Warrants held by certain of the Selling Stockholders, and
the Class B Redeemable Warrants are sometimes herein collectively referred to as
the "Redeemable Warrants". The Registration Statement and Prospectus also (i)
relates to the registration of the shares of the Company's Common Stock issuable
upon the exercise of the Redeemable Warrants (including the shares of Common
Stock issuable upon the exercise of the Redeemable Warrants contained in the
Underwriter's Warrants referred to in the last sentence of this paragraph), and
(ii) involves the grant to A.S. Goldmen & Co., Inc., the underwriter of this
Offering (the "Underwriter"), of an option to purchase up to
<PAGE>
Board of Directors
Imatec, Ltd.
June 20, 1996
Page 2
an aggregate of an additional 150,000 shares of Common Stock and/or 600,000
Class A Redeemable Warrants and/or 600,000 Class B Redeemable Warrants for the
sole purpose of covering over-allotments, if any. Further, this Prospectus
involves the sale of warrants to the Underwriter, for nominal consideration (the
"Underwriter's Warrants"), to purchase from the Company 100,000 shares of Common
Stock, 400,000 Class A Redeemable Warrants, and 400,000 Class B Redeemable
Warrants.
We have examined the Certificate of Incorporation and the ByLaws of the
Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, drafts of the Underwriting Agreement relating to the
offering of the Company's Common Stock, (as that agreement is defined in the
Registration Statement), draft forms of certificates representing the Common
Stock and the Representative's Warrant, originals or copies of such records of
the Company and where applicable, its predecessor-in- interest, agreements,
certificates of public officials, certificates of officers and representatives
of the Company and its predecessor-in-interest, and others, and such other
documents, certificates, records, authorizations, proceedings, statutes and
judicial decisions as we have deemed necessary to form the basis of the opinion
expressed below. In such examination, we have assumed the genuiness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as copies thereof.
As to various questions of fact material to such opinion, we have relied upon
statements and certificates of officers and representatives of the Company and
its predecessor-in-interest and others.
Based on the foregoing, we are of the opinion that:
1. All shares of Common Stock, including shares of Common Stock for the
purpose of covering over-allotments, if any, have been duly authorized and, when
issued and sold in accordance with the Prospectus, will be validly issued, fully
paid and nonassessable.
2. The Redeemable Warrants, including Redeemable Warrants for the
purpose of covering over-allotments, if any, and the Underwriter's Warrants have
been duly authorized and, when issued and sold in accordance with the
Prospectus, will be validly issued, fully paid and nonassessable.
3. All shares of Common Stock issuable upon the exercise of the
Redeemable Warrants have been duly authorized and, when issued
<PAGE>
Board of Directors
Imatec, Ltd.
June 20, 1996
Page 3
upon the exercise of the Redeemable Warrants in accordance their respective
terms, will be validly issued, fully paid and nonassessable.
4. The shares of Common Stock and the Redeemable Warrants issuable upon
exercise of the Underwriter's Warrants, (and the shares of Common Stock issuable
upon the exercise of the Redeemable Warrants issuable upon the exercise of the
Underwriter's Warrants) have been duly authorized, and when issued in accordance
with its terms, will be validly issued, fully paid and nonassessable.
We hereby consent to be named in the Prospectus as attorneys who have
passed upon the validity of the shares of Common Stock for the Company under the
caption "Legal Matters."
We further consent to your filing a copy of this opinion as an exhibit
to the Prospectus.
Very truly yours,
/s/ Zukerman Gore & Brandeis, LLP
------------------------------------
ZUKERMAN GORE & BRANDEIS, LLP
<PAGE>
EXHIBIT 10.1
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This Agreement is made and entered into as of this day
of , 1996 [the effective date of the Registration Statement], by and
between Imatec, Ltd., a Delaware corporation (the "Company"), and A.S. Goldmen
& Co., Inc. (the "Consultant").
In consideration of and for the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Purpose. The Company hereby retains the Consultant during
the term specified in Section 2 hereof to render consulting advice to the
Company as an investment banker relating to financial and similar matters, upon
the terms and conditions as set forth herein.
2. Term. Subject to the provisions of Section 8, 9 and 10
hereof, this Agreement shall be effective for a period of twenty four (24)
months commencing , 1996 [the effective date of the Registration
Statement].
3. Duties of Consultant. During the term of this Agreement,
the Consultant will provide the Company with such regular and customary
consulting advice as is reasonably requested by the Company, provided that the
Consultant shall not be required to undertake duties not reasonably within the
scope of the consulting advisory service contemplated by this Agreement. In
performance of these duties, the Consultant shall provide the Company with the
benefits of its best judgment and efforts. It is understood and acknowledged by
the parties that the value of the Consultant's advice is not measurable in any
quantitative manner, and that the Consultant shall be obligated to render
advice, upon the request of the Company, in good faith, but shall not be
obligated to spend any specific amount of time in doing so. The Consultant's
duties may include, but will not necessarily be limited to:
A. Providing sponsorship and exposure in connection with the
dissemination of corporate information regarding the Company to the investment
community at large under a systematic planned approach.
B. Rendering advice and assistance in connection with the
preparation of annual and interim reports and press releases.
C. Arranging, on behalf of the Company and its
representatives, at appropriate times, meetings with securities analysts of
major regional investment banking firms.
<PAGE>
D. Assisting in the Company's financial public relations,
including discussions between the Company and the financial community.
E. Rendering advice with regard to internal operations,
including:
(1) advice regarding the formation of corporate goals and
their implementation;
(2) advice regarding the financial structure of the Company
and its future divisions or subsidiaries, if any, or any
programs and projects of such entities;
(3) advice concerning the securing, when necessary and if
possible, of additional financing through banks, insurance
companies and/or other institutions; and
(4) advice regarding corporate organization and personnel.
F. Rendering advice with respect to any acquisition program of
the Company.
G. Rendering advice regarding a future public or private
offering of securities of the Company or of any future subsidiary.
4. Relationships with Others. The Company acknowledges that
the Consultant and its affiliates are in the business of providing financial
service and consulting advice (of all types contemplated by this Agreement) to
others. Nothing herein contained shall be construed to limit or restrict the
Consultant or its affiliates from rendering such services or advice to others.
5. Consultant's Liability. In the absence of gross negligence
or willful misconduct on the part of the Consultant or the Consultant's breach
of this Agreement, the Consultant shall not be liable to the Company, or to any
officer, director, employee, shareholder or creditor of the Company, for any act
or omission in the course of or in connection with the rendering or providing of
advice or services hereunder. Except in those cases where the gross negligence
or misconduct of the Consultant or the breach by the Consultant of this
Agreement is alleged and proven, the Company agrees to defend, indemnify and
hold the Consultant harmless from and against any and all reasonable costs,
expenses and liability (including, but not limited to, attorneys' fees paid in
the defense of the Consultant) which may in any way result from services
rendered by the Consultant pursuant to or in any connection with this Agreement.
6. Expenses. The Company, upon receipt of appropriate
supporting documentation, shall reimburse the Consultant for any and all
reasonable out-of-pocket expenses incurred by the Consultant in connection with
services rendered by the Consultant to the Company pursuant to this Agreement,
including, but not limited to, hotel, food and associated expenses, all charges
for travel and long-distance telephone calls and all other expenses incurred by
the Consultant in connection with services rendered by the Consultant
2
<PAGE>
to the Company pursuant to this Agreement. Expenses payable under this Section 6
shall not include allocable overhead expenses of the Consultant, including, but
not limited to, attorneys' fees, secretarial charges and rent.
7. Compensation. As compensation for the services to be
rendered by the Consultant to the Company pursuant to Section 3 hereof during
the term set forth in Section 2 hereof, the Company shall pay the Consultant a
financial consulting fee of two thousand dollars ($2,000) per month, all of
which (an aggregate of forty eight thousand dollars ($48,000)) shall be paid by
the Company on , 1996 [the closing date of the initial public offering].
8. Other Advice. ln addition to the duties set out in Section
3 hereof, the Consultant agrees to furnish advice to the Company in connection
with the acquisition of and/or merger with other companies, joint ventures with
any third parties, license and royalty agreements and any other financing (other
than the private or public sale of the Company's securities for cash),
including, but not limited to, the sale of the Company itself (or any
significant percentage, subsidiaries or affiliates thereof).
In the event that any such transactions are directly or
indirectly originated by the Consultant for a period of five (5) years from the
date hereof, the Company shall pay fees to the Consultant as follows:
Legal Consideration Fee
------------------- ---
$-0- - $3,000,000 5% of legal consideration
$3,000,000 - $4,000,000 4% of excess over $3,000,000
$4,000,000 - $5,000,000 3% of excess over $4,000,000
over $5,000,000 2% of excess over $5,000,000
Legal Consideration is defined, for purposes of this
Agreement, as the total of stock (valued at market on the day of closing, or if
there is no public market, valued at fair market value as agreed or, if not, by
an independent appraiser), cash and assets and property or other benefits
exchanged by the Company or received by the Company or its shareholders (all
valued at fair market value as agreed or, if not, by an independent appraiser),
irrespective of period of payment or terms.
9. Sales or Distributions of Securities. If the Consultant
assists the Company in the sale or distribution of securities to the public or
in a private transaction, the Consultant shall receive fees in the amount and
form to be arranged separately at the time of such transaction.
10. Form of Payment. All fees due to the Consultant pursuant
to Section 8 hereof are due and payable to the Consultant, in cash or by
certified check, at the closing or
3
<PAGE>
closings of any transaction specified in such Section 8 or as otherwise shall
mutually be agreed between the parties hereto; provided, however, that in the
case of license and royalty agreements specified in Section 8 hereof, the fees
due the Consultant in respect of such license and royalty agreements shall be
paid as and when license and/or royalty payments are received by the Company. In
the event that this Agreement shall not be renewed for a period of at least
twelve (12) months at the end of the five (5) year period referred to in Section
8 hereof or if terminated for any reason prior to the end of such five (5) year
period, then, notwithstanding any such non-renewal or termination, the
Consultant shall be entitled to the full fee for any transaction contemplated
under Section 8 hereof which closes within twelve (12) months after such
non-renewal or termination.
11. Limitation Upon the Use of Advice and Services.
(a) No person or entity, other than the Company or any of its
subsidiaries, shall be entitled to make use of or rely upon the advice of the
Consultant to be given hereunder, and the Company shall not transmit such advice
to others, or encourage or facilitate the use or reliance upon such advice by
others, without the prior consent of the Consultant.
(b) It is clearly understood that the Consultant, to services
rendered under this Agreement, makes no commitments whatsoever to make a market
in the securities of the Company or to recommend or advise its clients to
purchase the securities of the Company. Research reports or corporate finance
reports that may be prepared by the Consultant will, when and if prepared, be
done solely on the merits or judgment of analysts of the Consultant or senior
corporate finance personnel of the Consultant.
(c) The use of the Consultant's name in any annual report or
other report of the Company, or any release or similar document prepared by or
on behalf of the Company, must have the prior approval of the Consultant unless
the Company is required by law to include the Consultant's name in such annual
report, other report or release, in which event the Consultant will be furnished
with a copy of such annual report, other report or release using the
Consultant's name in advance of publication by or on behalf of the Company.
(d) Should any purchases of securities be requested to be
effected through the Consultant by the Company, its officers, directors,
employees or other affiliates, or by any person on behalf of any profit sharing,
pension or similar plan of the Company, for the account of the Company or the
individuals or entities involved, such orders shall be taken by a registered
account executive of the Consultant, shall not be subject to the terms of this
Agreement, and the normal brokerage commission as charged by the Consultant will
apply in conformity with all rules and regulations of the New York Stock
Exchange, the National Association of Securities Dealers, Inc. or other
regulatory bodies. Where no regulatory body sets the fee, the normal established
fee as used by the Consultant shall apply.
(e) The Consultant shall not disclose confidential information
which it learns about the Company as a result of its engagement hereunder,
except for such disclosure as may be required for Consultant to perform its
duties hereunder.
4
<PAGE>
12. Indemnification. Since the Consultant will be acting on
behalf of the Company in connection with its engagement hereunder, the Company
and Consultant have entered into a separate indemnification agreement
substantially in the form attached hereto as Exhibit A and dated the date
hereof, providing for the indemnification of Consultant by the Company. The
Consultant has entered into this Agreement in reliance on the indemnities set
forth in such indemnification agreement.
13. Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is deemed unlawful or
invalid for any reason whatsoever, such unlawfulness or invalidity shall not
affect the validity of the remainder of this Agreement.
14. Miscellaneous.
(a) Any notice or other communication between the parties
hereto shall be sent by certified or registered mail, postage prepaid, if to the
Company, addressed to it at Imatec, Ltd., 158 East 58th Street, New York, New
York 10155, Attention: Dr. Hanoch Shalit, President, with a copy to Zukerman
Gore & Brandeis, LLP, 900 Third Avenue, New York, New York 10022, Attention:
Clifford A. Brandeis, Esq. or, if to the Consultant, addressed to it at A.S.
Goldmen & Co., Inc., 99 Wood Avenue South, Suite 902, Iselin, New Jersey 08830,
Attention: Stuart Winkler, Vice President, with a copy to Orrick, Herrington &
Sutcliffe, 666 Fifth Avenue, New York, New York 10103, Attention: Lawrence B.
Fisher, Esq., or to such address as may hereafter be designated in writing by
any of such entities to the others. Such notice or other communication shall be
deemed to be given on the date of receipt.
(b) If, during the term hereof, the Consultant shall cease to
do business, the provisions hereof relating to the duties of the Consultant and
the compensation by the Company as it applies to the Consultant shall thereupon
cease to be in effect, except for the Company's obligation of payment for
services rendered prior thereto. This Agreement shall survive any merger of,
acquisition of, or acquisition by the Consultant and, after any such merger or
acquisition, shall be binding upon the Company and the corporation surviving
such merger or acquisition.
(c) This Agreement embodies the entire agreement and
understanding between the Company and the Consultant and supersedes any and all
negotiations, prior discussions and preliminary and prior agreements and
understandings related to the central subject matter hereof.
(d) This Agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Consultant.
(e) This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws rules or principals.
5
<PAGE>
(f) This Agreement and the rights hereunder may not be
assigned by either party (except by operation of law) and shall be binding upon
and inure to the benefit of the Parties and their respective successors, assigns
and legal representatives.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date hereof.
IMATEC, LTD.
By:_________________________________
Name: Dr. Hanoch Shalit
Title: President
A.S. GOLDMEN & CO., INC.
By:_________________________________
Name: Stuart Winkler
Title: Vice President
7
<PAGE>
EXHIBIT A
_____________________ , 1996
A.S. GOLDMEN & CO., INC.
99 Wood Avenue South
Suite 902
Iselin, New Jersey 08830
New York, New York 10006
Ladies and Gentlemen:
In connection with our engagement of A.S. GOLDMEN & CO., INC.
(the "Consultant") as our financial advisor and investment banker, we hereby
agree to indemnify and hold the Consultant and its affiliates, and the
directors, officers, partners, shareholders, agents and employees of the
Consultant (collectively the "Indemnified Persons"), harmless from and against
any and all claims, actions, suits, proceedings (including those of
shareholders), damages, liabilities and expenses incurred by any of them
(including, but not limited to, fees and expenses of counsel) which are (A)
related to or arise out of (i) any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
us, or (ii) any actions taken or omitted to be taken by any Indemnified Person
in connection with our engagement of the Consultant pursuant to the Financial
Advisory and Consulting Agreement, of even date herewith, between the Consultant
and us (the "Consulting Agreement"), or (B) otherwise related to or arise out of
the Consultant's activities on our behalf pursuant to the Consultant's
engagement under the Consulting Agreement, and we shall reimburse any
Indemnified Person for all expenses (including, but not limited to, fees and
expenses of counsel) incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or proceeding
(collectively a "Claim"), whether or not in connection with pending or
threatened litigation in which any Indemnified Person is a party. We will not,
however, be responsible for any Claim which is finally judicially determined to
have resulted exclusively from the gross negligence or willful misconduct of any
person seeking indemnification hereunder. We further agree that no Indemnified
Person shall have any liability to us for or in connection with the Consultant's
engagement under the Consulting Agreement except for any Claim incurred by us
solely as a direct result of any Indemnified Person's gross negligence or
willful misconduct.
We further agree that we will not, without the prior written consent of
the Consultant, settle, compromise or consent to the entry of any judgment in
any pending or threatened Claim in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such Claim), unless such settlement, compromise or consent
includes a legally binding, unconditional, and irrevocable release of each
Indemnified Person hereunder from any and all liability arising out of such
Claim.
A-1
<PAGE>
Promptly upon receipt by an Indemnified Person of notice of
any complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution, but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
unless, and only to the extent that, such failure results in the forfeiture by
us of substantial rights and defenses, and such failure to so notify us will not
in any event relieve us from any other obligation or liability we may have to
any Indemnified Person otherwise than under this Agreement. If we so elect or
are requested by such Indemnified Person, we will assume the defense of such
Claim, including the employment of counsel reasonably satisfactory to such
Indemnified Person and the payment of the fees and expenses of such counsel. In
the event, however, that such Indemnified Person reasonably determines in its
sole judgment that having common counsel would present such counsel with a
conflict of interest or such Indemnified Person concludes that there may be
legal defenses available to it or other Indemnified Persons that are different
from or in addition to those available to us, then such Indemnified Person may
employ its own separate counsel to represent or defend it in any such Claim and
we shall pay the reasonable fees and expenses of such counsel. Notwithstanding
anything herein to the contrary, if we fail timely or diligently to defend,
contest, or otherwise protect against any Claim, the relevant Indemnified Party
shall have the right, but not the obligation, to defend, contest, compromise,
settle, assert crossclaims or counterclaims, or otherwise protect against the
same, and shall be fully indemnified by us therefor, including, but not limited
to, for the fees and expenses of its counsel and all amounts paid as a result of
such Claim or the compromise or settlement thereof. In any Claim in which we
assume the defense, the Indemnified Person shall have the right to participate
in such defense and to retain its own counsel therefor at its own expense.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason, then (whether or
not the Consultant is the Indemnified Person) we and the Consultant shall
contribute to the Claim for which such Indemnity is held unavailable in such
proportion as is appropriate to reflect the relative benefits to us, on the one
hand, and the Consultant, on the other, in connection with the Consultant's
engagement by us under the Consulting Agreement, subject to the limitation that
in no event shall the amount of the Consultant's contribution to such Claim
exceed the amount of fees actually received by the Consultant from us pursuant
to the Consultant's engagement under the Consulting Agreement. We hereby agree
that the relative benefits to us, on the one hand, and the Consultant, on the
other, with respect to the Consultant's engagement under the Consulting
Agreement shall be deemed to be in the same proportion as (a) the total value
paid or proposed to be paid or received by us or our shareholders as the case
may be, pursuant to the transaction (whether or not consummated) for which the
Consultant is engaged to render services bears to (b) the fee paid or proposed
to be paid to the Consultant in connection with such engagement.
