UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-28606
NUWAVE TECHNOLOGIES, INC.
(name of small business issuer in its charter)
DELAWARE 22-3387630
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
ONE PASSAIC AVENUE
FAIRFIELD, NEW JERSEY 07004
(Address of principal executive offices)(Zip Code)
(973) 882-8810
(Issuer's telephone number, including area code)
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Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.01 PAR VALUE,
PUBLIC WARRANTS
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days. Yes
[XX] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference to Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [XX]
State issuer's revenues for its most recent fiscal year: $16,553
Aggregate market value of the voting stock held by non-affiliates based on the
last sale price for such stock at December 31, 1999: $19,588,540
The number of shares of Common Stock outstanding as of March 6, 2000: 8,468,889
Transitional Small Business Disclosure Format: Yes [ ] No [XX]
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference in Part III hereof.
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NUWAVE TECHNOLOGIES, INC.
FORM 10-KSB
INDEX
PART I........................................................................1
ITEM 1. BUSINESS....................................................1
ITEM 3. LEGAL PROCEEDINGS..........................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........11
PART II......................................................................11
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................................11
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION..................................................12
ITEM 7. FINANCIAL STATEMENTS.......................................20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................20
PART III.....................................................................21
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS....................................................21
ITEM 10. EXECUTIVE COMPENSATION.....................................21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............21
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...........................21
SIGNATURES...................................................................25
This Form 10-K contains forward-looking statements with the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
are discussed in Item 6, "Management's Discussion and Analysis or Plan of
Operation -- Certain Factors That May Affect Future Results" within this report.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
The Company is a development stage enterprise organized in July
1995. Our mission is to identify and commercialize high margin, proprietary
technologies suited for high-volume, high-growth markets and, in turn achieve
attractive long-term growth for the Company. The first technologies being
commercialized are in the field of photo and video-enhancement. In this regard
we have developed proprietary video-enhancement technology designed to
significantly enhance video output devices with clearer, sharper details and
more vibrant colors when viewed on the display screen. This is known as the
NUWAVE Video Processor ("NVP") technology. We intend to license this technology
and/or have it manufactured in the form of Application Specific Integrated
Circuit ("ASICs") chips through third parties and to directly market these
products to OEMs which would incorporate this enabling technology to improve
picture quality in set-top boxes, televisions, VCR's, DVD's, camcorders and
other video output devices.
In addition to the NVP technology, during 1999, the Company
completed the initial development of its first proprietary digital photo and
video software technology. The technology was introduced as PictureWizard in
September 1999 and sold directly to consumers through our exclusive e-commerce
Web site store at picturewizard.com for the primary purpose of limited test
marketing, system and product evaluation in a live setting, and to garnish
customer feedback on both the product and the Web site. Based on this initial
test marketing, customer feedback and the results of an independent survey
sponsored by the Company, in April we will launch the PicturePrepSuite2000
product line offering additional features, benefits and options. These products
are the first downloadable software products with the ability to enhance both
pictures and streaming video from virtually any PC program or while surfing the
internet using a PC. In addition to direct on-line consumer sales (B to C
sales), we intend to market this technology directly to businesses (B to B)
expanding our OEM customer base by either embedding or bundling our technology
into products such as PC's, printers, scanners, camcorders and DVD's among other
imaging devices and by providing our software products to retailers for sale in
their camera, film and film processing departments. This digital technology not
only complements our analog ASIC chip technology but can also work in
conjunction to further improve the resulting image quality.
The Company, in conjunction with Terk Technologies Corp., is
currently developing a commercial video retail product utilizing the NVP
technology (the "Retail Version"). In this regard, the Company has entered into
a five-year manufacturing and marketing agreement with Terk Technologies Corp.
to manufacture and market under the Terk brand name, a line-up of set-top boxes
incorporating NUWAVE's technology for existing televisions and video output
products.
In early March 2000 we received the OEM version of our ASIC chip
from the semiconductor-manufacturing foundry. This ASIC chip is currently
undergoing full quality assurance testing. The initial test results have been
positive. We plan to use this chip for sales demonstration purposes and expect
to be ready for production during the third quarter. Our sales program is aimed
at obtaining orders initially from those customers who have signed non
disclosure agreements and already had evaluated the Company's technology in PCB
(printed circuit format) and wish to test the ASIC chips in their products. In
anticipation of production of the NVP ASIC chip, the Company has been conducting
sales presentations of the NVP and Softset technologies to prospective OEM
customers world wide (i.e., manufacturers of set-top boxes, televisions, VCR's,
DVD's and other video output devices). We have marketing and sales organizations
in place in the U.S., Japan and China, close to key prospective customers, to
implement this program. Although we are unable to predict whether our marketing
efforts will be successful, we believe that our products have been well
received.
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We are concentrating the Company's activities primarily on the
final phase of the development of our ASIC line of chips and the continued
development of our digital software technology and Internet presence and the
marketing and sales of its line of analog and digital picture and video
enhancement products to the OEM, professional video and retail markets. We are
also conducting investigation and research and development activities with
respect to additional new technologies/products to address the digital, PC and
Internet markets. These activities may give rise to additional products that may
be commercialized by the Company.
In this regard, the Company has formed a strategic alliance with
MemoryLink Corp. for the commercialization of MemoryLink's propriety Wireless
Digital Video Technology, which was recently introduced by NUWAVE and MemoryLink
at the January 2000 International Consumer Electronics Show, where prototypes of
the initial products using the technology were demonstrated to selected major
OEM companies based in Asia, Europe and the U.S. The products using the Wireless
Digital Video Technology are expected to be available within the next twelve to
eighteen months.
The Company believes this focused product strategy will provide
NUWAVE with an expanded technology base and diversify the product line and
services it can offer potential customers and allow it to take full advantage of
the significant video growth opportunity presented by the converging PC,
Internet, television, HDTV and telecommunication markets. It believes that the
capacity of its existing data processing and management information systems is
sufficient to allow it to expand its business without significant additional
capital expenditures.
On March 13, 2000, the Company completed a private placement with
Janssen-Meyers whereby the Company issued to certain accredited investors, as
defined under Regulation D as promulgated under the Securities Act, 2,088,608
shares of the Company's Common Stock and 1,044,304 Class A Redeemable Warrants
for an aggregate purchase price of $6,600,000.
HISTORY
The Company was conceived of by Mr. Ernest Chu in June 1994 when
he met with Mr. Ted Wong, the President of Prime Technology, Inc. ("Prime") as a
result of an introduction by employees of a high-technology company for which
Mr. Chu was then rendering consulting services in his individual capacity. At
that time, Prime was the exclusive licensee of Rave Engineering Corp.'s ("Rave")
technology. Mr. Chu believed that the technology had the potential to be
commercialized on a mass basis for use in the video broadcast industry. In the
Fall of 1994, Mr. Chu and Mr. Wong determined that the Rave technology could be
most effectively exploited if a new company were organized to license the
technology and related products and directly commercialize and manufacture them,
rather than relying on sublicensing. They agreed that Prime and Mr. Chu would
directly participate in the equity of the new entity, and Rave would participate
through its approximately 20% equity ownership in Prime and through royalty and
development payments from the new company. Prime would continue to be
responsible for sublicensing through an agency agreement with the new company.
The parties recognized the need for an experienced president to operate the new
company and to commercialize the products, and began negotiations with Mr.
Gerald Zarin, whom Mr. Wong had recently met, to accept that position and
participate in the Company's equity.
Negotiations commenced in December 1994 and continued among Mr.
Zarin, Mr. Chu, Mr. Wong on behalf of Prime and Mr. Randy Burnworth on behalf of
Rave through early July 1995. As a result of these negotiations, the Company was
organized in July 1995, at which time Prime terminated its exclusive license
arrangement with Rave and the Company entered into the License Agreement. In
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addition, Rave agreed to continue the development of the technology and the
Initial Products pursuant to the Development Agreement and Prime became the
Company's exclusive agent to sublicense the products covered by the License
Agreement to third parties (subject in all cases to the Company's approval)
under the terms of the Agency Agreement. Mr. Zarin became the Company's
President and Mr. Chu became the Chairman of its Board of Directors and acting
Chief Financial Officer. Mr. Wong became a director of the Company.
The Company believed that Rave had not performed the services
required under the Development Agreement. In November 1998, the Company
commenced an arbitration proceeding (the "Arbitration") against Rave and Randy
Burnworth. On May 28, 1999, pursuant to a Settlement Agreement, the Arbitration
was resolved and the License Agreement was terminated. As a result of the
Settlement Agreement, the Company continues to maintain exclusive worldwide
license rights to make, market and license its video enhancement technology free
of any claims of ownership or inventorship by Rave; in return, Rave and certain
individuals associated with Rave received $175,000 in cash as well as 100,000
shares of the Company's Common Stock and options to purchase 50,000 shares of
the Company's Common Stock at an exercise price of $1.46, exercisable until May
28, 2002.