Our indemnity, reimbursement and contribution obligations
under this Agreement shall be in addition to, and shall in no way limit or
otherwise adversely affect any rights that any Indemnified Party may have at law
or at equity.
Should the Consultant, or any of its directors, officers,
partners, shareholders, agents or employees, be required or be requested by us
to provide documentary evidence or
A-2
<PAGE>
testimony in connection with any proceeding arising from or relating to the
Consultant's engagement under the Consulting Agreement, we agree to pay all
reasonable expenses (including, but not limited to, fees and expenses of
counsel) in complying therewith and one thousand dollars ($1,000) per day for
any sworn testimony or preparation therefor, payable in advance.
We hereby consent to personal jurisdiction and service of
process and venue in any court in which any claim for indemnity is brought by
any Indemnified Person.
It is understood that, in connection with the Consultant's
engagement under the Consulting Agreement, the Consultant may be engaged to act
in one or more additional capacities and that the terms of the original
engagement or any such additional engagement may be embodied in one or more
separate written agreements. The provisions of this Agreement shall apply to the
original engagement and any such additional engagement and shall remain in full
force and effect following the completion or termination of the Consultant's
engagement(s).
Very truly yours,
IMATEC, LTD.
By: __________________________________
Name: Dr. Hanoch Shalit
Title: President
CONFIRMED AND AGREED TO:
A.S. GOLDMEN & CO., INC.
By: _____________________________
Name: Stuart Winkler
Title: Vice President
A-3
<PAGE>
Exhibit 10.2
AGREEMENT
---------
THIS AGREEMENT made as of this first day of July, 1995, by and between:
IMATEC Limited, a corporation of New York, (hereinafter called "Employer"
or "IMATEC") and Hanoch Shalit, Ph.D. (hereinafter called "Employee")
WITNESSETH:
-----------
WHEREAS, the Employee possesses the knowledge, skills and experience
necessary to serve and advance the operations and business of the Employer in
the capacity designated in this Agreement; and
WHEREAS, Employer desires to employ the Employee to serve in the capacity
designated in this Agreement, and Employee is willing to accept employment as
such;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties intending to be legally bound agree as follows;
1. EMPLOYMENT:
--------------
The Employer hereby employs the Employee and the Employee hereby accepts
employment in the positions of President, CEO, and Chairman of the Board of
Directors, under and subject to the terms and conditions contained in this
Agreement
2. TERM OF EMPLOYMENT:
----------------------
Subject to the provisions for termination of employment as hereinafter
provided, Employee's term of employment by Employer under this Agreement shall
commence on July 1st 1995 and terminate the earlier of (i) July 1, 2000; (ii)
IMATEC no longer involved in the imaging technology business; (iii) The
bankruptcy or merger of IMATEC or its acquisition by another.
3. EXTENT OF SERVICES:
----------------------
Employee shall be a full-time employee, in the above named positions and
shall devote that amount of his ability, working time and energy to serve and
advance the operations and business of the Employer and to perform his duties in
a faithful and diligent manner hereunder. The duties of Employee in the capacity
of employment designated in this Agreement shall be those set forth from time to
time in the By-Laws of the Employer and any and all other duties which Employee
shall reasonably be directed to perform by the Board of Directors of the
Employer during the term of his employment.
1
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4. WORKING FACILITIES:
----------------------
The Employee shall be furnished with a private office, stenographic help,
and such other facilities and services suitable to his position and adequate for
the performance of his duties.
5. COMPENSATION:
----------------
For all services performed by Employee in any capacity hereunder,
Employee shall receive remuneration as designated in Schedule 1. Employer may
authorize additional compensation by way of salary, bonus or otherwise, as it
deems appropriate.
The compensation to Employee for services provided according to paragraph
1 above, may be terminated following the termination procedure as outlined in
paragraphs 2, and 6. Upon termination, the compensation and benefits for the
above services will terminate as well. However, the payment amount of royalties
for the use of the patents as described in the Exclusive License Agreement will
change according to paragraph 6 below, and will continue to be paid to Employee,
regardless if the Employee is assigned a position or spends time on Employer's
business, and irrespective of Employee's status in the Company and/or Employee's
relationship with Employer, in accordance with the Exclusive License Agreement
of Employee with IMATEC.
6. TERMINATION:
---------------
Notwithstanding any other provision hereof, Employee's positions as
President and/or CEO, and/or Chairman of the Board, hereunder may be ended under
terms specified in Paragraph 2 above (Term of Employment). However, upon such
ending of positions, the payment of Royalties for the use of the patents (as
outlined in paragraph 5, Schedule 1, and the Exclusive License Agreement), will
increase to Two hundred and fifty thousands dollars ($250,000) per year or
twenty thousands eight hundred thirty three dollars per month, and will continue
as long as the Employer, its affiliates and/or successors, are in existence,
regardless if Employee is, or is not assigned another position by Employer,
since such compensation is governed by the Exclusive License Agreement which is
attached hereto.
2
<PAGE>
Employee's position as President and/or CEO, and/or Chairman of the
Board, hereunder may be ended immediately only under the following conditions:
A. Upon the death of the Employee or disability of Employee for a period
longer than one year, or Employee's change of position by Employer upon good and
sufficient cause.
B. "Good and sufficient cause" is limited to:
(i) Dishonesty detrimental to the best interests of Employer or
any of its affiliates;
(ii) Willful disloyalty to Employer or any of its affiliates.
7. BENEFITS:
------------
Employee shall be entitled to receive all benefits generally made
available to employees of his class of Employees. These benefit currently
include but are not limited to those set forth in Schedule 2.
8. DISCLOSURE OF INFORMATION:
-----------------------------
A. Employee recognizes that by reason of employment with Employer, he has
engaged in and will engage in and has gained and will gain knowledge of
information, developments, research projects, manufacturing and trade secrets,
know-how and business confidences relating to, and concerned with, the past,
present and future business operations, products and policies of the Employer,
its affiliates, suppliers, customers and other persons. Employee hereby agrees
to hold as secret and confidential any and all such information that has been or
will be disclosed to him by Employer, or which he has learned or will learn of
by virtue of employment with Employer.
B. Employee hereby agrees not to use such information for his own benefit
or to disclose or to use such information for the benefit of others, during the
term of his employment, without the written consent of Employer, until such
information shall become public knowledge.
Employee acknowledges that all lists, books, records, literature,
products and any other materials owned by Employer or its affiliates or used by
them in connection with the conduct of their business, shall at all times
remain the property of Employer and its affiliates and that upon termination of
said termination, Employee hereby agrees to surrender to Employer and its
affiliates all such lists, books, records, literature, products and other
materials immediately thereupon.
3
<PAGE>
C. Employee agrees to communicate to Employer promptly, in writing, all
inventions, discoveries and improvements, whether or not patentable, which
Employee may conceive or make, either solely or jointly with others, in any
field and of any products, during the term of this employment.
D. Employee is the inventor and owner of the following patents:
o Method and System for Improved Tone and Color Reproduction of Electronic
Image on Hard Copy Using a Closed Loop Control, H. Shalit, US Patent number
5,345,315, issued: September 6, 1994
o Method and System In Video Image Reproduction, H. Shalit, US Patent number
5,115,229, Issued: May 19, 1992
o Method and System In Video Image Hard Copy Reproduction, H. Shalit, US
Patent number 4,939,581, issued: July 3, 1990
o Method and System in Video Image Hard Copy Reproduction, H. Shalit,
International Patent protection applied: June 25, 1990
Under the Exclusive License Agreement Employee allows Employer to use and
sub-license these patents, and any other patent issued to Employee, royalties
paid, as long as the Employee receives the royalty and compensation therein, and
as long as the Employer, its affiliates and/or successors, are in existence. It
is understood by and between the parties that all necessary costs of obtaining
and securing and maintaining such patents shall be paid for solely by Employer.
Employee will also provide Employer with free consultation relating to these
patents as long as Employee's positions as defined in Paragraph 1, are not
terminated.
E. Employee hereby agrees to take whatever reasonable steps are requested
by Employer to secure patent or other legal protection on such inventions,
discoveries and improvements in any and all countries. The Employee will own the
patents, however, the Employer will have the right to use and sub-license such
patents as long as Employer, its affiliates and/or successors, are in existence,
in accordance with the Exclusive License Agreement. It is understood by and
between the parties that all necessary costs of making and securing such patents
shall be paid for solely by Employer.
4
<PAGE>
9. COVENANT NOT TO COMPETE:
---------------------------
A. Employee hereby agrees that he will not, during the term of his full
time employment by Employer, within the United States and Canada, engage in any
business or perform any service, directly or indirectly, in competition with the
business of Employer or any of its affiliates, or have any interest, whether as
proprietor, partner, major stockholder, principal, agent, director or officer in
any enterprise which shall so engage.
B. In furtherance of the foregoing, and not in limitation thereof,
Employee hereby agrees, during the period of non-competition referred to in
subparagraph A above, not to directly or indirectly solicit or service in any
way, on behalf of himself or on behalf of or in conjunction with others, for any
image technology product or service, any client or customer, or prospective
client or customer, who has been solicited or serviced by Employer or any
affiliate of Employer as long as Employer, its affiliates and/or successors, are
in existence.
C. If any court shall determine that the duration of geographical limits
of any restriction contained in this paragraph are unenforceable, it is the
intention of the parties that the restrictive covenant set forth herein shall
not thereby be terminated, but shall be deemed amended to the extent required to
render it valid and enforceable, such amendment to apply only with respect to
the operation of this paragraph in the jurisdiction of the court which has made
such adjudication.
10. REMEDIES OF EMPLOYER:
-------------------------
Employee acknowledges that the restrictions contained in paragraphs 8 and
9 of this Agreement are a reasonable and necessary protection of the legitimate
interests of Employer, that any violation of them would cause substantial injury
to Employer, and that Employer would not have entered into this Agreement with
Employee without receiving the additional consideration of Employee binding
himself to said restrictions. In the event of any violation of the said
restrictions, Employer shall be entitled, in addition to any other remedy, to
preliminary and permanent injunctive relief.
5
<PAGE>
11. IMPEDIMENT:
---------------
A. Employee hereby represents, warrants and agrees that his execution and
delivery of this Agreement and performance of his duties and obligations
hereunder will not violate the provisions of any employment trade secret,
patent, non-competition or other agreements, oral or written, court order or
instrument to which Employee is a party or is bound, or result in a breach of
or constitute a default under any of the same.
B. Employee hereby agrees to comply promptly with any reasonable requests
made from time to time by the Board of Directors of Employer for full disclosure
of any of such agreements, court orders or instruments described in subparagraph
A above and any consulting or other business activities engaged in by Employee
during the term of his employment hereunder.
12. DEFINITIONS:
----------------
The following definitions shall apply for the purposes of this Agreement
to the terms listed below:
A. "Business of Employer" shall mean the business of Employer, whether
presently conducted or hereafter engaged in by Employer at any time during the
term of this Agreement.
B. "Disability" shall mean the inability of Employee due to illness,
injury or other incapacitating cause to perform the usual duties required to be
performed by him pursuant hereto for a continuing period of four (4) months.
13. SEVERABILITY:
-----------------
If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall, nevertheless, remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall, nevertheless, remain in full
force and effect in all other circumstances.
14. Consent to Jurisdiction:
----------------------------
Each party irrevocably submits to the jurisdiction of any New York State
court seating in the borough of Manhattan. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
6
<PAGE>
15. MISCELLANEOUS:
------------------
A. In the event any suit or other action is commenced involving the
Employee, as a result of his connection with the Employer, the Employer will
bear all the costs associated with the action.
B. In the event any suit or other action is commenced with respect to the
interpretation or enforcement of any provision of this Agreement, the prevailing
party shall be entitled, in addition to any other sums to which such party may
be entitled, to recover from the other party the reasonable fees and
disbursements of counsel retained to investigate and pursue such matter.
C. Employee shall not be required by the Employer to relocate outside the
New York, NY area during the term of this Agreement.
16. NOTICE:
-----------
All notices required to be given under the terms of this Agreement shall
be in writing, shall be effective upon receipt, and shall be delivered to the
addressee in person or mailed by certified mail, return receipt requested:
If to Employer, addressed to:
IMATEC Ltd.
86 Edwards Street (2A)
Roslyn Heights, NY 11577
Attention: President
If to Hanoch Shalit (Ph.D.), addressed to:
86 Edwards Street (2A)
Roslyn Heights, NY 11577
or to such other address as a party shall have designated for notices to
be given to him or it by notice given in accordance with this paragraph.
17. BENEFIT:
------------
This Agreement shall inure to and be binding upon the parties hereto, the
successors and assigns of Employer and the heirs and personal representatives of
Employee.
7
<PAGE>
18. WAIVER:
------------
The waiver by either party of any breach or violation of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach or violation hereof.
19. GOVERNING LAW:
------------------
This Agreement has been negotiated and executed in the State of New York
and the law of that state shall govern its construction and validity.
20. ENTIRE AGREEMENT:
---------------------
This Agreement contains the entire Agreement between the parties hereto.
No change, addition or amendment shall be made except by written agreement
signed by the parties hereto.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on
the day and year first above written.
<TABLE>
<CAPTION>
<S> <C> <C>
By IMATEC Ltd. Hanoch Shalit Witnessed by: Michael Cohen
------------- -------------
Witnessed by: M. Sandalfin Date:
------------- -------------
By Hanoch Shalit, Ph.D. Hanoch Shalit Witnessed by: Michael Cohen
------------- -------------
Witnessed by: M. Sandalfin Date:
------------- -------------
</TABLE>
8
<PAGE>
SCHEDULE 1.
-----------
COMPENSATION
------------
Employee shall receive the following as long as Employee is an employee
of Employer in the positions described in paragraph 1 above:
I. An annual salary of $60,000, paid monthly, in advance, on the first
day of each month.
II. The above monies payable to Employee shall be increased at an annual
rate of five percent (5%).
III. Benefits as described in Schedule 2 below.
IV. In addition to the above payments the Employer, will pay to Employee
bonuses, on an annual basis, under the following conditions:
one percent (1%) for every $1,000,000 in annual sales achieved by
the Employer as long as Employee is a full time employee of the
Employer.
Note: Under an Exclusive License Agreement between Hanoch Shalit (Ph.D.)
and IMATEC Ltd., there is a minimum royalty of $11,666 per month, which (i) is
increased to $20,833 a month upon Employee ceasing to be employed by Employer,
and (ii) increased at an annual rate of five percent (5%).
9
<PAGE>
SCHEDULE 2.
----------
BENEFITS
--------
Employee shall receive from the Employer the following benefits, as long
as the Employee is a full time employee of Employer:
Paid health insurance,
Paid Director and Officer liability insurance,
The use of a company car, lease ranging from $600 to $700 per month, paid
by the Employer,
In case of death of the Employee, the above benefits will continue for
the beneficiaries for a period of 180 days.
Paid long term disability insurance for 60% of salary until the age of
65, and payment of 40% of salary for one year, paid by the Employer,
Paid personal life insurance coverage,
Paid twenty (20) vacation days per year, and the customary holidays in
New York City.
<PAGE>
AMENDMENT NO. 1
TO
EXCLUSIVE LICENSE AGREEMENT
Amendment No. 1 to the Exclusive License Agreement made as of June 25,
1995, by and between Imatec, Ltd., a New York corporation with its principal
place of business at 86 Edwards Street, 2A, Roslyn Heights, NY 11577
(hereinafter referred to as "Imatec") and Dr. Hanoch Shalit, PhD, having a
residence at 86 Edwards Street, 2A, Roslyn Heights, NY 11577 (hereinafter
referred to as "Shalit").
W I T N E S S E T H:
WHEREAS, Imatec and Shalit have heretofore entered into that certain
exclusive license agreement dated June 25, 1995 (the "License Agreement"); and
WHEREAS, the parties of the License Agreement wish to amend the License
Agreement in accordance with the terms and conditions hereinbelow set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, and for other good and valuable consideration, receipt of
which is hereby mutually acknowledged, the parties hereto mutually agree as
follows:
1. Unless expressly set forth herein to the contrary, all capitalized
terms set forth in this Amendment No. 1 shall have the same meaning ascribed to
them in the License Agreement.
2. Paragraph 7 of Section 1.3 of the License Agreement shall be amended
by adding the following to the end thereof:
"; as used herein, the phrase "fully and timely paid" shall mean
payment within forty-five (45) days after the giving of notice of
default by Shalit to the Company."
3. Section 1.3 of the License Agreement is amended by adding the
following:
"8. Any and all practical applications, products, trade secrets and
technologies, whether now existing or hereafter developed by Shalit,
with respect to any of 1. through 7. above."
4. The License Agreement shall be amended to add Section 6.12 to the
License Agreement as follows:
<PAGE>
"6.12 Litigation Costs. In the event that any challenges are instituted
by third parties as to the validity and enforceability of the
Patentable Image Technology or Shalit institutes legal action in order
to protect infringement of any Patentable Image Technology by third
parties, all costs, disbursements and expenses of any nature whatsoever
with respect to the foregoing, including but not limited to the
settlement thereof, shall be the sole responsibility, and shall be
borne solely by, Imatec."
5. The License Agreement is amended by adding Section 6.13 to the
License Agreement which shall be as follows:
"6.13 Board Representation. It is expressly understood and agreed that
until the last expiration date of the Patents referred to in paragraphs
1 through 3 of Section 1.3 of this Agreement, Shalit shall be entitled
to have a representative, which may be himself, serve on the Board of
Directors of Imatec."
6. Unless expressly set forth in this Amendment No. 1 to the contrary,
all other terms and conditions of the License Agreement shall remain in full
force and effect. In the event that there is an inconsistency between the terms
and provisions of this Amendment No. 1 and the License Agreement, the terms and
provisions of this Amendment No. 1 shall govern.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
executed as of October 18, 1995.
IMATEC, LTD.
/s/ David J. Leffler By:/s/ Dr. Hanoch Shalit
- ---------------------------- ---------------------------------
Witness Dr. Hanoch Shalit, President
/s/ David J. Leffler /s/ Dr. Hanoch Shalit
- ---------------------------- ---------------------------------
Witness DR. HANOCH SHALIT
2
<PAGE>
INDEMNITY AGREEMENT
This Agreement made and entered into as of this day of June, 1996, by
and between Imatec, Ltd., a Delaware corporation (the "Company"), and
("Indemnitee") (sometimes herein collectively called "the parties hereto").
W I T N E S S E T H :
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors or officers of
publicly-held corporations unless they are provided with adequate protection
against claims and actions against them for their activities on behalf of the
corporation, generally through insurance and indemnification; and
WHEREAS, the uncertainties in the interpretations of the statutes,
regulations, laws and public policies relating to indemnification of corporate
directors and officers are such as to make adequate, reliable assessment of the
risks to which directors and officers of publicly-held corporations may be
exposed difficult, particularly in light of the proliferation of lawsuits
against directors and officers; and
WHEREAS, the Company's board of directors (the "Board of Directors"),
based upon their business experience, have concluded that the continuation of
present trends in litigation against corporate directors and officers will
inevitably make it more difficult for the Company to retain directors and
officers of the highest competence committed to the active and effective
direction and supervision of the business and affairs of the Company and the
operation of its facilities, and the Board of Directors deems such
<PAGE>
consequences to be so detrimental to the best interests of the Company's
stockholders that it has concluded that the Company should act to assure its
directors and officers of maximum protection against inordinate risks attendant
on their positions in order to ensure that the most capable persons otherwise
available will be attracted to such positions and, therefore, the Board of
Directors has further concluded that it is not only reasonable and prudent but
necessary for the Company to contractually obligate itself to indemnify to the
fullest extent permitted by applicable law its directors and officers and to
assume for itself maximum liability for expenses and liabilities which might be
incurred by its directors and officers in connection with claims lodged against
them for their decisions and actions as directors or officers; and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which the Company is organized, empowers corporations to
indemnify persons serving as a director or officer of the corporation or a
person who serves at the request of the corporation as a director or officer of
another corporation, subsidiary, partnership, joint venture, trust, or other
enterprise, owned or controlled by, or under common control with, the Company
(an "Affiliate of the Company"), and further specifies that the indemnification
set forth in said Section "shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise;" and said Section
145 further empowers a corporation to "purchase and
2
<PAGE>
maintain insurance" (on behalf of such persons) "against any liability asserted
against him or incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under" (the provision of said laws); and
WHEREAS, the Company desires to have Indemnitee serve or continue to
serve as a director and/or officer of the Company or of any Affiliate of the
Company of which he will be, has been or is serving at the request, for the
convenience of or to represent the interests of the Company free from undue
concern for unpredictable, inappropriate or unreasonable claims for damages by
reason of his being a director or officer of the Company or an Affiliate of the
Company or by reason of his decisions or actions on their behalf; and Indemnitee
desires to serve, or to continue to serve (provided that he is furnished the
indemnity provided for hereinafter), in one or more of such capacities.
NOW THEREFORE, in consideration of the mutual premises herein set
forth, and for other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Agreement to Serve. Indemnitee will serve and/or continue to serve,
at the will of the Company or an Affiliate of the Company as a director and/or
officer faithfully and to the best of his ability so long as he is duly elected
and qualified in accordance with the provisions of the By-laws thereof or until
such time as he tenders his resignation in writing.
3
<PAGE>
2. Indemnification. The Company shall indemnify Indemnitee to the
fullest extent permitted, and in the manner required, by the laws of the State
of Delaware as in effect as of the date hereof or as such laws may from time to
time be amended:
(a) In the event that Indemnitee is a 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 Company or an
Affiliate of the Company by reason of the fact that he is or 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 an Affiliate of the
Company or by reason of anything done or not done by him in any such capacity,
against expenses (including attorneys' fees and disbursements), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the investigation, defense or appeal of any such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company or an Affiliate of the
Company or, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
(b) In the event that Indemnitee is a 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 Company or an Affiliate of
the Company to procure a judgment in its
4
<PAGE>
favor by reason of the fact that he is or was a director, officer, employee or
agent of the Company or an Affiliate of the Company or is or was serving at the
request of the Company or an Affiliate of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or by reason by anything done or not done by him in any such
capacity, against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by him in connection with the investigation,
defense, settlement or appeal of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company or an Affiliate of the Company and except that no
indemnification under this sub-paragraph shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty 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 the 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 of the State of
Delaware or such other court shall deem proper.
(c) Notwithstanding the foregoing provisions of this Paragraph
2, to the extent the Indemnitee has been successful on the merits or otherwise
in defense of any action, suit or
5
<PAGE>
proceeding referred to in sub-paragraphs (a) or (b) of this paragraph, or in the
defense of any claim, issue or matter described therein, against expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
by him in connection with the investigation, defense or appeal of such action,
suit or proceeding.
3. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses (including attorneys' fees and disbursements),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in the investigation, defense, appeal or settlement of such suit, action
or proceeding but not, however, for all of the total amount thereof, the Company
shall nevertheless indemnify Indemnitee of the portion thereof to which
Indemnitee is entitled.
4. Plea of Nolo Contendre. The termination of any action, suit or
proceeding which is covered by this Agreement by judgment, order, settlement or
conviction, or upon a plea of nolo contendre or its equivalent, shall not, of
itself, create a presumption for the purposes of this Agreement that Indemnitee
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interest of the Company and, with respect to any
criminal action or proceeding, has reasonable cause to believe that his conduct
was unlawful.
5. Determination of Right to Indemnification. Any indemnification or
advancement of expenses made hereunder, shall be
6
<PAGE>
made promptly, and in any event within 45 days, upon the written request of the
Indemnitee. Anything contained elsewhere herein to the contrary notwithstanding,
the determination as to whether or not Indemnitee has met the standard of
conduct required to qualify and entitle him, partially or fully, to
indemnification under the provisions of any sub-paragraph of Paragraph 2 hereof
may be made either by (i) the Board of Directors 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 and a quorum
of disinterested directors so directs, by independent legal counsel (who may be
the outside counsel regularly employed by the Company) or (iii) by the
stockholders of the Company, provided that the manner in which (and, if
applicable, the counsel by which) the right to indemnification is to be
determined shall be approved in advance in writing by both the Board of
Directors of the Company and by Indemnitee. In the event that such parties are
unable to agree on the manner in which the determination of the right to
indemnify is to be made, such determination may be made by independent legal
counsel retained by the Company especially for such purpose, provided that such
counsel be approved in advance in writing by both the Board of Directors and
Indemnitee and provided further, that such counsel shall not be outside counsel
regularly employed by the Company. In the event that the parties hereto are
unable to agree on the selection of such outside counsel, such outside counsel
shall be selected by lot by the outside counsel regularly employed by the
Company from among
7
<PAGE>
the New York law firms having more than thirty attorneys and having a rating of
"a" or better in the then current Martindale-Hubbell Law Directory. Such
selection by lot shall be made in the presence of the Indemnitee (and his legal
counsel or either of them, as Indemnitee may elect). The outside counsel
regularly employed by the Company and Indemnitee (and his legal counsel or
either of them, as Indemnitee may elect) shall contact, in the order of their
selection by lot, such law firms, requesting each such firm to accept engagement
to make the determination required hereunder until one of such firms accepts
such engagement. The fees and expenses of counsel in connection with making said
determination contemplated hereunder shall be borne by the Company.
Notwithstanding the foregoing, Indemnitee may, either before or within two (2)
years after a determination has been made as provided above, petition the Court
of Chancery of the State of Delaware or any other court of competent
jurisdiction to determine whether the Indemnitee is entitled to indemnification
under the provisions hereof under which he claims the right to indemnification,
and such court shall thereupon have the exclusive authority to make such
determination unless such court dismisses or otherwise terminates such action
without having made such determination. The court shall, as petitioned, make an
independent determination of whether Indemnitee is entitled to indemnification
as provided hereunder, irrespective of any prior determination made by the Board
of Directors, the stockholders or counsel. In the event that the court shall
determine that Indemnitee is entitled to
8
<PAGE>
indemnification hereunder as to any claim, issue or matter involved in the
action, suit or proceeding with respect to which there has been no prior
determination pursuant hereto to or with respect to which there has been a prior
determination pursuant hereto that Indemnitee was not entitled to
indemnification hereunder, the Company shall pay all expenses (including
attorneys' fees and disbursements) actually incurred by Indemnitee in connection
with such judicial determination. If the person (including the Board of
Directors' independent legal counsel, the stockholders, or a court) making the
determination hereunder shall determine that Indemnitee is entitled to
indemnification as to some claims, issues or matters involved in the action,
suit or proceeding but not as to others, such person shall reasonably prorate
the expenses (including attorneys' fees and disbursements) judgments, penalties,
fines and amounts paid in settlement with respect to which indemnification is
sought by Indemnitee among such claims, issues, or matters. If, and to the
extent it is finally determined hereunder that Indemnitee is not entitled to
indemnification, then Indemnitee agrees to reimburse for all expenses advanced
or prepaid hereunder, or the proper proportion thereof, other than the expenses
of obtaining the judicial determination referred to above.
6. Prepaid Expenses. The costs and expenses incurred by Indemnitee in
investigating, defending, or appealing any threatened, pending or completed
civil or criminal action, suit or proceeding, administrative hearing or
investigation covered hereunder, shall be paid by the Company in advance, in
accordance
9
<PAGE>
with Delaware law, as may be appropriate to properly defend any such action,
suit, or proceeding, with the understanding and agreement hereby made and
entered into by Indemnitee and the Company that in the event it shall ultimately
be determined as provided hereunder that Indemnitee was not entitled to be
indemnified, or was not entitled to be fully indemnified, that Indemnitee shall
repay the Company such amount, or the appropriate portion thereof, so paid or
advanced.
7. Other Rights and Remedies. The indemnification and advance payment
of expenses as provided by any provision of this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under any
provision of law, the Certificate of Incorporation, any By-Law, this Agreement
or other agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while occupying any of the positions or having any of the
relationships referred to in Paragraph 2 of this Agreement, and shall continue
after Indemnitee has ceased to occupy such position or have such relationship
and shall insure to the benefit of the heirs, executors and administrators of
Indemnitee.
8. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever (i)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
10
<PAGE>
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
9. Prior Agreements. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by the Company and/or Indemnitee prior to
the date hereof.
10. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement.
11. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction thereof.
12. Use of Certain Terms. As used in this Agreement the words "herein,"
"hereof," and "hereunder" and words of similar import refer to this Agreement as
a whole and not to any particular paragraph, sub-paragraph or other subdivision.
13. Modification and Waiver. No supplement, modification or
11
<PAGE>
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
14. Notice to the Company by Indemnitee. Indemnitee agrees to promptly
notify the Company in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
15. Notices. All notices, requests, and other communications hereunder
shall be deemed to be duly given if sent postage prepaid, by registered or
certified mail, return receipt requested, or by U.S. express mail or by private
overnight mail service (e.g., Federal Express) addressed to the other party at
the address as set forth herein below:
If to the Company, to:
_______________________
c/o Imatec, Ltd.
150 E. 58th Street
New York, NY 10155
With a copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
8th Floor
New York, NY 10022
Attn: Clifford A. Brandeis, Esq.
16. Governing Law; Jurisdiction and Venue. The parties hereto agree
that this Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware; without giving effect to such
State's conflicts of laws provisions.
12
<PAGE>
Each of the parties hereto hereby irrevocably consents to the venue and
jurisdiction of the federal and state courts located in the State of Delaware,
County of Kent.
17. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his estate, distributees, heirs, executors and administrators.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
IMATEC, LTD.
By:____________________________
INDEMNITEE
________________________________
ADDRESS:
c/o Imatec, Ltd.
150 E. 58th Street
New York, NY 10155
13
<PAGE>
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 31 day of January 1996, between 150
E. 58th ST. PARTNERS, L.P., a New York Limited partnership, having an address
at 150 E. 58th Street, New York, New York 10155, party of the first part,
hereinafter referred to as OWNER, or LANDLORD, and IMATEC, LTD., a Delaware
Corporation having an address at 86 Edwards Street, Rosalyn Heights, New York
11577 party of the second part, hereinafter referred to as TENANT.
WITNESSETH: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord a portion of the twenty-first (21st) floor, substantially as shown
on Exhibit A annexed hereto (the "Demised Premises") in the building known as
150 E. 58th Street (also known as 964 Third Avenue) in the Borough of
Manhattan, City of New York, (the "Building") for a term to commence on the
First (1st) Day of February 1996, and to the end on the Thirty First (31st)
Day of January 1999, or until such date as such term shall sooner cease and
expire as hereinafter provided (the "Expiration Date"), both dates inclusive,
at an annual rental rate (the "Base Annual Rent") as set forth in paragraph
51 hereof, which Tenant agrees to pay in lawful money of the United States
which shall be legal tender in payment of all debts and dues, public and
private, at the time of payment, in equal monthly installments in advance on
the first day of each month during said term, at the Office of Owner or such
other place as Owner may designate, without any set off or deduction
whatsoever, except that Tenant shall pay the first ____________ monthly
installment(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner
pursuant to the terms of another lease with Owner or with Owner's predecessor
in interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder
and the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby
covenant as follows:
RENT:
1. Tenant shall pay the rent as above and as hereinafter provided.
OCCUPANCY:
2. Tenant shall use and occupy demised premises for General and Executive
offices and for no other purpose.
TENANT ALTERATIONS:
3. Tenant shall make no changes in or to the demised premises of any
nature without Owner's prior written consent. Subject to the prior written
consent to Owner, and to the provisions of this article, Tenant, at Tenant's
expense, may make alterations, installations, additions or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved in each instance by Owner. Tenant
shall, before making any alterations, additions, installations or
improvements, at its expense, obtain all permits, approvals and certificates
required by any governmental or quasi-governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly duplicates
of all such permits, approvals and certificates to Owner and Tenant agrees to
carry and will cause Tenant's contractors and sub-contractors to carry such
workman's compensation, general liability, personal and property damage
insurance as Owner may require. If any mechanic's lien is filed against the
demised premises, or the building of which the same forms a part, for work
claimed to have been done for, or materials furnished to, Tenant, whether or
not done pursuant to this article, the same shall be discharged by Tenant
within thirty days thereafter, at Tenant's expense, by payment or filing the
bond required by law. All fixtures and all paneling, partitions, railings and
like installations, installed in the premises at any time, either by Tenant
or by Owner on Tenant's behalf, shall, upon installation, become the property
of Owner and shall remain upon and be surrendered with the demised premises
unless Owner, by notice to Tenant no later than twenty days prior to the date
fixed as the termination of this lease, elects to relinquish Owner's right
<PAGE>
thereto and to have them removed by Tenant, in which event the same shall be
removed from the premises by Tenant prior to the expiration of the lease, at
Tenant's expense. Nothing in this Article shall be construed to give Owner title
to or to prevent Tenant's removal of trade fixtures, moveable office furniture
and equipment, but upon removal of any such from the premises or upon removal of
other installations as may be required by Owner, Tenant shall immediately and at
its expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or may be removed from the premises by Owner, at Tenant's
expense.
MAINTENANCE AND REPAIRS:
4. Tenant shall, throughout the term of this lease, take good care of the
demised premises and the fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other
part of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor,
service or equipment done for or supplied to Tenant or any subtenant or
arising out of the installation, use or operation of the property or
equipment of Tenant or any subtenant. Tenant shall also repair all damage to
the building and the demised premises caused by the moving of Tenant's
fixtures, furniture and equipment. Tenant shall promptly make, at Tenant's
expense, all repairs in and to the demised premises for which Tenant is
responsible, using only the contractor for the trade or trades in question,
selected from a list of at least two contractors per trade submitted by
Owner. Any other repairs in or to the building or the facilities and systems
thereof for which Tenant is responsible shall be performed by Owner at the
Tenant's expense. Owner shall maintain in good working order and repair the
exterior and the structural portions of the building, including the
structural portions of its demised premises, and the public portions of the
building interior and the building plumbing, electrical, heating and
ventilating systems (to the extent such systems presently exist) serving the
demised premises. Tenant agrees to give prompt notice of any defective
condition in the premises for which Owner may be responsible hereunder. There
shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or
reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this Lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of an action for
damages for breach of contract. The provisions of this Article 4 shall not
apply in the case of fire or other casualty which are dealt with in Article 9
hereof.
WINDOW CLEANING:
5. Tenant will not clean nor require, permit, suffer or allow any window
in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of
the Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board
of Fire Underwriters, Insurance Services Office, or any similar body
including, without limitation, The Americans with Disabilities Act, Public
Law 101-336, 42 U.S.C.A. sec.12101 et seq. (hereinafter called "ADA") which
shall impose any violation, order or duty upon Owner or Tenant with respect
to the demised premises, whether or not arising out of Tenant's use or manner
of use thereof, (including Tenant's permitted use) or, with respect to the
building if arising out of Tenant's use or manner of use of the premises or
the building (including the use permitted under the lease). Nothing herein
shall require Tenant to make structural repairs or alterations unless Tenant
<PAGE>
has, by its manner of use of the demised premises or method of operation
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant may, after securing Owner to Owner's
satisfaction against all damages, interest, penalties and expenses, including,
but not limited to, reasonable attorney's fees, by cash deposit or by surety
bond in an amount and in a company satisfactory to Owner, contest and appeal any
such laws, ordinances, orders, rules, regulations or requirements provided same
is done with all reasonable promptness and provided such appeal shall not
subject Owner to prosecution for a criminal offense or constitute a default
under any lease or mortgage under which Owner may be obligated, or cause the
demised premises or any part thereof to be condemned or vacated. Tenant shall
not do or permit any act or thing to be done in or to the demised premises which
is contrary to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time carried by or for the
benefit of Owner with respect to the demised premises or the building of which
the demised premises form a part, or which shall or might subject Owner to any
liability or responsibility to any person or for property damage. Tenant shall
not keep anything in the demised premises except as now or hereafter permitted
by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating
Organization or other authority having jurisdiction, and then only in such
manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. Tenant shall pay all
costs, expenses, fines, penalties, or damages, which may be imposed upon Owner
by reason of Tenant's failure to comply with the provisions of this article and
if by reason of such failure the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" of rate for the building
or demised premises issued by the New York Fire Insurance Exchange, or other
body making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and charges in the
fire insurance rates then applicable to said premises. Tenant shall not place a
load upon any floor of the demised premises exceeding the floor load per square
foot area which it was designed to carry and which is allowed by law. Owner
reserves the right to prescribe the weight and position of all safes, business
machines and mechanical equipment. Such installations shall be placed and
maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's
judgement, to absorb and prevent vibration, noise and annoyance.
SUBORDINATION:
7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or
the real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real
property of which the demised premises are a part. In confirmation of such
subordination, Tenant shall from time to time execute promptly any
certificate that Owner may request.