BACKGROUND--VIDEO IMAGES
The human eye perceives all images as a result of its ability to
recognize light. Light travels as continuous electromagnetic waves ("Analog
Light Waves") that are either emitted by the object being observed or reflected
from it. Analog Light Waves vary in frequency and amplitude, and can be directly
captured as images. For example, in photography, light waves strike film treated
with certain chemicals and the energy from the light wave causes chemical
reactions that change the translucency of the film. As a result, the image can
be recreated by again passing light through the film. In computers, visual
images can be stored and manipulated after Analog Light Waves have been broken
down into smaller constituent parts expressed as digital signals. These digital
signals are transmitted as bits and then reconstituted into Analog Light Waves
visible to the human eye.
Broadcast television technology is based on Analog Light Wave
transmissions. Analog Light Waves are captured by an electronic television
camera and turned into usable electrical energy in the form of lower frequency
waves in the form of electrical currents in an electric circuit ("Analog Video
Waves"). That wave is transmitted to a receiver, where it is projected at the
standard broadcast rate of 30 frames per second ("fps") against a phosphorescent
screen. The screen then emits Analog Light Waves, making the image visible to
the human eye.
Modern video telecommunications, such as satellite broadcasting
and cable television, generally combine both analog and digital processes in
order to capture and transmit images. For example, in digital satellite video
telecommunication the image is digitized by a computer processor and then
broadcast to a satellite. The digital information is received and rebroadcast by
the satellite directly to a receiver, and then reconstituted into energy in the
form of an analog wave and displayed at 30 fps to create a visible image.
Band widths available for satellite video transmission are
limited by the Federal Communications Commission ("FCC"). These limitations
significantly restrict the amount of information that can be transmitted in any
time interval and require most information to be transmitted in a compressed
digitized format.
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Internet telecommunication is subject to greater limitations. All
sites on the Internet are computers that process data on a digital basis linked
by telephone lines. Information is typically transmitted over these lines from
computers through modems. Currently, the fastest modems available for general
use can transmit only a fraction of the digital information necessary to create
real time images at 30 fps. Even if the speed of a modem was increased, the
limitations of currently available personal computers for general use make it
unlikely that a user would be able to retrieve and display data at a rate
greater than 15 fps. One result is that real time teleconferences are generally
accomplished by using special high speed modems and dedicated telephone lines
rather than using the Internet. These telephone lines are usually provided by a
national carrier having the equivalent band width of approximately 24 standard
telephone lines, which is then able to transmit the video images at 30 fps.
Charges for these dedicated lines are substantially the same as for 24 standard
lines, making real time teleconferences expensive. The ability to use the
Internet or otherwise use standard telephone lines for teleconferencing would
substantially reduce costs of teleconferencing.
Given the physical limitations of satellite, cable and telephone
systems, and their increasing interactivity, ever more emphasis is being placed
on compression technology as a means to allow more data to be transmitted in any
time interval. Using a variety of techniques, portions of a digital description
of an image are omitted in the transmission of information, and, by mathematical
formula or inference, most of the omitted data is then replaced after reception.
The result of this compression technology has been to increase the number of
channels available for digital satellite broadcasting from 50 to 150, and to
significantly improve the quality of images transmitted over the Internet. The
Company believes that improvements in the amount of compression possible will
continue. However, as the amount of compression increases, more data will likely
be lost, and the quality of the image will deteriorate.
Image information may be lost in the process of compression or
distorted during recording, transmission or playback because of various factors,
including signal interference or deterioration of original film quality and
camera focus. Some of the problems from this loss or distortion of image
information include lack of clarity, a "washed out" look and excessive or
inadequate black level.
One of the methods used to compress digitized video information
for storage and transmission (other than television transmission) is to
eliminate frames. A phenomenon causing analogous results occurs when the hard
drive of a computer, or some other component, cannot retrieve or present data at
sufficiently high fps. In either case, image movement is erratic and
unrealistic. Regardless of whether the signal is compressed, the image may be
subject to random salt and pepper patterns.