PROPERTY LOSS, DAMAGE REIMBURSEMENT INDEMNITY:
8. Owner or its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of Tenant by theft or otherwise, nor for any injury
or damage to persons or property resulting from any cause of whatsoever
nature, unless caused by or due to the negligence of Owner, its agents,
servants or employees. Owner or its agents will not be liable for any such
damage caused by other tenants or persons in, upon or about said building or
caused by operations in construction of any private, public or quasi public
work. If at any time any windows of the demised premises are temporarily
closed, darkened or bricked up (or permanently closed, darkened or bricked
up, if required by law) for any reason whatsoever including, but not limited
to Owner's own acts, Owner shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation therefor
nor abatement or diminution of rent nor shall the same release Tenant from
its obligations hereunder nor constitute an eviction. Tenant shall indemnify
and save harmless Owner against and from all liabilities, obligations,
<PAGE>
damages, penalties, claims, costs and expenses for which Owner shall not be
reimbursed by insurance, including reasonable attorneys fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's agents, contractors,
employees, invitees, or licensees, of any covenant or condition of this lease,
or the carelessness, negligence or improper conduct of the Tenant, Tenant's
agents, contractors, employees, invitees or licensees. Tenant's liability under
this lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
DESTRUCTION, FIRE AND OTHER CASUALTY:
9. (a) If the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give immediate notice thereof to Owner
and this lease shall continue in full force and effect except as hereinafter
set forth. (b) If the demised premises are partially damaged or rendered
partially unusable by fire or other casualty, the damages thereto shall be
repaired by and at the expense of Owner and the rent and other items of
additional rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thenceforth shall
cease until the date when the premises shall have been repaired and restored
by Owner (or sooner reoccupied in part by Tenant then rent shall be
apportioned as provided in subsection (b) above), subject to Owner's right to
elect not to restore the same as hereinafter provided. (d) If the demised
premises are rendered wholly unusable or (whether or not the demised premises
are damaged in whole or in part) if the building shall be so damaged that
Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within 90 days after such fire or casualty, or 30 days after adjustment
of the insurance claim for such fire or casualty, whichever is sooner,
specifying a date for the expiration of the lease, which date shall not be
more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination
of this lease and Tenant shall forthwith quit, surrender and vacate the
premises without prejudice however, to Landlord's rights and remedies against
Tenant under the lease provisions in effect prior to such termination, and
any rent owing shall be paid up to such date and any payments of rent made by
Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the
conditions of (b) and (c) hereof, with all reasonable expedition, subject to
delays due to adjustment of insurance claims, labor troubles and causes
beyond Owner's control. After any such casualty, Tenant shall cooperate with
Owner's restoration by removing from the premises as promptly as reasonably
possible, all of Tenant's salvageable inventory and moveable equipment,
furniture, and other property. Tenant's liability for rent shall resume five
(5) days after written notice from Owner that the premises are substantially
ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve
Tenant from liability that may exist as a result of damage from fire or other
casualty. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated
to repair any damage thereto or replace the same. (f) Tenant hereby waives
the provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
EMINENT DOMAIN:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim
for the value of any unexpired term of said lease and assigns to Owner,
Tenant's entire interest in any such award, Tenant shall have the right to
make an independent claim to the condemning authority for the value of
Tenant's moving expenses and personal property, trade fixtures and equipment,
provided Tenant is entitled pursuant to the terms of the lease to remove such
property, trade fixture and equipment at the end of the term and provided
further such claim does not reduce Owner's award.
<PAGE>
ASSIGNMENT, MORTGAGE, ETC.:
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representative, successor and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant or a majority of
ownership of beneficial interest of Tenant if Tenant is an unincorporated
association or partnership, whether in one or a series of related or
unrelated transactions or otherwise, or the majority partnership interest of
a partnership Tenant shall be deemed an assignment. If this lease be
assigned, or if the demised premises or any part thereof be underlet or
occupied by anybody other than Tenant, Owner may, after default by Tenant,
collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this
covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve
Tenant from obtaining the express consent in writing of Owner to any further
assignment or underletting.
ELECTRIC CURRENT:
12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in
Owner's opinion, reasonably exercised, will overload such installations or
interfere with the use thereof by other tenants of the building. The change
at any time of the character of electric service shall in no wise make Owner
liable or responsible to Tenant, for any loss, damages or expenses which
Tenant may sustain.
ACCESS TO PREMISES:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and,
at other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and
maintain and replace pipes and conduits in and through the demised premises
and to erect new pipes and conduits therein provided they are concealed
within the walls, floor, or ceiling. Owner may, during the progress of any
work in the demised premises, take all necessary materials and equipment into
said premises without the same constituting an eviction nor shall the Tenant
be entitled to any abatement of rent while such work is in progress nor to
any damages by reason of loss or interruption of business or otherwise.
Throughout the term hereof Owner shall have the right to enter the demised
premises at reasonable hours for the purpose of showing the same to
prospective purchasers or mortgagees of the building, and during the last six
months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the
demised premises, Owner or Owner's agent may enter the same whenever such
entry may be necessary or permissible by master key or forcibly and provided
reasonable care is exercised to safeguard Tenant's property, such entry shall
not render Owner or its agents liable therefor, nor in any event shall the
obligations of Tenant hereunder be affected. If during the last month of the
term Tenant shall have removed all or substantially all of Tenant's property
therefrom Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring
liability to Tenant for any compensation and such act shall have no effect on
this lease or Tenant's obligations hereunder.
VAULT, VAULT SPACE, AREA:
14. [Intentionally deleted]
OCCUPANCY:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to
Owner's work, if any. In any event, Owner makes no representation as to the
condition of the premises and Tenant agrees to accept the same subject to
violations, whether or not of record.
<PAGE>
BANKRUPTCY:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding,
this lease may be cancelled by Owner by the sending of a written notice to
Tenant within a reasonable time after the happening of any one or more of the
following events: (1) the commencement of a case in bankruptcy or under the
laws of any state naming Tenant or any guarantor of Tenant's obligations
hereunder as the debtor; or (2) the making by Tenant or any guarantor of
Tenant's obligations hereunder of an assignment or any other arrangement for
the benefit of creditors under any state statute. Neither Tenant nor any
person claiming through or under Tenant, or by reason of any statute or order
of court, shall thereafter be entitled to possession of the premises demised
but shall forthwith quit and surrender the premises. If this lease shall be
assigned in accordance with its terms, the provisions of this Article 16
shall be applicable only to the party then owning Tenant's interest in this
lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference
between the rent reserved hereunder for the unexpired portion of the term
demised and the fair and reasonable rental value of the demised premises for
the same period. In the computation of such damages the difference between
any installment of rent becoming due hereunder after the date of termination
and the fair and reasonable rental value of the demised premises for the
period for which such installment was payable shall be discounted to the date
of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be re-let by the Owner for the unexpired term of said
lease, or any part thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of rent reserved
upon such re-letting shall be deemed to be the fair and reasonable rental
value for the part or the whole of the premises so re-let during the term of
the re-letting. Nothing herein contained shall limit or prejudice the right
of the Owner to prove for and obtain as liquidated damages by reason of
such termination, an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
DEFAULT:
17. (1) If Tenant defaults in fulfilling any of the covenants of this lease
other than the covenants for the payment of rent or additional rent; or if the
demised premises become vacant or deserted; or if any execution or attachment
shall be issued against Tenant or any of Tenant's property whereupon the demised
premises shall be taken or occupied by someone other than Tenant; or if this
lease be rejected under Section 365 of Title 11 of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within thirty (30) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written fifteen (15)
days notice upon the Tenant specifying the nature of said default and upon the
expiration of said fifteen (15) days, if Tenant shall have failed to comply with
or remedy such default, or if the said default or omission complained of shall
be of a nature that the same cannot be completely cured or remedied within said
fifteen (15) day period, and if Tenant shall not have diligently commenced
curing such default within such fifteen (15) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed to remedy or
cure such default, then Owner may serve a written five (5) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said five (5)
days this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such five (5) day xxxxxxxxxxxxxxxxxxxxx
illegible xxxxxxxxxxxxxxxxxxx fixed for the end and expiration of this lease and
the term thereof and Tenant shall then quit and surrender the demised premises
to Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the
term shall expire as aforesaid; or if Tenant shall make default in the payment
of the rent reserved herein or any item of additional rent herein mentioned or
any part of either or in making any other payment herein required; then and in
any of such events Owner may without notice, re-enter the demised premises
either by force or otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other occupant of demised
premises and remove their effects and hold the premises as if this lease had not
<PAGE>
been made, and Tenant hereby waives the service of notice of intention to
re-enter or to institute legal proceedings to that end. If Tenant shall make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminate such renewal or
extension agreement by written notice.
REMEDIES OF OWNER AND WAIVER OF REDEMPTION:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or other wise, (a) the rent shall become due thereupon and
be paid up to the time of such re-entry, dispossess and/or expiration, (b)
Owner may re-let the premises or any part or parts thereof, either in the
name of Owner or otherwise, for a term or terms, which may at Owner's option
be less than or exceed the period which would otherwise have constituted the
balance of the term of this lease and may grant concessions or free rent or
charge a higher rental than that in this lease, and/or (c) Tenant or the
legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts
thereof shall not release or affect Tenant's liability for damages. In
computing such liquidated damages there shall be added to the said deficiency
such expenses as owner may incur in connection with re-letting, such as legal
expenses, reasonable attorneys' fees, brokerage, advertising and for keeping
the demised premises in good order or for preparing the same for re-letting.
Any such liquidated damages shall be paid in monthly installments by Tenant
on the rent day specified in this lease and any suit brought to collect the
amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a
similar proceeding. Owner, in putting the demised premises in good order or
preparing the same for re-rental may, at Owner's option, make such
alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgement, considers advisable and
necessary for the purpose of re-letting the demised premises, and the making
of such alterations, repairs, replacements, and/or decorations shall not
operate or be construed to release Tenant from liability hereunder as
aforesaid. Owner shall in no event be liable in any way whatsoever for
failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess,
if any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Owner shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not herein provided
for. Mention in this lease of any particular remedy, shall not preclude Owner
from any other remedy, in law or in equity. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present or future
laws in the event of Tenant being evicted or dispossessed for any cause, or
in the event of Owner obtaining possession of demised premises, by reason of
the violation by Tenant of any of the covenants and conditions of this lease,
or otherwise.
FEES AND EXPENSES:
19. If Tenant shall default in the observance or performance of any term
or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, after notice
if required and upon expiration of any applicable grace period if any,
(except in an emergency), then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with the
foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or incurs any obligations for the
payment of money, including but not limited to reasonable attorneys' fees, in
instituting, prosecuting or defending any action or proceeding, and prevails
in any such action or proceeding then Tenant will reimburse Owner for such
sums so paid or obligations incurred with interest and costs. The foregoing
expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within ten
(10) days of rendition of any bill or statement to Tenant therefor. If
Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable
by Owner, as damages.
<PAGE>
BUILDING ALTERATIONS AND MANAGEMENT:
20. Owner shall have the right at any time without the same constituting
an eviction and without incurring liability to Tenant therefor to change the
arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building
may be known. There shall be no allowance to Tenant for diminution of rental
value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or other Tenants making
any repairs in the building or any such alterations, additions and
improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of such controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem
necessary for the security of the building and its occupants.
NO REPRESENTATIONS BY OWNER:
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land
upon which it is erected or the demised premises, the rents, leases, expenses
of operation or any other matter or thing affecting or related to the
premises except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as
expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a
part were in good and satisfactory condition at the time such possession was
so taken, except as to latent defects. All understandings and agreements
heretofore made between the parties hereto are merged in this contract, which
alone fully and completely expresses the agreement between Owner and Tenant
and any executory agreement hereafter made shall be ineffective to change,
modify, discharge or effect in abandonment of it in whole or in part, unless
such executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
END OF TERM:
22. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Owner the demised premises, broom clean,
in good order and condition, ordinary wear and damages which Tenant is not
required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If
the last day of the term of this Lease or any renewal thereof, falls on
Sunday, this lease shall expire at noon on the preceding Saturday unless it
be a legal holiday in which case it shall expire at noon on the preceding
business day.
QUIET ENJOYMENT:
23. Owner covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed,
Tenant may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
FAILURE TO GIVE POSSESSION:
24. If Owner is unable to give possession of the demised premises on the
date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease
shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the term of this lease, but the rent payable
hereunder shall be abated (provided Tenant is not responsible for Owner's
inability to obtain possession or complete construction) until after Owner
shall have given Tenant written notice that the Owner is able to deliver
possession in condition required by this lease. If permission is given to
Tenant to enter into the possession of the demises premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease. Tenant covenants and agrees that such
possession and/or occupancy shall be deemed to be under all the terms,
covenants, conditions and provisions of this lease except the obligation to
pay the fixed annual rent set forth in the preamble to this lease. The
provisions of this article are intended to constitute "an express provision
to the contrary" within the meaning of Section 223-a of the New York Real
Property Law.
<PAGE>
NO WAIVER:
25. The failure of Owner to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease or of
any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent and/or additional rent with knowledge of the breach
of any covenant of this lease shall not be deemed a waiver of such breach and
no provision of this lease shall be deemed to have been waived by Owner
unless such waiver be in writing signed by Owner. No payment by Tenant or
receipt by Owner of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent,
nor shall any endorsement or statement of any check or any letter
accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy
in this lease provided. No act or thing done by Owner or Owner's agents
during the term hereby demised shall be deemed an acceptance of a surrender
of said premises, and no agreement to accept such surrender shall be valid
unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of
the premises.
WAIVER OF TRIAL BY JURY:
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with this lease,
the relationship of Owner and Tenant. Tenant's use of or occupancy of said
premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any proceeding or
action for possession including a summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4
except for statutory mandatory counterclaims.
INABILITY TO PERFORM:
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant
to be performed shall in no wise be affected, impaired or excused because
Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying
any equipment, fixtures, or other materials if Owner is prevented or delayed
from so doing by reason of strike or labor troubles or any cause whatsoever
including, but not limited to, government preemption or restrictions or by
reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions which have
been or are affected, either directly or indirectly, by war or other
emergency.
BILLS AND NOTICES:
28. Except as otherwise in this lease provided, a bill, statement, notice
or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant
at the building of which the demised premises form a part or at the last
known residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left
at the premises as herein provided. Any notice by Tenant to Owner must be
served by registered or certified mail addressed to Owner at the address
first hereinabove given or at such other address as Owner shall designate by
written notice.
<PAGE>
SERVICES PROVIDED BY OWNERS:
29. As long as Tenant is not in default under any of the covenants of this
lease beyond the applicable grace period provided in this lease for the curing
of such defaults, Owner shall provide: (a) necessary elevator facilities on
business days from 8:30 a.m. to 5:30 p.m. and have one elevator subject to call
at all other times; (b) heat to the demised premises when and as required by
law, on business days from 8:30 a.m. to 5:30 p.m.; (c) water for ordinary
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge), Owner
may install a water meter at Tenant's expense which Tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register such
water consumption and Tenant shall pay for water consumed as shown on said meter
as additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Owner's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner reasonably
satisfactory to Owner and no one other than persons approved by Owner shall be
permitted to enter said premises or the building of which they are a part for
such purpose. Tenant shall pay Owner the cost of removal of any of Tenant's
refuse and rubbish from the building; (e) If the demised premises are serviced
by Owner's air conditioning/cooling and ventilating system, air
conditioning/cooling will be furnished to tenant from May 15th through September
30th on business days (Mondays through Fridays, holidays excepted) from 8:30
a.m. to 5:30 p.m., and ventilation will be furnished on business days during the
aforesaid hours except when air conditioning/cooling is being furnished as
aforesaid. If Tenant requires air conditioning/cooling or ventilation for more
extended hours or on Saturdays, Sundays or on holidays, as defined under Owner's
contract with Operating Engineers Local 94-94A, Owner will furnish the same at
Tenant's expense and owner shall furnish such service upon reasonable advance
notice from Tenant and Tenant shall pay, on demand, Owner's then standard charge
therefor; (f) Owner reserves the right to stop services of the heating,
elevators, plumbing, air-conditioning, electric, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof or by
reason of strikes, accidents, laws, orders or regulations or any other reason
beyond the control of Owner. If the building of which the demised premises are a
part supplies manually operated elevator service, Owner at any time may
substitute automatic control elevator service and proceed diligently with
alterations necessary therefor without in any wise affecting this lease or the
obligation of Tenant hereunder.
CAPTIONS:
30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.
DEFINITIONS:
31. The term "office", or "offices", wherever used in this lease, shall
not be construed to mean premises used as a store or stores, for the sale or
display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" or "Landlord". means a
landlord or lessor, and as used in this lease means only the owner, or the
mortgagee in possession, for the time being of the land and building (or the
owner of a lease of the building or of the land and building) of which the
demised premises form a part, so that in the event of any sale or sales of
said land and building or of said lease, or in the event of a lease of said
building, or of the land and building, the said Owner shall be and hereby is
entirely freed and relieved of all covenants and obligations of Owner
hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties
and the purchaser, at any such sale, or the said lessee of the building, or
of the land and building, that the purchaser or the lessee of the building
has assumed and agreed to carry out any and all covenants and obligations of
Owner, hereunder. The words "re-enter" and "re-entry" as used in this lease
are not restricted to their technical legal meaning. The term "business days"
as used in this lease shall exclude Saturdays, Sundays and all days as
observed by the State or Federal Government as legal holidays and those
designated as holidays by the applicable building service union employees
service contract or by the applicable Operating Engineers contract with
respect to HVAC service. Wherever it is expressly provided in this lease that
consent shall not be unreasonably withheld, such consent shall not be
unreasonably delayed.
<PAGE>
ADJACENT EXCAVATION-SHORING:
32. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the
person causing or authorized to cause such excavation, license to enter upon
the demised premises for the purpose of doing such work as said person shall
deem necessary to preserve the wall or the building of which demised premises
form a part from injury or damage and to support the same by proper
foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
RULES AND REGULATIONS:
33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as
Owner or Owner's agents may from time to time adopt. Notice of any additional
rules or regulations shall be given in such manner as Owner may elect. In
case Tenant disputes the reasonableness of any additional Rule or Regulation
hereafter made or adopted by Owner or Owner's agents, the parties hereto
agree to submit the question of the reasonableness of such Rule or Regulation
for decision to the New York office of the American Arbitration Association,
whose determination shall be final and conclusive upon the parties hereto.
The right to dispute the reasonableness of any additional Rule or Regulation
upon Tenant's part shall be deemed waived unless the same shall be asserted
by service of a notice, in writing upon Owner within fifteen (15) days after
the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for
violation of the same by any other tenant, its servants, employees, agents,
visitors or licensees.