THE COMPANY'S VIDEO ENHANCEMENT PRODUCTS
The NVP and Softsets
The NVP controls, corrects and improves analog video signals' use
of digital control (software). The NVP first detects and replaces all important
picture synchronization and stability attributes. It then separates and corrects
the color and black and white information. The NVP enhances fine details of an
image and reduces distortions incurred in the course of transmitting the image,
corrects the pure black content of images and adjusts perceived light on
projected images. Fine detail enhancement is achieved by a proprietary circuit
that analyzes the form of the analog waves at the point of origin or display,
and processes the wave to significantly increase the clarity of the image.
The NVP achieves "blackness" correction by establishing a
"reference to true black" and adjusting the rest of the color spectrum to that
reference, making a "washed out" image appear more vivid. Similar referencing
currently is available only in expensive video display units, TV monitors and
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projection systems; the NVP's proprietary circuits enable the process to be
performed inexpensively on a printed circuit board, ASIC or a small portion of a
integrated circuit chip.
The NVP also contains circuits that provide for the adjustment of
light in images and brightness of the colors presented, similar to circuits
traditionally included in televisions.
The NVP can be used prior to further processing of the Analog
Video Wave at the source of the video signal and/or at the other end of the
process prior to the display of the video image. In the form of a chip, it can
be included in a television set, video projector or in a video conference
display or in the decoder or routing box that connects a typical television to a
cable broadcasting company or a multichannel satellite provider. The NVP also
can be included in any personal computer that has a capture board, a device
enabling the computer to convert standard broadcast video signals into a
digitized form. This enables the image to be enhanced prior to digitization.
Through its Advanced Engineering Group, the Company has developed
the Softsets to control the functions of the NVP. The Softsets give both
end-users and manufacturers who use the NVP in their products the ability to
manipulate the attributes of video images to their own taste or standards. For
example, the manufacturer of a set-top box who includes the NVP and Softsets in
its product could offer viewers the ability to select predetermined optimum
video parameters for "Sports," "Movies," "Drama" or other predesignated
programming from their remote control ("Active Softsets"). Additionally, program
providers or other transmitters can encode their signal so that a receiving
device containing the Softsets and enhanced NVP will automatically adjust its
video parameters to a predetermined value when the signal is received ("Passive
Softsets"). The encoded signal can also be included in the actual programming.
Digital Video and Photo Software Video Enhancement Technology
During 1998, NUWAVE, using internal resources, developed a
proprietary technology to remove noise, graininess in pictures, to complement
the company's Clarity technology used in the NVP-103 ASIC. The result of this
development is a set of algorithms, patent pending, that remove 70% of the
picture noise while retaining correct focus (the image does not blur). In
addition the NUWAVE algorithm process is three times faster than any other known
algorithm or filter thus allowing use in and during real time streaming video.
In 1999, NUWAVE was desirous to offer digital technology
solutions and to create and enter into an E-Commerce environment. Based upon the
power of its propriety noise reduction algorithms a software program,
PictureWizard, was developed for users to correct, improve and enhance digital
streaming video and digital photography. PictureWizard, the product, and
www.PictureWizard.com were introduced in late 1999. This became the first
downloadable software product with the ability enhance both pictures and
streaming video from virtually any PC program or while surfing the internet
using a PC. Based on initial test marketing, customer feedback and the results
of an independent survey, in April the Company will launch the
PicturePrepSuite2000 product line offering additional features, benefits and
options. The PictureWizard movie and picture enhancement product is sold at the
www.PictureWizard.com web store. The PicturePrep Suite 2000 website store at
www.PicturePrep.com will launch in April.
The evolution of the noise reduction algorithms results in six
products for NUWAVE to sell or license to the OEM, the retailer and the
consumer:
1. PicturePrep software product sold via the Internet to consumers.
2. PicturePrep custom software sold bundled with an OEM product such as a
scanner, digital camera or computer printer.
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3. PicturePrep software in "blister packs" sold via retail stores such as drug
stores that sell photo processing.
4. NUWAVE algorithms licensed in software form to OEM of consumer electronics
products.
5. NUWAVE algorithms licensed in hardware chip form to OEM of consumer
electronics products.
6. NUWAVE algorithms bundled with our ASIC video enhancement chip sales to
OEM of consumer electronic products.
Management believes the Company now has proprietary solutions for
sale in both analog and digital form to meet the evolution and convergence of
the PC to Television markets and the worldwide trend away from analog devices
toward digital devices.