SECURITY:
34. Tenant has deposited with Owner the sum of $17,920.00 as security for
the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults
in respect of any of the terms, provisions and conditions of this lease,
including, but not limited to the payment of rent and additional rent, Owner
may use, apply or retain the whole or any part of the security so deposited
to the extent required for the payment of any rent and additional rent or any
other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect
of any of the terms, covenants and conditions of this lease, including but
not limited to, any damages or deficiency in the re-letting of the premises,
whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Owner. In the event that Tenant shall fully
and faithfully comply with all of the terms, provisions, covenants and
conditions of this lease, the security shall be returned to tenant after the
date fixed as the end of the Lease and after delivery of entire possession of
the demised premises to Owner. In the event of a sale of the land and
building or leasing of the building, of which the demised premises form a
part, Owner shall have the right to transfer the security to the vendee or
lessee and Owner shall thereupon be released by Tenant from all liability for
the return of such security; and Tenant agrees to look to the new Owner
solely for the return of said security, and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to a
new Owner. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and
that neither Owner nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
ESTOPPEL CERTIFICATE:
35. Tenant, at any time, and from time to time, upon at least 10 days'
prior notice by Owner, shall execute, acknowledge and deliver to Owner,
and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), stating the dates to
which the rent and additional rent have been paid, and stating whether or not
there exists any default by Owner under this Lease, and, if so, specifying
each such default.
<PAGE>
SUCCESSORS AND ASSIGNS:
36. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns. Tenant shall look only to Owner's estate
and interest in the land and building, for the satisfaction of Tenant's remedies
for the collection of a judgment (or other judicial process) against Owner in
the event of any default by Owner hereunder, and no other property or assets of
such Owner (or any partner, member, officer or director thereof, disclosed or
undisclosed), shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this lease,
the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of
the demised premises.
SEE RIDER ATTACHED HERETO AND MADE A PART HEREOF
CONTAINING PARAGRAPHS 37-59
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Owner making the within lease with Tenant, the undersigned guarantees to
Owner, Owner's successors and assigns, the full performance and observance of
all the covenants, conditions and agreements, therein provided to be
performed and observed by Tenant, including the "Rules and Regulations" as
therein provided, without requiring any notice of non-payment,
non-performance, or non-observance, or proof, or notice, or demand, whereby
to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall in no wise be terminated,
affected or impaired by reason of the assertion by Owner against Tenant of
any of the rights or remedies reserved to Owner pursuant to the provisions of
the within lease. The undersigned further covenants and agrees that this
guaranty shall remain and continue in full force and effect as to any
renewal, modification or extension of this lease and during any period when
Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner
and the undersigned covenant and agree that in any action or proceeding
brought by either Owner or the undersigned against the other on any matters
whatsoever arising out of, under, or by virtue of the terms of this lease or
of this guarantee that Owner and the undersigned shall and do hereby waive
trial by jury.
Date:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantor
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Witness
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantor's Residence
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Address
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Firm Name
STATE OF NEW YORK ) ss.:
COUNTY OF )
On this day of , 19 , before me personally came
to me known and known to me to be the individual described in, and who
executed the foregoing Guaranty and acknowledged to me that he executed the
same.
. . . . . . . . . . . . . . .
Notary
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or
encumbered by any Tenant or used for any purpose other than for ingress or
egress from the demised premises and for delivery of merchandise and
equipment in a prompt and efficient manner using elevators and passageways
designated for such delivery by Owner. There shall not be used in any space,
or in the public hall of the building, either by any Tenant or by jobbers or
others in the delivery or receipt of merchandise, any hand trucks, except
those equipped with rubber tires and sideguards. If said premises are
situated on the ground floor of the building, Tenant thereof shall further,
at Tenant's expense, keep the sidewalk and curb in front of said premises
clean and free from ice, snow, dirt and rubbish.
<PAGE>
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and
no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from
the violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window
of the building and no Tenant shall sweep or throw or permit to be swept or
thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the building by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any bicycles, vehicles, animals, fish, or
birds be kept in or about the building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premise if
the same is visible from the outside of the premises without the prior
written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing
by any Tenant, Owner may remove same without any liability, and may charge
the expense incurred by such removal to Tenant or Tenants violating this
rule. Interior signs on doors and directory tablet shall be inscribed,
painted or affixed for each Tenant by Owner at the expense of such Tenant,
and shall be of a size, color and style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may direct. No Tenant shall lay
linoleum, or other similar floor covering, so that the same shall come in
direct contact with the floor of the demised premises, and, if linoleum or
other similar 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, soluble in water, the use of cement or other similar adhesive
material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such Tenant, and in the event
of the loss of any keys, so furnished, such Tenant shall pay to Owner the
costs thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and
only during hours and in a manner approved by Owner. Owner 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 of
the lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building all persons who do
not present a pass to the building signed by Owner. Owner will furnish passes
to persons for whom any Tenant requests same in writing. Each Tenant shall be
responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons. Tenant shall not have a claim
against Owner by reason of Owner excluding from the building any person who
does not present such pass.
11. Owner shall have the right to prohibit any advertising by any Tenant which
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, explosive, or hazardous fluid,
material, chemical or substance, or cause or permit any odors of cooking or
other processes, or any unusual or other objectionable odors to permeate in
or emanate from the demised premises.
<PAGE>
13. If the building contains central air conditioning and ventilation, Tenant
agrees to keep all windows closed at all times and to abide by all rules and
regulations issued by Owner with respect to such services. If Tenant requires
air conditioning or ventilation after the usual hours, Tenant shall give
notice in writing to the building superintendent prior to 3:00 p.m. in the
case of services required on week days, and prior to 3:00 p.m. on the day
prior in case of after hours service required on weekends or on holidays.
Tenant shall cooperate with Owner in obtaining maximum effectiveness of the
cooling system by lowering and closing venetian blinds and/or drapes and
curtains when the sun's rays fall directly on the windows of the demised
premises.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures
requires special handling, all work in connection therewith shall comply with
the Administrative Code of the City of New York and all other laws and
regulations applicable thereto and shall be done during such hours as Owner
may designate.
15. Refuse and Trash. (1) Compliance by Tenant. Tenant covenants and agrees,
at its sole cost and expense, to comply with all present and future laws,
orders, and regulations of all state, federal, municipal, and local
governments, departments, commissions and boards regarding the collection,
sorting, separation and recycling of waste products, garbage, refuse and
trash. Tenant shall sort and separate such waste products, garbage, refuse
and trash into such categories as provided by law. Each separately sorted
category of waste products, garbage, refuse and trash shall be placed in
separate receptacles reasonably approved by Owner. Such separate receptacles
may, at Owner's option, be removed from the demised premises in accordance
with a collection schedule prescribed by law. Tenant shall remove, or cause
to be removed by a contractor acceptable to Owner, at Owner's sole discretion
such items as Owner may expressly designate. (2) Owner's Rights in Event of
Noncompliance. Owner has the option to refuse to collect or accept from
Tenant waste products, garbage, refuse or trash (a) that is not separated and
sorted as required by law or (b) which consists of such items as Owner may
expressly designate for Tenant's removal, and to require Tenant to arrange
for such collection at Tenant's sole cost and expense, utilizing a contractor
satisfactory to Owner. Tenant shall pay all costs, expenses, fines,
penalties, or damages that may be imposed on Owner or Tenant by reason of
Tenant's failure to comply with the provisions of this Building Rule 15, and,
at Tenant's sole cost and expense, shall indemnity, defend and hold Owner
harmless (including reasonable legal fees and expenses) from and against any
actions, claims and suits arising from such noncompliance, utilizing counsel
reasonably satisfactory to Owner.
<PAGE>
Address 150 E. 58th Street
Premises a portion of the 21st flr
====================================
150 E. 58th ST. PARTNERS, L.P.
TO
IMATEC, LTD.
====================================
STANDARD FORM OF
Office
Lease
The Real Estate Board of New York, Inc.
(C) Copyright 1994. All rights Reserved.
Reproduction in whole or in
part prohibited.
====================================
Dated 19
Rent Per Year
Rent Per Month
Term
From
To
Drawn by . . . . . . . . . . .
Check by . . . . . . . . . . .
Entered by . . . . . . . . . .
Approved by . . . . . . . . .
<PAGE>
RIDER TO LEASE, DATED AS OF, JANUARY 31, 1996,
BETWEEN 150 E. 58TH STREET PARTNERS, L.P. AND THE IMATEC, LTD., WITH
RESPECT TO A PORTION OF THE 21ST FLOOR OF
150 EAST 58TH STREET, NEW YORK, NEW YORK
The provisions of this Rider shall supersede any inconsistent provisions
contained in the printed portion of this Lease.
37. Limitation on Liability. If the Landlord or any successor in
interest be an individual, joint venture, tenancy in common, co-partnership,
unincorporated association, or other unincorporated aggregate of individuals or
a corporation (all of which are referred to below in this paragraph individually
and collectively, as a "Landlord Entity"), then, anything elsewhere to the
contrary notwithstanding, Tenant and Tenant's officers, directors, stockholders,
partners, associates, employees, agents, licensees or investors (or any other
party claiming by or on behalf of Tenant), shall look solely to the estate and
property of such Landlord Entity in the land and building of which the Demised
Premises are a part, for the satisfaction of Tenant's remedies for the
collection of any judgment (or other judicial process) requiring the payment of
money by Landlord Entity with respect to any liability of Landlord Entity under,
pursuant to or in connection with this lease, and no other property or assets of
such Landlord Entity shall be subject to levy, execution or other enforcement
procedures for the satisfaction of Tenant's remedies. In no event shall Landlord
be liable to Tenant for consequential damages.
38. Insurance. Supplementing paragraphs 3 and 8 hereof, Tenant shall
carry minimum insurance coverage of $3,000,000.00 combined single limit for all
general liability, personal injury and property damage. Such insurance policies
shall name Landlord (and any other parties having an insurable interest in the
Demised Premises as are designated by Landlord) and Tenant as insureds. Tenant
shall also carry customary all risk insurance coverage for the full replacement
value of Tenant's contents and improvements located in or about the Demised
Premises. Certificates evidencing such insurance and other insurance coverage
referred to in this Lease shall be delivered to Landlord prior to the
commencement of any work or taking of possession of the Demised Premises, and
shall be maintained with Landlord throughout the term of this Lease. All
casualty insurance carried by Tenant shall specifically waive any right of
subrogation against Landlord and its agents. All insurance carried by Tenant
shall be issued by an insurance company licensed in the State of New York having
at least an "A" VI rating from Best Reports. Tenant agrees to indemnify, defend
and hold Landlord harmless from and against all claims, loss, liability, costs
and expenses (including reasonable attorney's fees) arising from any accident,
injury or damage of whatever nature caused to any person or to the property of
any person occurring in, on or about the Demised Premises during the term of
this Lease. Tenant likewise shall indemnify, defend and hold Landlord harmless
from and against all claims, loss, liability, costs, expenses (including
reasonable attorneys fees) for injury or damages arising from any accident,
injury or damage of whatever nature, occurring outside the Demised Premises but
within the Building, but only where such damage or injury results or is claimed
to have resulted from any action or omission on the part of Tenant or Tenant's
contractors, licensees, agents, invitees, visitors, servants or employees.
39. Brokers. Tenant warrants and represents that it dealt solely with
Jay G. Smith, Licensed Real Estate Broker and Newmark & Company Real Estate,
Inc. (collectively, the "Brokers") as brokers and that to Tenant's knowledge no
other broker was instrumental in bringing about or procuring this Lease. Tenant
agrees to indemnify and hold Landlord harmless from and against the claims of
other brokers or agents for compensation by reason of Tenant's acts. Landlord
shall be solely responsible for compensating the Brokers pursuant to separate
agreements.
<PAGE>
40. Condition of Premises. Without limiting the generality of
paragraph 21, Tenant has made or been given the opportunity to make a thorough
examination and inspection of the Demised Premises. Tenant agrees that it enters
into this Lease without any representations or warranties by Landlord, its
employees, agents, representatives or servants or any other person as to the
condition of the Demised Premises or the appurtenances thereof, or any
improvements therein or thereon, or any other matters pertinent thereto or to
this Lease. Tenant agrees to accept the Demised Premises "as is" in their
condition at the time possession is given to Tenant, without requiring any
alterations, improvements, repairs or decorations to be made by Landlord or at
Landlord's expense.
41. Assignment and Subletting. (1) Supplementing paragraph 11 hereof,
if Tenant shall at any time or times during the term of this Lease desire to
assign this Lease or sublet all or part of the Demised Premises, Tenant shall
give notice thereof to Landlord, which notice shall be accompanied by (i) an
executed counterpart of the assignment or sublease (and all ancillary documents
to be executed in connection with or with respect to or modifying such proposed
assignment or sublease), the effective or commencement date of which shall be at
least forty five (45) days after the giving of such notice, (ii) a statement
setting forth in reasonable detail the identity of the proposed assignee or
subtenant, the nature of its business and its proposed use of the Demised
Premises, (iii) current financial information with respect to the proposed
assignee or subtenant, including, without limitation, its most recent financial
report and (iv) such other information as Landlord may reasonably request. Such
notice shall be deemed an offer from Tenant to Landlord whereby Landlord (or
Landlord's designee) may, at its option, (i) sublease such space from Tenant
upon the terms and conditions hereinafter set forth (if the proposed transaction
is a sublease of all or part of the Demised Premises), (ii) have this Lease
assigned to it or its designee or terminate this Lease (if the proposed
transaction is an assignment or a sublease of all or substantially all of the
Demised Premises or a sublease of a portion of the Demised Premises which, when
aggregated with other subleases then in effect, covers all or substantially all
of the Demised Premises), or (iii) terminate this Lease with respect to the
space covered by the proposed sublease (if the proposed transaction is a
sublease of part of the Demised Premises). Said option may be exercised by
Landlord by notice to Tenant at any time within forty five (45) days after such
notice has been given by Tenant to Landlord and Landlord shall have received all
other information required to be furnished to Landlord by Tenant pursuant to the
provisions of this paragraph 41; and during such 45-day period Tenant shall not
assign this Lease or sublet such space to any person. Any termination of this
Lease with respect to all or any portion of the Demised Premises pursuant to
this paragraph 41 shall require the consent of the holders of any mortgages on
the land and the building.
<PAGE>
(2) (a) If Landlord exercises its option to terminate this Lease in
the case where Tenant desires either to assign this Lease or sublet all or
substantially all of the Demised Premises, therein, this Lease shall end and
expire on the date that such assignment or sublet was to be effective or
commence, as the case may be and the Base Annual Rent and additional rent shall
be paid and apportioned to such date.
(b) If Landlord exercises its option to have this Lease assigned
to it (or its designee) in the case where Tenant desires either to assign this
Lease or to sublet all or substantially all of the Demised Premises, then Tenant
shall assign this Lease to Landlord (or Landlord's designee) by an assignment in
form and substance reasonably satisfactory to Landlord. Such assignment shall be
effective on the date the proposed assignment was to be effective or the date
the proposed sublease was to commence, as the case may be. Tenant shall not be
entitled to consideration or payment from Landlord (or Landlord's designee) in
connection with any such assignment. If the proposed assignee or sublessee was
to receive any consideration or concessions from Tenant in connection with the
proposed assignment or sublease, the Tenant shall pay such consideration and/or
grant any such concessions to Landlord (or Landlord's designee) on the date
Tenant assigns this Lease to Landlord (or Landlord's designee).
(3) If Landlord exercises its option to terminate this Lease with
respect to the space covered by Tenant's proposed sublease in any case where
Tenant desires to sublet part of the Demised Premises, then (i) this Lease shall
end and expire with respect to such part of the Demised Premises on the date
that the proposed sublease was to commence; (ii) from and after such date the
Base Annual Rent and additional rent shall be adjusted, based upon the
proportion that the rentable area of the Demised Premises remaining bears to
the total rentable area of the Demised Premises; and (iii) Tenant shall pay to
Landlord, upon demand, as additional rent hereunder the costs incurred by
Landlord in physically separating such part of the Demised Premises from the
balance of the Demised Premises and in complying with any laws and requirements
of any public authorities relating to such separation.
(4) If Landlord exercises its option to sublet the Demised Premises
or the portion(s) of the Demised Premises which Tenant desires to sublet, such
sublease to Landlord or its designee (as subtenant) shall be at the lower of (i)
the rental rate per rentable square foot of Base Annual Rent and recurring
additional rent then payable pursuant to this Lease or (ii) the rentals set
forth in the proposed sublease, and shall be for the same term as that of the
proposed subletting, and:
<PAGE>
(a) The sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this Lease except
such as are irrelevant or inapplicable, and except as otherwise expressly set
forth to the contrary in this section;
(b) Such sublease shall be upon the same terms and conditions as
those contained in the proposed sublease, except such as are irrelevant or
inapplicable and except as otherwise expressly set forth to the contrary in
this section;
(c) Such sublease shall give the sublessee the unqualified and
unrestricted right, without Tenant's permission, to assign such sublease or any
interest therein and/or to sublet the space covered by such sublease or any part
or parts of such space and to make any and all changes, alterations, and
improvements in the space covered by such sublease;
(d) Such sublease shall provide that any assignee or further
subtenant of Landlord or its designee, may, at the election of Landlord, be
permitted to make alterations, decorations and installations in such space or
any part thereof and shall also provide in substance that any such alterations,
decorations and installations in such space therein made by any assignee or
subtenant of Landlord or its designee may be removed, in whole or in part, by
such assignee or subtenant, at its option, prior to or upon the expiration or
other termination of such sublease provided that such assignee or subtenant, at
its expense, shall repair any damage and injury to such space so sublet caused
by such removal; and
(e) Such sublease shall also provide that (i) the parties to such
sublease expressly negate any intention that any estate created under such
sublease be merged with any other estate held by either of said parties, (ii)
any assignment or subletting by Landlord or its designee (as the subtenant) may
be for any purpose or purposes that Landlord, in Landlord's uncontrolled
discretion, shall deem suitable or appropriate, (iii) Tenant, at Tenant's
expense, shall and will at all times provide and permit reasonably appropriate
means of ingress to and egress from such space so sublet by Tenant to Landlord
or its designee, (iv) Landlord, at Tenant's expense, may make such alterations
as may be required or deemed necessary by Landlord to physically separate the
subleased space from the balance of the Demised Premises and to comply with any
laws and requirements of public authorities relating to such separation, and (v)
that at the expiration of the term of such sublease, Tenant will accept the
space covered by such sublease in its then existing condition, subject to the
obligations of the sublessee to make such repairs thereto as may be necessary to
preserve the premises demised by such sublease in good order and condition.
(5) In the event Landlord does not exercise its options pursuant to
paragraph 41(1) hereof to so sublet the Demised Premises or terminate (in whole
or in part) or have assigned to it or its designee this Lease and providing that
Tenant is not in default of any of Tenant's obligations under this Lease,
Landlord's consent (which must be in writing and in form satisfactory to
Landlord) to the proposed assignment or sublease shall not be unreasonably
withheld, provided and upon condition that:
<PAGE>
(a) Tenant shall have complied with the provisions of paragraph
41(l) hereof and Landlord shall not have exercised any of its options under said
paragraph 41(l) within the time permitted therefor;
(b) In Landlord's judgment the proposed assignee or subtenant is
engaged in a business and the Demised Premises, or the relevant part thereof,
will be used in a manner which (i) is in keeping with the then standards of the
Building, and (ii) will not violate any negative covenant as to use contained in
any other Lease of space in the Building;
(c) The proposed assignee or subtenant is a reputable person or
entity of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof,
(d) Neither (i) the proposed assignee or sublessee nor (ii) any
person which, directly or indirectly, controls, is controlled by, or is under
common control with, the proposed assignee or sublessee or any person who
controls the proposed assignee or sublessee, is then an occupant of any part of
the building or any other building in the County of New York owned or operated
under a ground or underlying Lease by Landlord or any person which, directly or
indirectly, controls, is controlled by, or is under common control with Landlord
or any person who controls Landlord or a party who dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building during the six (6) months immediately preceding Tenant's request for
Landlord's consent;
(e) The form of the proposed sublease shall be reasonably
satisfactory to Landlord and shall comply with the applicable provisions of this
paragraph 41;
(f) The proposed assignee or sublessee is not a person with whom
Landlord or Landlord's agent dealt with in respect to space in the Building
during the four (4) months immediately preceding Tenant's request for consent;
(g) There shall not be more than one (1) subtenant (including
Landlord or Landlord's designee) of the Demised Premises;
(h) The amount of the aggregate rent to be paid by the proposed
subtenant is not less than the then current market rent per rentable square foot
for the Demised Premises as though the Demised Premises were vacant, and the
rental and other terms and conditions of the sublease are the same as those
contained in the proposed sublease furnished to Landlord pursuant to paragraph
41(l) hereof;
(i) Tenant shall reimburse Landlord on demand for any costs that
may be incurred by Landlord in connection with said assignment or sublease,
including, without limitation, the costs of making investigations as to the
acceptability of the proposed assignee or subtenant, and legal costs incurred
in connection with the granting of any requested consent; and
<PAGE>
(j) Tenant shall not have (x) advertised or publicized in any way
the availability of the Demised Premises without prior notice to and approval by
Landlord, nor shall any advertisement state the name (as distinguished from the
address) of the Building or the proposed rental, (y) listed the Demised Premises
for subletting, whether through a broker, agent, representative, or otherwise at
a rental rate less than the greater of (1) the Base Annual Rent and additional
rent then payable hereunder for such space, or (2) the Base Annual Rent and
additional rent at which Landlord is then offering to Lease other space in the
Building.
(6) In the event that (x) Landlord fails to exercise any of its
options under paragraph 41(l) hereof, and consents to a proposed assignment or
sublease, and (y) Tenant fails to execute and deliver the assignment or sublease
to which Landlord consented within forty-five (45) days after the giving of such
consent, then, Tenant shall again comply with all of the provisions and
conditions of paragraph 41(l) hereof before assigning this Lease or subletting
all or part of the Demised Premises.
(7) With respect to each and every sublease or subletting authorized
by Landlord under the provisions of this Lease, it is further agreed:
(a) No subletting shall be for a term (including any renewal or
extension options contained in the sublease) ending later than one day prior to
the expiration date of this Lease.
(b) No sublease shall be valid, and no subtenant shall take
possession of the Demised Premises or any part thereof, until an executed
counterpart of such sublease (and all ancillary documents executed in connection
therewith, with respect to or modifying such sublease) has been delivered to
Landlord.
(c) Each sublease shall provide that it is subject and
subordinate to this Lease and to any matters to which this Lease is or shall be
subordinate, and that in the event of termination, reentry or dispossess by
Landlord under this Lease Landlord may, at its option, take over all of the
right, title and interest of Tenant as sublessor, under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not be (i)
liable for any previous act or omission of Tenant under such sublease, (ii)
subject to any credit, offset, claim, counterclaim, demand or defense which such
subtenant may have against Tenant, (iii) bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
(iv) bound by any covenant of Tenant to undertake or complete any construction
of the Demised Premises or any portion thereof, (v) required to account for any
security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (vi) bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease to be performed
after the date of such attornment, (vii) responsible for any monies owing by
Landlord to the credit of Tenant or (viii) required to remove any person
occupying the Demised Premises or any part thereof.
(d) Each sublease shall provide that the subtenant may not assign
its rights thereunder or further sublet the space demised under the sublease,
in whole or in part, without Landlord's consent.
<PAGE>
(8) (a) If Landlord shall give its consent to any assignment of this
Lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as additional rent an amount equal to the Assignment Profit
(hereinafter defined) or Sublease Profit (hereinafter defined), as the case may
be.
(b) For purposes of this paragraph 41(8), the term "Assignment
Profit" shall mean an amount equal to all sums and other considerations paid to
Tenant by the assignee for or by reason of such assignment (including, but not
limited to, sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements and equipment, less, in the case of a sale thereof, the then net
unamortized or undepreciated portion (determined on a straight-line basis over
the term of this Lease) of the amount, if any, by which the original cost
thereof exceeded any amounts paid for or contributed by Landlord which were
applied or could have been applied by Tenant against such original cost pursuant
to the terms of this Lease).
(c) For purposes of this paragraph 41(8), the term "Sublease
Profit" shall mean in any year of the term of this Lease (x) any rents,
additional charges or other consideration payable under the sublease to Tenant
by the subtenant which is in excess of the Base Annual Rent and recurring
additional rent accruing during such year of the term of this Lease in respect
of the subleased space (at the rate per square foot payable by Tenant hereunder)
pursuant to the terms hereof, and (y) all sums paid for the sale or rental of
Tenant's fixtures, leasehold improvements and equipment, less, in the case of
the sale thereof, the then net unamortized or undepreciated portion (determined
on a straight-line basis over the term of this Lease) of the amount, if any, by
which the original cost thereof exceeded any amounts paid for or contributed by
Landlord which were applied or could have been applied by Tenant against such
original cost pursuant to the terms of this Lease, which net unamortized amount
shall be deducted from the sums paid in connection with such sale in equal
monthly installments over the balance of the term of the sublease (each such
monthly deduction to be in an amount equal to the quotient of the net
unamortized amount, divided by the number of months remaining in the term of
this Lease).
(d) The sums payable under this paragraph 41(8) shall be paid to
Landlord as and when paid by the assignee or subtenant to Tenant.
(9) Except for any subletting by Tenant to Landlord or its designee
pursuant to the provisions of this paragraph 41, each subletting shall be
subject to all of the covenants, agreements, terms, provisions and conditions
contained in this Lease. Notwithstanding any such subletting to Landlord or any
such subletting to any other subtenant and/or acceptance of rent or additional
rent by Landlord from any subtenant, Tenant shall and will remain fully liable
for the payment of the Base Annual Rent and additional rent due and to become
due hereunder and for the performance of all the covenants, agreements, terms,
provisions and conditions contained in this Lease on the part of Tenant to be
performed and all acts and omissions of any licensee or subtenant or anyone
claiming under or through any subtenant which shall be in violation of any of
the obligations of this Lease, and any such violation shall be deemed to be a
violation by Tenant. Tenant further agrees that notwithstanding any such
subletting, no other and further subletting of the Demised Premises by Tenant or
any person claiming through or under Tenant (except as provided in paragraph
41(4) hereof) shall or will be made except upon compliance with and subject to
the provisions of this paragraph. If Landlord shall decline to give its consent
to any proposed assignment or sublease, or if Landlord shall exercise any of its
options under paragraph 41(l) hereof, Tenant shall indemnify, defend and hold
harmless Landlord against and from any and all loss, liability, damages, costs
and expenses (including, but not limited to, reasonable counsel fees) resulting
from any claims that may be made against Landlord by the proposed assignee or
sublessee or by any brokers or other persons claiming a commission or similar
compensation in connection with the proposed assignment or sublease.
<PAGE>
42. Escalation Rider Incorporated. Tenant agrees to pay additional rent and
any increases in the Base Annual Rental Rate in accordance with the provisions
of the Escalation Rider annexed hereto and hereby incorporated by reference.
43. Capital Improvements in Compliance with Law. If any capital improvement
or alteration to the Demised Premises or the Building, is made by Landlord at
any time during the term of this Lease in compliance with requirements of any
Federal, State or local law or governmental regulation, the necessity of which
Landlord is not aware of as of the date of the commencement of this Lease,
whether or not such law or regulation is valid or mandatory, the cost of any
such improvement or alteration shall, for the purposes herein, be deemed
amortized by Landlord in accordance with an amortization schedule with a
reasonable interest rate factored therein as determined in Landlord's reasonable
judgment, and during each calendar year or part thereof during the remaining
term of this Lease for which such amortization occurs, Tenant shall pay to
Landlord as additional rent, a sum equal to Tenant's Percentage (as defined in
the Escalation Rider) of the cost of any such improvements or alteration with
applicable interest as determined by such amortization schedule as applied to
such calendar year.
44. Hazardous Materials/Environmental Compliance. Tenant shall not allow
any Hazardous Materials (as hereinafter defined) to be brought upon, kept or
used in or about the Demised Premises. Tenant shall indemnify, defend and hold
Landlord harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses (including reasonable attorneys' fees) which arise
during or after the term of this Lease as a result of Tenant's breach of its
obligations hereunder. The foregoing indemnification includes, without
limitation, costs incurred in connection with any investigation of conditions or
any clean-up, remedial work, removal or restoration work in the Demised
Premises. Without limiting the foregoing, if the presence of any Hazardous
Materials within the Demised Premises caused or permitted by Tenant results in
any contamination of the Demised Premises, Tenant shall promptly take all
actions at its sole expense as are necessary to return the Demised Premises to
the condition existing prior to the introduction of any such Hazardous Materials
to the Demised Premises. As used in this paragraph, the term "Hazardous
Materials" means: (i) polychlorinated biphenyls (PCBS) and (ii) hazardous or
toxic materials, wastes and substances which are defined, determined or
identified as such pursuant to any applicable governmental regulations. Tenant
shall also comply with all rules and regulations imposed by Landlord within the
Building with respect to recycling waste, if required by applicable governmental
regulations.
45. Signs. Subject to prior written approval of Landlord, Tenant shall be
permitted to install a sign indicating Tenant's name on the exterior of the main
entrance door to the Demised Premises. The sign shall conform to Landlord's
guidelines for the Building. Tenant has the right to three listings in the
Building Directory.
46. Late Charges. If any amount required to be paid by Tenant to Landlord
is not paid within 10 days after the date such payment is due, then, in addition
to paying the amount due, Tenant shall pay as additional rent a late charge
("Late Charge") equal to 5% of the amount required to be paid, which late charge
shall be paid when billed. If any amount due from Tenant to Landlord remains
unpaid for 30 days after the date such payment is due, then in addition to such
Late Charge, Landlord shall be entitled to bill and collect, as additional rent,
interest on such sums from the due date until paid, at the rate which is the
lesser of (a) the greater of (i) 4% above the prime rate of Chemical-Bank (or
any successor thereto or, if Chemical Bank or its successor shall not then be
announcing a prime rate, the prime rate of the largest bank by capital and
assets then announcing a prime rate in the City of New York) at that time or
(ii) 18% per annum, or (b) the maximum rate then permitted under applicable law.
This paragraph shall not be deemed to permit Tenant to delay payment, or to
postpone or waive any rights of Landlord to collect any rent or additional rent,
with interest and expenses, by legal action or otherwise. If any legal action or
proceeding is commenced by Landlord to collect unpaid rent or additional rent,
Landlord shall be entitled to recover 5% of the amount of any such unpaid rent
or additional rent as reimbursement for Landlord's administrative expenses in
connection with Tenant's nonpayment.
<PAGE>
47. Hold Over. Tenant acknowledges the extreme importance to Landlord of
obtaining possession of the Demised Premises at the stated expiration date or
sooner termination of this Lease, and in the condition required by this Lease,
so that Landlord can prepare and rerent such Premises for a term commencing
promptly after the expiration or termination of this Lease. If Tenant shall
hold-over or retain possession of the Demised Premises after the expiration or
termination of this Lease, Tenant shall pay Landlord, upon demand, as liquidated
damages, three times the amount of the Base Annual Rental Rate and additional
rent in effect on the date of such expiration or termination, prorated for each
day that Tenant so holds over or retains possession. The provisions of the
foregoing sentence shall in no way be deemed a waiver of any rights or remedies
which Landlord may have against Tenant to obtain immediate possession of the
Demised Premises, and the demand or acceptance by Landlord of such payment shall
not be construed as a consent by Landlord to such holding over. The rights and
obligations hereunder and under paragraph 22 shall continue after the
termination or expiration of this Lease.
48. Remedies. If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any damages
for any withholding by Landlord of its consent, it being intended that Tenant's
sole remedy shall be an action for specific performance or injunction, and that
such remedy shall be available only in those cases where Landlord has expressly
agreed in writing not to unreasonably withhold its consent or where as a matter
of law Landlord may not unreasonably withhold its consent. If Tenant prevails in
an action for specific injunction or performance, Landlord shall reimburse
Tenant up to $2000.00 in reasonable attorneys fees.
49. Alterations. Supplementing paragraph 3 hereof, if Tenant desires to
make any changes or alterations to the Demised Premises, Tenant shall comply
with Landlord's then customary rules and regulations with respect to making of
alterations, which will be provided to Tenant upon request.
50. Not an Offer. This Lease is submitted by Landlord to Tenant for
signature and return with the understanding that there shall be no liability
upon the part of Landlord or Tenant and that it shall not bind Landlord or
Tenant unless and until it is executed by both Landlord and Tenant and an
executed copy delivered to Tenant.
51. Base Annual Rent. The Base Annual Rent payable by Tenant hereunder
(subject-to adjustment as provided in paragraph 5 of the Escalation Rider
annexed hereto and incorporated herein by reference) shall be as follows:
A. For the period commencing on February 1, 1996, and ending on
January 31, 1997, at the rate of SIXTY SEVEN THOUSAND FIVE HUNDRED EIGHTY FOUR
DOLLARS AND 00/100 ($67,584.00) DOLLARS per annum, payable in equal monthly
installments of FIVE THOUSAND SIX HUNDRED THIRTY TWO DOLLARS AND 00/100
($5,632.00) DOLLARS in advance on the first day of each calendar month during
such period.
<PAGE>
B. For the period commencing on February 1, 1997, and ending on
January 31, 1998, at the rate of SIXTY NINE THOUSAND SIX HUNDRED THIRTY TWO
DOLLARS AND 00/100 ($69,632.00) DOLLARS per annum, payable in equal monthly
installments of FIVE THOUSAND EIGHT HUNDRED TWO DOLLARS AND 67/100 ($5,802.67)
DOLLARS in advance on the first day of each calendar month during such period.
C. For the period commencing on February 1, 1998, and ending on
January 31, 1999, at the rate of SEVENTY ONE THOUSAND SIX HUNDRED EIGHTY DOLLARS
AND 00/100 ($71,680.00) DOLLARS per annum, payable in equal monthly installments
of FIVE THOUSAND NINE HUNDRED SEVENTY THREE DOLLARS AND 33/100 ($5,973.33)
DOLLARS in advance on the first day of each calendar month during such period.
D. Notwithstanding the foregoing provisions of this paragraph 51 and
provided Tenant is not in default of any of the terms of this Lease, if Tenant
installs the HVAC Unit as described in paragraph 58 hereinafter, the Base Annual
Rent payable under the Lease shall be partially abated for the month after said
installation, so that during only that one month, the monthly installment of
Base Annual Rent then payable by Tenant shall be at the rate of $512.00 per
month on account of electricity, subject to increase pursuant to the provisions
of paragraph 5 of the Escalation Rider annexed hereto. Except for the partial
rent abatement as herein provided, Tenant shall use and occupy the Demised
Premises pursuant to all of the other terms, covenants and conditions of this
Lease including, but not limited to, additional rent payments herein.
52. Security. Supplementing paragraph 34 hereof;
A. If and only if Tenant has furnished Landlord its Federal Tax
identification number in the space provided below, Landlord agrees to deposit
the security in an insured money market fund or other interest bearing account.
The interest or dividends that accrue on such security shall be credited to
Tenant if not in default, less an amount equal to 1% per annum of the security
hereinabove set forth which shall be retained by Landlord as an annual
administration fee. Tenant's Federal Tax identification number is 11-3289398. If
Landlord shall use or apply all or part of the security by reason of Tenant's
default, Tenant shall upon written demand from Landlord restore the security to
the original amount set forth in paragraph 34 hereof.
B. Tenant shall have the right from time to time to deposit with
Landlord, as the security deposit required pursuant to paragraph 34 hereof, a
clean, unconditional, irrevocable letter of credit in the aggregate amount of
THIRTY FIVE THOUSAND EIGHT HUNDRED FORTY DOLLARS AND 00/100 ($35,840.00) DOLLARS
and otherwise in form and substance satisfactory to Landlord and issued by a
member bank of the New York Clearinghouse Association or other bank acceptable
to Landlord, payable upon the presentation by Landlord to such bank of a
sight-draft and the letter of credit without presentation of any other
documents, statements or authorization, which letter of credit shall provide (a)
for the continuance of such credit for the period of at least one year from the
commencement date of the term of this Lease, (b) for the automatic extension of
such letter of credit for additional periods of one year from the initial and
each future expiration date thereof (the last such extension to provide for the
continuance of such letter of credit for at least 3 months beyond the expiration
date of the term) unless such bank gives Landlord notice of its intention not to
renew such letter of credit, in the manner provided in paragraph 28 hereof, not
less than 90 days prior to the initial or any future expiration date of such
letter of credit and (c) that in the event such notice is given by such bank,
Landlord shall have the right to draw on such letter of credit. Each letter of
credit to be deposited and maintained with Landlord (or the proceeds thereof)
shall be held by Landlord as security for the faithful performance and
observance by Tenant of the terms of this Lease as provided herein and in the
event that (i) any default occurs hereunder or (ii) Landlord notifies Tenant
that Landlord proposes to transfer its right, title, annual interest under this
Lease to a third party and the bank issuing such letter of credit does not
consent to the transfer of such letter of credit to such third party within
thirty (30) days after Tenant receives such notice from Landlord, or (iii)
notice is given by the bank of its intention not to renew as above provided,
then, in any such event, Landlord may draw on such letter of credit upon
presentation by Landlord to such bank of a sight-draft and the letter of credit
and the proceeds of such letter of credit shall then be held and applied as
security (and be replenished, if necessary) as provided in paragraph 34 hereof.