Wireless Digital Technology
The Company has formed a strategic alliance with MemoryLink
Corp., for the commercialization of MemoryLink's propriety Wireless Digital
Video Technology. MemoryLink, a privately owned Wisconsin company was founded in
1998 with the vision of empowering individuals with wireless, personal broadband
technologies that will create a host of new life enhancing applications and
leverage the power of the internet Capitalizing on the FCC's establishment of
nonrestrictive spectrum in the 5GHz band, MemoryLink has developed
state-of-the-art digital wireless multimedia RF technologies encompassing video,
audio and data applications and its intellectual property portfolio positions
the company to establish itself as a leader in this field. Products that may
evolve from MemoryLink's efforts include portable wireless, flat panel TV's and
computers, home and commercial surveillance products, personal hand held
products and wide area digital PC video networking products. This technology was
recently introduced by NUWAVE and MemoryLink at the January 2000 International
Consumer Electronics Show, where prototypes of the initial products using the
technology were demonstrated to selected major OEM companies based in Asia,
Europe and the U.S. Initial products emerging from this technology expected to
be available within the next twelve to eighteen months.
Other Potential Products
The Company intends to continue to use outside consultants to
assure exposure to new ideas and technology. The Company, through its Advanced
Engineering Group and agreements with third parties, is conducting investigation
and research and development activities with respect to other new
technologies/products to address the digital, PC and internet markets, which are
new markets for the Company to participate in. These activities may give rise to
additional products that may be commercialized by the Company. However, there
can be no assurance that its efforts will result in marketable products or
products that can be produced at commercially acceptable costs.
RESEARCH AND DEVELOPMENT
Research and development activity with respect to the Company's
Initial Products was carried out by Rave prior to July 21, 1995, when the
Company and Rave entered into the License Agreement and the Development
Agreement. The Company's Initial Products were based on technology originated by
Rave prior to the Company's organization and licensed to the Company by Rave
pursuant to the License Agreement. Although it was the Company's intention to
utilize Rave as its primary source for research and development activities, the
Company became dissatisfied with Rave's performance under the Development
Agreement and has found it necessary to utilize its Advanced Engineering Group
as its primary means for product development. The Company's Advanced Engineering
Group currently operates to support the continuing development of the Company's
products and related technology, and the identification of additional sources of
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new technology. The Company utilizes its Advanced Engineering Group to create
products and technology independent of the "Licensed Product" and "Licensed
Process" as outlined in the License Agreement. These independently developed
products and technology include the NVP, a significant amount of the software
included in each of its products and new circuitry to allow certain of the
products to be produced as ASICs. The Advanced Engineering Group is also
currently developing a commercial video retail product which utilizes the NVP
technology and during 1999 developed proprietary digital software photo and
video enhancement technology utilized in the Company's first Internet product
Picture Wizard.
As of December 31, 1999, the Advanced Engineering Group consisted
of 5 of the Company's employees and outside consultant organizations who have on
their respective staffs engineers, technicians and support personnel (totaling
more than 30 personnel) who devote time to the Company on an as-needed
project-by-project basis. The Company anticipates that the make-up of its
Advanced Engineering Group will change from time to time depending on its
current and anticipated development and commercialization plans. The Company's
strategy with respect to new products and technologies is to continue to utilize
the Advanced Engineering Group as well as other independent third party sources
and to increase its internal technical and engineering staff as appropriate.
From July 17, 1995 to December 31, 1999, the Company incurred
expenses of $6,319,909 on research and development, of which approximately 55%
was paid to Rave pursuant to the Development Agreement. During fiscal 1999 and
1998, $938,745 and $1,572,364, respectively, was spent on research and
development activities. During the next 12 months, the Company estimates that it
will spend approximately $800,000 in support of the commercialization of its
products and on research and development. In the event the Company is able to
generate sufficient revenues from sales of its NVP products during such 12-month
period, it anticipates it will increase its expenditures on research and
development and the identification of new sources of technology.