53. Landlord's Successors in Interest. In the event that any mortgagee or
any trustee under a trust indenture, or their respective assigns, shall succeed
to the interest of Landlord then, at the option of such mortgagee or trustee,
this Lease shall nevertheless continue in full force and effect and the Tenant
shall attorn to such mortgagee or such trustee.
<PAGE>
54. Change of Location. (a) Tenant covenants and agrees that Landlord shall
at any time during the term of this Lease have the absolute and unqualified
right, upon notice to Tenant to designate as the Demised Premises any part of
any other floor of the Building that is the same or higher floor as the Demised
Premises with substantially the same views and layout as reasonably acceptable
to Tenant. Tenant represents that it will not unreasonably withhold its
acceptance thereof. Such notice shall specify and designate the space so
substituted for the Demised Premises. Notwithstanding such substitution of
space, this Lease and all terms, provisions, covenants and conditions contained
in this Lease shall remain and continue in full force and effect, except that
the Demised Premises shall be and be deemed to be such substituted space
(hereinafter called "Substituted Space"), with the same force and effect as if
the Substituted Space were originally specified in this Lease, as the premises
demised hereunder.
(b) In the event of the substitution of space as provided in
subparagraph 54(a) above,
(i) Landlord shall at Landlord's expense, prepare the Substituted
Space in substantially the same manner as Tenant has prepared the Demised
Premises and shall have the right to remove any floor covering, wallcovering,
cabinet work, and any other decoration to the Substituted Space as well as
telephone lines and any other communication line to the Substituted Space,
(ii) As soon as Landlord has completed preparing the Substituted
Spare as set forth in subparagraph (b), Tenant upon five (5) days prior written
notice shall move to the Substituted Space, and upon failure of Tenant to so
move to the Substituted Space, Landlord may as Tenant's agent, remove Tenant
from the Demised Premises to the Substituted Space.
(c) Following such substitution of space (pursuant to this paragraph
54), if any, Landlord and Tenant shall, promptly at the request of either party,
execute and deliver an agreement in recordable form setting forth such
substitution of space and the change (if any) in the fixed annual rent, and
rentable area in the appropriate places in the Lease.
55. Subordination. (a) Supplementing paragraph 7 hereof, in the event of
any act or omission of Landlord that would give Tenant the right, immediately or
after lapse of a period of time, to cancel or terminate this Lease, or to claim
a partial or total eviction, Tenant shall not exercise such right (i) until it
has given written notice of such act or omission to the holder of each superior
mortgage and the lessor of each superior lease whose name and address shall
previously have been furnished to Tenant in writing and (ii) unless such act or
omission shall be one that is not capable of being remedied by Landlord or such
holder or lessor within a reasonable period of time, until a reasonable period
for remedying such act or omission shall have elapsed following the giving of
such notice and following the time when such holder or lessor shall have become
entitled under such superior mortgage or superior lease, as the case may be, to
remedy the same (which reasonable period shall in no event be less than the
period to which Landlord would be entitled under this Lease or otherwise, after
similar notice, to effect such remedy), provided that such holder or lessor
shall give Tenant written notice of its intention to remedy such act or omission
and shall, with due diligence, commence and continue to do so.
<PAGE>
(b) If the lessor of a superior lease or the holder of a superior
mortgage shall succeed to the rights of Landlord under this Lease, whether
through possession or foreclosure action or delivery of a new lease or deed,
then, at the request of the party so succeeding to Landlord's rights (herein
sometimes called the successor landlord) and upon such successor landlord's
written agreement to accept Tenants attornment, Tenant shall attorn to and
recognize such successor landlord as Tenant's landlord under this lease, and
shall promptly execute and deliver any instrument that such successor landlord
may reasonably request to evidence such attornment. Upon such attornment, this
Lease shall continue in full force and effect, or as if it were, a direct lease
between the successor landlord and Tenant, upon all of the terms, conditions and
covenants as are set forth in this Lease and shall be applicable after such
attornment, except that the successor landlord shall not:
(i) be liable for any previous act or omission
of Landlord under this Lease;
(ii) be subject to any offset, not expressly
provided for in this Lease, that shall have
theretofore accrued to Tenant against
Landlord; or
(iii) be bound by any previous modification of
this Lease, not expressly provided for in
this Lease, or by any previous prepayment
of more than one month's fixed rent or any
additional rent then due, unless such
modification or prepayment shall have been
expressly approved in writing by lessor of
the superior lease or the holder of the
superior mortgage through, or by reason of
which, the successor landlord shall have
succeeded to the rights of Landlord under
this Lease.
56. Labor Regulations. Tenant covenants and agrees that prior to and
throughout the term, it shall not take any action which would violate Landlord's
union contracts, if any, affecting the Building, nor create any work stoppage,
picketing, labor disruption or dispute, or any interference with the business of
Landlord or any other Tenant or occupant in the Building or with the rights and
privileges of any person(s) lawfully in said Building, nor cause any impairment
or reduction of the good name of the Building. Any default by Tenant under this
Article shall be deemed a material default entitling Landlord to exercise any or
all of the remedies provided in this Lease.
57. Cleaning. In the event Landlord shall furnish cleaning service to the
Demised Premises pursuant to the provisions of subparagraph (d) of paragraph 29
of the printed portion of this Lease, Tenant covenants and agrees that Tenant
shall pay to Landlord on demand the costs incurred by Landlord for (a) extra
cleaning work in the Demised Premises required because of (i) misuse or neglect
on the part of Tenant or its employees or visitors, (ii) use of portions of the
Demised Premises for preparation, serving or consumption of food or beverages,
data processing or reproducing operations, private lavatories or other special
purposes requiring greater or more difficult cleaning work than office areas,
(iii) unusual quantity of interior glass surfaces, (iv) non building standard
materials or finishes installed by Tenant or at its request, and (b) removal
from the Demised Premises and the Building of so much of any refuse and rubbish
of Tenant as shall exceed that ordinarily accumulated daily in the routine of
business office occupancy.
<PAGE>
58. Supplemental HVAC. Notwithstanding anything to the contrary contained
herein, and provided that Tenant is not in default of any of the terms of this
Lease, Landlord shall permit Tenant to install a supplementary HVAC unit (the
"HVAC Unit") at Tenant's own expense, subject to Landlord's pre-approval. Tenant
shall be responsible, at Tenant's sole cost and expense, for the installation,
operation, maintenance and repair of the HVAC Unit during the term of this
Lease. Such maintenance obligations shall be performed throughout the term of
this Lease, on Tenants behalf, by a reputable HVAC maintenance company engaged
by Tenant at its expense, and reasonably approved by Landlord. In the event
Tenant shall fail to engage an HVAC maintenance company as aforesaid, Landlord
may (but shall not be obligated to) perform such maintenance and/or engage an
HVAC service company at Tenant's expense to perform the aforesaid maintenance to
the HVAC Unit, and Tenant shall pay on demand as additional rent hereunder all
expenses incurred by Landlord in connection therewith. All electricity used in
connection with the operation of the HVAC Unit shall be supplied by Landlord
upon, and subject to, all of the terms, covenants, and conditions contained in
paragraph 5 of the Escalation Rider annexed hereto including, but not limited
to, Landlord's right to re-survey the value of the electrical service.
59. Miscellaneous. (a) If any of the provisions of this Lease, or the
application thereof to any person or circumstances, shall to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
(b) This Lease shall be governed in all respects by the laws of the
State of New York.
(c) If, in connection with obtaining financing for the Building, a
bank, insurance company or other lending institution shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created.
(d) Tenant shall not be entitled to exercise any right of termination
or other option granted to it by this Lease (if any) at any time when Tenant is
in default in the performance or observance of any of the covenants, terms,
provisions or conditions on its part to be performed or observed under this
Lease.
(e) Tenant shall not place or permit to be placed any vending machines
in the Demised Premises, except with the prior written consent of Landlord in
each instance, provided Tenant may install such vending machines if the use
thereof is confined to Tenant's employees.
(f) Neither Tenant nor any corporation or other entity controlling,
controlled by or under common control with Tenant shall occupy any space in the
building (by assignment, sublease or otherwise) other than the Demised Premises,
except with the prior written consent of Landlord in each instance.
(g) The paragraph headings of this Lease are for convenience only and
are not to be given any effect whatsoever in construing this Lease.
(h) The Exhibits and Riders annexed to this Lease shall be deemed part
of this Lease with the same force and effect as if such Exhibits and Riders were
numbered Articles of this Lease.
(i) If the rent hereunder shall commence on any day other than the
first day of a calendar month, the rent for such calendar month shall be
prorated.
(j) The listing of any name other than that of Tenant, whether on the
doors of the Demised Premises, on the Building directory, if any, or otherwise,
shall not operate to vest any right or interest in this Lease or in the Demised
Premises, nor shall it be deemed to be the consent of Landlord to any assignment
or trader of this Lease, to any sublease of the Demised Premises, or to the use
or occupancy thereof by others.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
LANDLORD:
150 E. 58TH ST. PARTNERS, L.P.
BY: 58 ML General Corp., a general partner
By: /s/ Nathan Aber
---------------------------------------
Nathan Aber, Vice President
BY: 58 GR General Corp., a general partner
By: /s/ Nathan Aber
---------------------------------------
Nathan Aber, Vice President
TENANT:
IMATEC, INC.
By: /s/ HANOCK SHALIT
---------------------------------------
Name: Hanock Shalit
Title: President
<PAGE>
ESCALATION RIDER
1. Real Estate Tax Escalation. (a) For purposes of subparagraph 1(b) of
this Escalation Rider, the following definitions shall apply:
(i) "Real Estate Taxes" means the amount of annual real estate
taxes, assessments, sewer rent rates and charges, county taxes, transit taxes,
or any other governmental charge, general, special, ordinary or extraordinary,
which may now or hereinafter be imposed, levied, assessed and/or collected
against the Building and the land upon which it stands ("Land"). If due to a
change in the method of taxation, any franchise, income, profit, or other tax,
however designated, shall be levied against Landlord's interest in the property
in whole or in part for or in lieu of any tax which would otherwise constitute
Real Estate Taxes, such change in method of taxation shall be included in
determining the excess Real Estate Taxes over the Tax Base (as hereinafter
defined) for the purposes hereof;
(ii) "Tax Base" means the sum of (A) one-half of the amount of
Real Estate Taxes payable for the fiscal tax year commencing on July 1, 1995,
and ending on June 30, 1996, plus (B) one-half of the amount of the Real Estate
Taxes payable for the fiscal tax year commencing on July 1, 1996, and ending on
June 30, 1997.
(iii)"Tax Year" means each period, of twelve (12) consecutive
months commencing as of the first day of July of each such period, in which any
part of the term of this Lease shall occur, or such other periods of twelve
months as may be adopted as the fiscal year for real estate tax purposes of the
City of New York.
(iv) "Tenant's Percentage" means 0.40379%.
(b) Tenant agrees to pay as additional rent during each Tax Year or
portion thereof throughout the term of this Lease, or any renewal or extension
thereof, an amount equal to Tenant's Percentage of any increase in Real Estate
Taxes for such Tax Year over the Tax Base ("Tenant Tax Payment") regardless of
whether such increase results from a higher tax rate and/or an increase in the
assessed valuation of either the Land or the Building and/or the imposition of
any new form or type of tax against either the Land or the Building and/or from
the imposition of any special assessment(s) against the Land and/or the
Building. Reasonable fees and expenses, if any, incurred in obtaining any
reduction in assessed valuation shall also be considered an increase in Real
Estate Taxes for the purpose of this provision, provided such fees shall not
exceed the amount of the reduction obtained. Such payment shall be made promptly
by Tenant as additional rent on a semi-annual basis within 10 days' notice from
Landlord that such payment is due. Copies of tax bills applicable to the Tax
Base and to any such Tax Year shall be made available by Landlord for inspection
by Tenant during normal business hours. In the event of any reduction in Real
Estate Taxes with respect to which Tenant has paid its pro-rata share, Tenant
shall he entitled to a pro-rata portion of any such reduction, less a
proportionate amount of the actual fees and expenses incurred to obtain such
reduction.
(c) If the Taxes comprising the Tax Base are reduced as a result of an
appropriate proceeding or otherwise, the Taxes as so reduced shall, for all
purposes be deemed to be the Taxes for the Tax Base and Landlord shall give
notice to Tenant of the amount by which the Tenant's Tax Payments previously
made were less that the Tenant's Tax Payments required to be made under this
paragraph 1, and Tenant shall pay the amount of the deficiency within twenty
(20) days after demand therefor.
<PAGE>
2. Wage Rate Escalation. (a) For purposes of subparagraph 2(b) of this
Escalation Rider the following definitions shall apply:
(i) "Wage Rate" means the minimum hourly wage rate prescribed for
Porters (as hereinafter defined) in buildings classified as Class A Office
Buildings (or the then highest classification of office buildings) (hereinafter
called "Class A Office Buildings") under the agreement then in effect between
the Realty Advisory Board on Labor Relations, Incorporated ("R.A.B.") (or any
successor thereto) and Local 32B of the Building Service Employees International
Union, AFL-CIO (or any successor thereto) ("Local 32B-32J") covering the wage
rates of Porters in Class A Office Buildings. In the event, that any Labor
Agreement requires the regular employment of Porters on days or during hours
when overtime or other premium pay rates are in effect pursuant to the Labor
Agreement, then the term "hourly wage rate" as used in this paragraph shall be
deemed to mean the average hourly wage rate for the minimum number of hours in a
calendar week during which Porters are required to be regularly employed. Such
"hourly wage rate" shall exclude all social security and unemployment taxes,
worker's compensation, disability insurance, holiday, vacation and sick pay,
accident, health and welfare programs whether insured or not, pension plans,
guarantee pay plans, training, safety and advancement programs, annuities and
other fringe benefits required to be paid by Landlord to or on behalf of the
Porters in Class A Office Buildings under the Labor Agreement (collectively,
"fringe benefits"). If at any time there is no Labor Agreement in effect
prescribing such minimum "hourly wage rate" for Porters, computations and
payments shall be made on the basis of the minimum hourly wage rate actually
payable to Porters by Landlord or by the contractor performing the cleaning
services for Landlord.
(ii) "Base Wage Rate" means the Wage Rate in effect during
calendar year 1996.
(iii) "Porters" means that classification of employees engaged in
the general maintenance and operation of Class A Office Buildings, such
classification being presently termed "others" in the current agreement between
R.A.B, and Local 32B-32J.
(iv) "Wage Rate Year" means each calendar year subsequent to the
year 1996 in which any part of the terms of this Lease shall occur.
(b) Tenant agrees to pay as additional rent for each Wage Rate Year
(or portion thereof) in which the Wage Rate has increased over the Base Wage
Rate, an amount equal to the product obtained by multiplying 2,048 by the number
of cents and fraction of a cent by which the Wage Rate is greater than the Base
Wage Rate. Such payment shall be made by Tenant as additional rent in twelve
equal monthly installments together with the payment of the Base Annual Rental
Rate and any other payments of additional rent required under this Lease.
Landlord shall give Tenant written notice of each change in the Wage Rate which
will be effective to create or change Tenant's obligation to pay additional rent
pursuant to the provisions of this Escalation Rider together with a statement of
the additional rent payable resulting from such increase in the Wage Rate.
Tenant acknowledges that the foregoing Wage Rate calculation is a derived
formula being used as an index of general changes in commercial operating costs
and is unrelated to actual costs of the Porters at the Building.
3. Building Utility Cost Escalation. (a) For purposes of paragraph 3(b)of
this Escalation Rider, the following definitions shall apply;
(i) "Comparison Year" means any calendar year subsequent to the
calendar year 1996 (the "Base Year").
(ii) "Tenant's Percentage" means representing the agreed
percentage of any increase or decrease in electricity costs allocable to Tenant
under paragraph 3(b) of this Escalation Rider.
<PAGE>
(iii) "Electricity Costs" means the total costs (including a fuel
adjustment factor and taxes, if any) incurred by Landlord in respect of
electricity service used in connection with the operation of the Building,
including all public and service areas but excluding premises occupied by
tenants of the Building, which for purposes of this Escalation Rider shall be
deemed to be 50% of Landlord's total costs for electricity consumed at the
Building.
(iv) "Base Electric Costs" means the Electricity Costs incurred
in the Base Year.
(b) If the Electricity Costs for any Comparison Year (any part or all
of which falls within the term for this Lease) shall be greater or less then the
Base Electricity Costs, then the Base Annual Rental Rate for such Comparison
Year shall be increased or decreased, as the case may be, by Tenant's Percentage
of the increase or decrease.
(c) At any time and from time to time, during or after any Comparison
Year (for any part or all of which there is an increase or decrease in the Base
Annual Rental Rate under the preceding subparagraphs of this paragraph 3),
Landlord shall send Tenant a comparative statement(s) setting forth (i) a
comparison of the Electricity Costs in the Comparison Year with the Base
Electricity Costs, (ii) and the amount of the increase or decrease in the Base
Annual Rental Rate resulting from each of such comparisons. On the first day for
the payment of the monthly Base Annual Rent installment following the furnishing
to Tenant of the comparative statement (x) Tenant, in case of an increase, shall
pay to Landlord a sum equal to 1/12th of such increase in Base Annual Rental
Rate multiplied by the number of prior and current months (any fraction thereof)
for which the increase is applicable, and in case of a decrease, shall be
entitled to a credit against the rent next becoming due, of a sum equal to
1/12th of such decrease multiplied by the number of prior and current months
(and any fraction thereof) for which the decrease is applicable; and (y)
thereafter, commencing with the then current monthly rent installment and
continuing monthly thereafter until a different comparative statement is sent to
Tenant, the monthly installments of rent shall be increased or decreased, as the
case may be, by an amount equal to 1/12th of such increase or decrease, plus
1/12th of the Landlord's estimate of Electricity Costs for the current
Comparison Year based on actual Electricity Costs for the prior year increased
by 10%. Upon the rendering of comparative statements by the Landlord at the end
of each Comparison Year, the estimated payment made by Tenant shall be adjusted
between the parties so as to reflect the actual Electricity Costs. Said
adjustment shall be made by the parties for each Comparison Year as soon as
practicable after the end of said year. Any excess payments by Tenant shall be
credited against the next ensuing payments provided for in this Escalation
Rider. Any deficiencies shall be paid by Tenant within 10 days after Landlord
furnishes Tenant with a comparative statement.