MARKETING AND SALES
During 1999, the Company completed the initial development of its
first proprietary digital photo and video software technology. The technology
was introduced as Picture Wizard in September 1999 and sold directly to
consumers through our exclusive e-commerce Web site store at picturewizard.com
for the primary purpose of limited test marketing, system and product evaluation
in a live setting, and to garnish customer feedback on both the product and the
Web site. Based on this initial test marketing, customer feedback and the
results of an independent survey sponsored by the Company, we will launch in
April, the PicturePrepSuite2000 product line offering additional features,
benefits and options. These products are the first downloadable software
products with the ability enhance both pictures and streaming video from
virtually any PC program or while surfing the Internet using a PC. In addition
to direct on-line consumer sales (B to C sales), we intend to market this
technology directly to businesses (B to B) expanding our OEM customer base by
either embedding or bundling our technology into products such as PC's,
printers, scanners, camcorders and DVD's among other imaging devices and by
providing our software products to retailers for sale in their camera, film and
film processing departments. This digital technology not only complements our
analog ASIC chip technology but can also work in conjunction to further improve
the resulting image quality.
The Company is currently developing retail products for consumers
who do not have NUWAVE enabled products for their TV's but want to improve the
picture quality of their home viewing. We believe that the most effective way to
introduce this product into the retail marketplace is to work through
distributors who will manufacture and sell to retailers, including those with
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whom they are currently doing business. In this regard, the Company has entered
into a five-year manufacturing and marketing agreement with Terk Technologies
Corp. to manufacture and market under the Terk brand name, a line-up of set-top
boxes incorporating NUWAVE's technology for existing televisions and video
output products. Terk products are currently marketed to all major consumer
electronics retailers in the U.S. At present, there are three hundred million
non-enhanced televisions in the United States alone.
The Company has also commenced marketing of its NVP and Softsets
to manufacturers of video products including TV's, VCR's, DVD's, set-top boxes,
satellite distribution systems, digital cameras and camcorders. The Company has
also introduced its technology to companies that manufacture component parts and
semiconductors used in the manufacture of such video products. The Company
believes that the inclusion of its NVP and Softsets in such video products will
allow them to produce significantly better images and allow for product
differentiation, and the low cost to the user will make it an attractive
product. The Company's goal is to position itself to take advantage of the
converging television, telecommunication and computer markets by developing
multiple products from its unique video enhancement technology. Earlier this
month we received the OEM version of our ASIC chip from the
semiconductor-manufacturing foundry. This ASIC chip is currently undergoing full
quality assurance testing. The initial test results have been positive. We plan
to use this chip for sales demonstration purposes and expect to be ready for
production during the third quarter. Our sales program is aimed at obtaining
orders initially from those customers who have already evaluated the Company's
technology and wish to test the ASIC chips in their products. In anticipation of
production of the NVP ASIC chip, the Company has been conducting sales
presentations of the NVP and Softset technologies to prospective OEM customers
world wide (i.e., manufacturers of set-top boxes, televisions, VCR's, DVD's and
other video output devices). We have marketing and sales organizations in place
in the U.S., Japan and China, close to key prospective customers, to implement
this program. Although we are unable to predict whether our marketing efforts
will be successful, we believe that our products have been well received.
The Company has formed a strategic alliance with MemoryLink Corp.
for the commercialization of certain of MemoryLink's propriety Wireless Digital
Video Technologies, which was introduced in January, 2000 by NUWAVE and
MemoryLink at the 2000 International Consumer Electronics Show, where prototypes
of the initial products using the technology were demonstrated to selected major
OEM companies based in Asia, Europe and the U.S. The products using the Wireless
Digital Video Technology are expected to be available within the next twelve to
eighteen months.
The Company intends to support the above sales efforts through
various sales and marketing programs/activities including trade advertising,
attendance at industry trade shows, attendance at participating dealer shows,
attendance at end-user events, literature mailers and co-op dealer advertising.
MANUFACTURING
The Company does not contemplate that it will directly
manufacture any of its products. It intends to contract with third parties to
manufacture its proposed NVP and Softsets. It also may license to third parties
the rights to manufacture the products, through direct licensing, OEM
arrangements or otherwise.
The Company intends to produce the NVP ASIC chip in accordance
with a customer's specific application requirements supported by firm
commitments rather than producing and storing in inventory ASIC chips in
anticipation of applications required by customers in the future. In this
regard, the Company contracted with Adaptive to provide necessary technical
support and manage this process under the Company's direction, contracted with
TEC to complete the design work necessary to convert the Company's current NVP
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PC board design to ASIC specifications and contracted with ZMD for production of
the ASIC.
PATENTS; PROPRIETARY INFORMATION
To the extent practicable, the Company has filed and intends to
file U.S. patents and/or copyright applications for certain of its proposed
products and technology. The Company has also filed and intends to file
corresponding applications in key industrial countries worldwide.