(d) Any comparative statement sent to Tenant shall be conclusively
binding upon Tenant unless, within 30 days after such statement is sent, Tenant
shall send a written notice to Landlord objecting to such statement and
specifying the respects in which such statement is claimed to be incorrect,
Tenant shall have the right to inspect any surveys or records upon which
Landlord's comparative statement is based.
<PAGE>
(e) Any provision in this paragraph 3 to the contrary notwithstanding,
under no circumstances shall any decrease pursuant to subparagraph 3(d) reduce
the rental payable hereunder below the aggregate of the Base Annual Rental Rate
provided in paragraph 51 hereof and the Real Estate Tax escalation and Wage Rate
escalation then in effect.
4. The expiration of this Lease during any calendar year for any part or
all of which there is a payment due but not yet billed under paragraph 1, 2 and
3 of this Escalation Rider, shall not affect the rights or obligaitons of the
parties hereto, and a statement relating to such payment may be sent to Tenant
subsequent to any such expiration prorated to the date of expiration. Payments
due under such statement shall be payable within 20 days after such statement is
sent to Tenant. The failure of Landlord to compute or bill any item of
escalation provided for in this Escalation Rider shall not be a waiver of
Landlord's rights or prohibit Landlord from billing and collecting such item at
a later date.
5. Demised Premises Electricity. (a) As part of the Base Annual Rental Rate
hereunder, Landlord will furnish to the Demised Premises electric current which
Landlord represents is sufficient for General Executive Office use in the
Demised Premises to be used by Tenant for the lighting fixtures and electrical
receptacles presently installed at the Demised Premises. Tenant shall furnish
and install, at Tenant's expense, all replacement light bulbs, tubes and
ballasts in the Demised Premises, unless Landlord, at its option, shall elect to
do so at Tenant's expense.
(b) Upon the written request of Tenant, or, if, in Landlord's sole
discretion, the existing feeders or risers supplying the Demised Premises are
inadequate for Tenant's usage, then additional feeders or risers to supply
Tenant's electrical requirements shall be installed by Landlord along with any
other equipment Landlord deems necessary, all at Tenant's sole expense, provided
such installation will not cause damage to the Building or Demised Premises,
cause a dangerous condition, entail unreasonable alterations, repairs or
expense, or interfere with other tenants. As a condition to Landlord's
installation of additional feeders, risers or other electrical equipment serving
the Demised Premises, Landlord and Tenant shall first agree upon an increase in
the Base Annual Rental Rate, which increase shall reflect the value to Tenant of
the additional service being supplied by Landlord. If Landlord and Tenant cannot
agree thereon, such increase shall be finally determined by a professional
electric rate consultant selected by Landlord, who shall certify such
determination in writing to Landlord and Tenant. The Base Annual Rental Rate
shall be increased for the remainder of the term of this Lease in an amount
equal to the value of such additional service as so agreed or determined, such
increase, however, to be retroactive to the date of the first availability to
Tenant of such additional service.
(c) The electricity charge of $6,144.00 per annum included in the
Base Annual Rental Rate as of the date of execution of this Lease is based on
the present public utility rates as of the date of execution of this Lease. If
at any time after the date of execution of this Lease, the New York State Public
Service Commission shall authorize an increase or decrease in the public utility
rate schedule or if the public utility corporation supplying electrical service
to the Building shall increase or decrease its fuel adjustment factor or any
other charges, then the Base Annual Rental Rate hereunder shall thereupon be
adjusted by Landlord to reflect such increase or decrease in the applicable
rates and charges by a proportionate increase or decrease of that part of the
Base Annual Rental Rate attributable to Landlord's furnishing amounts of
electrical service to the Demised Premises. Whenever the amount of any such
increase or decrease is determined, Landlord shall advise Tenant in writing and
such increase or decrease shall be effective from the effective date of such
increase or decrease in the public utility rate schedule or other charges.
<PAGE>
(d) At any time during the term of this Lease, Landlord may retain a
professional electric rate consultant to make a determination of the value of
the electrical service furnished to Tenant. If the Base Annual Rental Rate
payable hereunder does not fully and fairly reflect the value of the electrical
service to Tenant, the Base Annual Rental Rate shall be increased or decreased
by an amount which shall fully and fairly reflect the value of such service to
Tenant as determined and certified in writing by such consultant. The findings
of the consultant shall he conclusive and binding upon the parties. Any such
increase or decrease in rent shall be effective from the date of such
consultant's written determination.
(e) Any retroactive increase in the Base Annual Rental Rate under the
provisions of this paragraph 5 with respect to the period from the effective
date of such increase, which shall be fixed by agreement or determination,
shall be payable by Tenant along with the next Base Annual Rental Rate
installment due pursuant to this Lease. Any retroactive decrease hereunder
shall be deducted from the next installment due under the Lease; however, in no
event shall any such decrease permit Tenant to pay less than the Base Annual
Rental Rate provided in paragraph 51 hereof.
<PAGE>
(f) If Landlord at any time elects to discontinue furnishing
electrical service, or is for any reason unable to continue furnishing
electrical service, to Tenant, this Lease shall continue in full force and
effect and shall be unaffected thereby, except that this paragraph 5 and all the
terms and conditions hereof shall cease and terminate without any liability by
either party to the other for such service after the date of such termination.
Landlord agrees to give not less than 30 days advance notice of any such
discontinuance to Tenant. In such event, the Base Annual Rental Rate reserved
shall be reduced to the Base Annual Rental Rate less the electricity charge
provided for in subparagraph (c) of this paragraph 5 as the same may have
increased. In the event of such discontinuance, Landlord shall permit Tenant to
receive such service directly from a public utility company and to permit its
existing wires, feeders, risers and facilities servicing the Demised Premises to
be used by Tenant. Tenant hereby agrees that any and all charges made by such
public utility company to Tenant for providing and installing electrical service
to the Demised Premises, including, but not limited to, the installation of
meters, shall be borne by Tenant.
(g) If Tenant disagrees with any determination made by Landlord's
electrical rate consultant as above provided in this paragraph 5, and, if a
licensed electrical engineer retained and paid for by Tenant certifies that the
determination of Landlord's electrical rate consultant is unreasonable, then
Landlord will consent to the submission of the contested issue to arbitration in
New York City before one arbitrator, in accordance with the then applicable
rules and regulations of the American Arbitration Association. The cost of any
such arbitration shall be shared equally between Landlord and Tenant (however
each party shall pay its own attorneys, witnesses and expert's fees).
<PAGE>
EXHIBIT A
FLOOR PLAN
GRAPHIC DESCRIPTION OF
FLOOR PLAN FOR
21ST FLOOR
150 EAST 58TH STREET
NEW YORK, NY
ALL AREAS, CONDITIONS AND
DIMENSIONS ARE APPROXIMATE
<PAGE>
IMATEC, LTD.
1996 STOCK OPTION PLAN
1. PURPOSES. The purposes of this Stock Option Plan (the "Plan") are to
attract and retain the best qualified personnel for positions of substantial
responsibility, to provide additional incentive to the Employees of the Company
or its Subsidiaries, if any (as such terms are defined in Section 2 below), as
well as other individuals who perform services for the Company or its
Subsidiaries, and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"non-qualified stock options," at the discretion of the Board and as reflected
in the terms of the written instrument evidencing an Option.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been
appointed, or the Board of Directors of the Company, if no Committee is
appointed.
(b) "Common Stock" shall mean the common stock of the Company,
par value $.0001 per share.
(c) "Company" shall mean Imatec, Ltd.
(d) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan, if
one is appointed.
(e) "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of sick leave or
any other leave of absence approved by the Board.
(f) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Incentive Stock Option" shall mean a stock option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
(i) "Non-Qualified Stock Option" shall mean a stock option not
intended to qualify as an Incentive Stock Option.
(j) "Option" shall mean a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(l) "Optionee" shall mean an Employee or other person who
receives an Option.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Internal Revenue Code of
1986, as amended.
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(o) "SEC" shall mean the Securities and Exchange
Commission.
(p) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(q) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended.
3. STOCK.
Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of shares which may be optioned and sold under the Plan is five
hundred thousand (500,000) shares of authorized, but unissued, or reacquired
Common Stock.
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 Plan shall have been terminated, become available for
further grant under the Plan.
4. ADMINISTRATION.
(a) Procedure. The Company's Board of Directors may appoint a
Committee to administer the Plan. The Committee shall consist of not less than
two members of the Board of Directors who shall administer the Plan on behalf of
the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board of Directors. From time to time the Board
of Directors may increase
2
<PAGE>
the size of the Committee and appoint additional members thereof, remove members
(with or without cause), and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
If a majority of the Board of Directors is eligible to be
granted Options or has been eligible at any time within the preceding year, a
Committee must be appointed to administer the Plan. The Committee must consist
of not less than two members of the Board of Directors, all of whom are
"disinterested persons" as defined in Rule 16b-3 of the General Rules and
Regulations promulgated under the Exchange Act.
(b) Powers of the Board. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion: (i) to grant
Incentive Stock Options, in accordance with Section 422 of the Internal Revenue
Code of 1986, as amended, or to grant Non-Qualified Stock Options; (ii) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (iii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iv) to
determine the persons to whom, and the time or times at which, Options shall be
granted and the number of shares to be represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the holder
thereof, accelerate, modify or amend each Option; (viii) to accelerate or defer
(with the consent of the Optionee) the exercise date of any Option; (ix) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the Board; and (x) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) Effect of the Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.
5. ELIGIBILITY. Incentive Stock Options may be granted only to
Employees. Non-Qualified Stock Options may be granted to employees as well as
directors (subject to the limitations set forth in Section 4), independent
contractors and agents, as determined by the Board. Any person who has been
granted an Option may, if he is otherwise eligible, be granted an additional
Option or Options.
No Incentive Stock Option may be granted to an Employee if, as a result
of such grant, the aggregate fair market value
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(determined at the time each Option was granted) of the Shares with respect to
which such Incentive Stock Options are exercisable for the first time by such
Employee during any calendar year (under all such plans of the Company and any
Parent and Subsidiary) shall exceed One Hundred Thousand Dollars ($100,000).
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of (i) its adoption by the Board of Directors, or (ii) its approval by
vote of the holders of a majority of the outstanding shares of the Company
entitled to vote on the adoption of the Plan. The Plan shall continue in effect
until June , 2006, unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be ten (10) years from
the date of grant thereof or such shorter term as may be provided in the
instrument evidencing the Option. However, in the case of an Incentive Stock
Option granted to an Employee who, immediately before the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the instrument
evidencing the Option.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued
pursuant to the exercise of an Option shall be such price as is determined by
the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, immediately
before the grant of such Incentive Stock
Option, owns stock representing more
than ten percent (10%) of the voting
power of all classes of stock of the
Company or any Parent or Subsidiary, the
per Share exercise price shall be no
less than 110% of the fair market value
per Share on the date of grant; or, as
the case may be,
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(B) granted to an Employee not subject
to the provisions of Section
8(a)(i)(A), the per Share exercise
price shall be no less than one
hundred percent (100%) of the fair
market value per Share on the date
of grant.
(ii) In the case of a Non-Qualified Stock Option, the
per Share exercise price shall be no less than one
hundred percent (100%) of the fair market value per
Share on the date of grant.
(b) The fair market value shall be determined by the Board in
its discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices or, if applicable, the closing price of the Common Stock on the
date of grant, as reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System or, in the event the Common Stock is listed
on a stock exchange, the fair market value per Share shall be the closing price
on such exchange on the date of grant of the Option, as reported in the Wall
Street Journal.
(c) The consideration to be paid for the Shares to be issued
upon exercise of an Option or in payment of any withholding taxes thereon,
including the method of payment, shall be determined by the Board and may
consist entirely of (i) cash, check or promissory note; (ii) other Shares of
Common Stock owned by the Employee that have a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised; (iii) an assignment by the Employee of the net
proceeds to be received from a registered broker upon the sale of the Shares or
the proceeds of a loan from such broker in such amount; or (iv) any combination
of such methods of payment, or such other consideration and method of payment
for the issuance of Shares to the extent permitted under Delaware Law and
meeting the rules and regulations of the SEC applicable to plans meeting the
requirements of Section 16(b)(3) of the Exchange Act.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and subject to such
conditions as may be determined by the Board, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
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An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the instrument evidencing the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Board, consist of any consideration and method of payment allowable under
Section 8(c) of the Plan; it being understood that the Company shall take such
action as maybe be reasonably required to permit use of an approved payment
method. Until the issuance, which in no event will be delayed more than thirty
(30) days from the date of the exercise of the Option (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided in
the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for the purposes
of the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) Termination of Status as an Employee. If any Employee
ceases to serve as an Employee, he may, but only within thirty (30) days (or
such other period of time not exceeding three (3) months as is determined by the
Board) after the date he ceases to be an Employee of the Company, exercise his
Option to the extent that he was entitled to exercise it as of the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Notwithstanding the provisions of Section 9(b) above, in
the event an Employee is unable to continue his employment with the Company as a
result of his total and permanent disability, he may, but only within three (3)
months (or such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of disability, exercise his Option to the
extent he was entitled to exercise it at the date of such disability. To the
extent that he was not entitled to exercise the Option at the date of
disability, or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate. For
purposes of Section 9, an Employee is permanently and totally disabled if he is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or
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mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months.
(d) Death of Optionee. In the event of the death of an
Optionee:
(i) during the term of the Option who is at
the time of his death an Employee of the Company and
who shall have been in Continuous Status as an
Employee since the date of grant of the Option, the
Option may be exercised, at any time within twelve
(12) months following the date of death, by the
Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or
inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee
continued living one (1) month after the date of
death; or
(ii) within thirty (30) days (or such other
period of time not exceeding three (3) months as is
determined by the Board) after the termination of
Continuous Status as an Employee, the Option may be
exercised, at any time within three (3) months
following the date of death, by the Optionee's estate
or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at
the date of termination.
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the stockholders of the Company, the number of shares
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as
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<PAGE>
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
or in the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation, the
Board of Directors of the Company shall, as to outstanding Options, either (i)
make appropriate provision for the protection of any such outstanding Options by
the substitution on an equitable basis of appropriate stock of the Company or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to one share of Common Stock of the Company; provided, only
that the excess of the aggregate fair market value of the shares subject to the
Options immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the shares
subject to such Options immediately before such substitution over the purchase
price thereof, or (ii) upon written notice to an Optionee, provide that all
unexercised Options must be exercised within a specified number of days of such
notice or they will be terminated. In any such case, the Board of Directors may,
in its discretion, advance the lapse of any waiting or installment periods and
exercise dates.
12. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Board makes the determination
granting such Option. Notice of the determination shall be given to each person
to whom an Option is so granted within a reasonable time after the date of such
grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) The Board may amend or terminate the Plan from time to
time in such respect as the Board may deem advisable; provided, however, that
the following revisions or amendments shall require approval of the holders of a
majority of the outstanding shares of the Company entitled to vote:
(i) any increase in the number of Shares
subject to the Plan, other than in connection with an
adjustment under Section 11 of the Plan;
(ii) any change in the designation of the
class of persons eligible to be granted options;
or
(iii) any material increase in the benefits
accruing to participants under the Plan.
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<PAGE>
(b) Stockholder Approval. If any amendment requiring
stockholder approval under Section 13(a) of the Plan is made, such stockholder
approval shall be solicited as described in Section 17(a) of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by, or
appropriate under, any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuation of the Plan shall be subject to
approval by the stockholders of the Company within
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<PAGE>
twelve (12) months before or after the date the Plan is adopted. If such
stockholder approval is obtained at a duly held stockholders' meeting, it may be
obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon. The
approval of such stockholders of the Company shall be (1) solicitated
substantially in accordance with Section 14(a) of the Exchange Act and the rules
and regulations promulgated thereunder, or (2) solicited after the Company has
furnished in writing to the holders entitled to vote substantially the same
information concerning the Plan as that which would be required by the rules and
regulations in effect under Section 14(a) of the Exchange Act at the time such
information is furnished.
18. OTHER PROVISIONS. The Stock Option Agreement authorized under the
Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Option, as the Board of Directors of the
Company shall deem advisable. Any Incentive Stock Option Agreement shall contain
such limitations and restrictions upon the exercise of the Incentive Stock
Option as shall be necessary in order that such option will be an Incentive
Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as
amended.
19. INDEMNIFICATION OF BOARD. In addition to such other rights of
indemnification as they may have as directors or as members of the Board, the
members of the Board shall be indemnified by the Company against the reasonable
expenses, including attorneys' fees actually and necessarily incurred in
connection with the defense of any action suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his duties, provided that within
60 days after institution of any such action, suit or proceeding a Board member
shall, in writing, offer the Company the opportunity, at its own expense, to
handle and defend the same.
20. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
21. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the
singular shall include the plural, and the masculine
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pronoun shall include the feminine gender.
22. HEADINGS, ETC., NO PART OF PLAN. Headings of Articles and Sections
hereof are inserted for convenience and reference; they constitute no part of
the Plan.
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PRESENT, COHEN, SMALLOWITZ & GLASSMAN
Certified Public Accountants
40 Cuttermill Road
Great Neck, NY 11021
Tel (516) 466-5150
Fax (516) 466-0897
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have read the disclosure contained under the heading "Changes in and
Disagreements with Accountants on Accounting and Financial Disclosures" in the
Registration Statement on Form SB-2 of Imatec, Ltd. and we agree with the
statements contained therein insofar as they relate to our firm.
Very truly yours,
/s/ Present, Cohen, Smallowitz & Glassman
------------------------------------------
Present, Cohen, Smallowitz & Glassman
Great Neck, New York
June 19, 1996
<PAGE>
MOST HOROWITZ & COMPANY, LLP
Certified Public Accountants
1133 Avenue of the Americas
New York, NY 10036
Tel (212) 764-4910
Fax (212) 764-2017
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form SB-2 of
our report dated April 29, 1996, relating to the consolidated financial
statements of Imatec, Ltd. of Imatec, Ltd., and the reference to our Firm under
the caption "Experts" in the prospectus.
/s/ Most Horowitz & Company, LLP
---------------------------------
Most Horowitz & Company, LLP
New York, New York
June 20, 1996
<PAGE>
EXHIBIT 24.2
WYATT, GERBER, BURKE & BADIE, L.L.P.
99 Park Avenue
New York, NY 10016
(212) 681-0800
CONSENT
-------
The undersigned hereby consents to the use of its name under the
heading "Legal Matters" in the Registration Statement and related prospectus of
Imatec, Ltd., file no. 333-03589.
/s/ Wyatt, Gerber, Burke & Badie, L.L.P.
----------------------------------------
Wyatt, Gerber, Burke & Badie, L.L.P.
New York, NY
June 19, 1996