In April 1996, the Company filed two patent applications on
behalf of Rave for its Randall connector system. One patent was received in
November 1997 and the second one in January 1998. Under the terms of the
settlement agreement with Rave, the Company retains the exclusive license rights
to these patents.
In April 1998, the Company filed three patent applications for
certain of its independently developed products: one for the NUWAVE Video
Processor and two for the Softsets. Although management believes that each of
these applications contains patentable claims, there is no assurance that the
Company will receive any patents. Also, even if granted, there is no assurance
that any patent will afford the Company with commercially significant protection
of its technology or that it will have adequate resources to enforce these
patents.
The Company also intends to license and/or sell its technology
and products in foreign markets. As such, it intends to seek foreign patent
protection. The patent laws of other countries may differ significantly from
those of the United States as to the patentability of the Company's products and
technology. Moreover, the degree of protection afforded by foreign patents may
be different from that in the United States. Patent applications in the United
States are maintained in secrecy until the patents are issued, and publication
of discoveries in scientific or patent literature tends to lag behind actual
discoveries by several months. As a result, the Company cannot be certain that
it will be the first creator of inventions covered by any patent applications it
makes or the first to file patent applications on such inventions.
Management believes that the products the Company intends to
market and sell do not infringe the patents or other proprietary rights of third
parties. Further, it is not aware of any patents held by competitors that will
prevent, limit or otherwise interfere with the Company's ability to make and
sell its products. However, it is possible that competitors may have applied
for, or may in the future apply for and obtain, patents which have an adverse
impact on the Company's ability to make and sell its products. In addition,
because the Company is a relatively new company in the development stage, claims
that its products infringe on the proprietary rights of others are more likely
to be asserted after commencement of commercial sales of its products. There is
no assurance that competitors will not infringe the Company's patents. Defense
and prosecution of patent suits, even if successful, are both costly and time
consuming. An adverse outcome in the defense of a patent suit could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require it to cease selling its products.
The Company also relies on unpatented proprietary technology.
There is no assurance that others may not independently develop the same or
similar technology or otherwise obtain access to the Company's unpatented
technology. To protect its trade secrets and other proprietary information, the
Company requires employees, advisors and collaborators to enter into
confidentiality agreements. The Company could be adversely affected in the event
that these agreements fail to provide meaningful protection for its trade
secrets, know-how or other proprietary information.
9
<PAGE>
COMPETITION
For a discussion relating to the competition that the Company
faces and risks related thereto, see "Management's Discussion and Analysis or
Plan of Operation--Certain Factors That May Effect Future Results--Competition"
and "--Rapid Changes to Industry Standards; Product Obsolescence."
EMPLOYEES
The Company currently has thirteen full-time employees, of which
eight are executives or administrative and five are in the Advanced Engineering
Group, and depending on its level of business activity, expects to hire
additional employees in the next 12 months, as needed, to support marketing and
sales, manufacturing and research and development.
FACILITIES
The Company has established its headquarters in Fairfield, New
Jersey. Pursuant to the sublease relating to such facility, the Company is
obligated to make monthly rental payments of $6,600. The lease is on a
month-to-month basis. The Company's subleased portion of the facility is
approximately 2,500 square feet and the sublease entitles the Company to share
certain common areas.
EXECUTIVE OFFICERS
Set forth below are the names, ages as of March 17, 2000 and
business experience of the executive officers of the Company:
Name Age Position
- ------------------ --- -----------------------------------------
Gerald Zarin 59 Chairman of the Board of Directors,
Chief Executive Officer and President
Don Legato 56 Vice President-Sales
Jeremiah F. O'Brien 53 Vice President, Secretary and Chief
Financial Officer
Robert Webb 64 Vice President - Marketing/Technical
Development
GERALD ZARIN has been a Director and President and Chief
Executive Officer of the Company since July 1995. He has been Chairman of the
Board of Directors since January 28, 1996. From June 1991 until January 1993,
Mr. Zarin was the Chairman, President and Chief Executive Officer of Emerson
Radio Corporation, which designs and sells consumer electronics products. From
June 1993 to July 1995, he was President and Chief Executive Officer at AMD
Consulting, Inc., a business consulting firm. From November 1990 to June 1991,
he was President and Chief Executive Officer of JEM, Inc., an importer of fine
furnishings. From August 1987 to October 1990, he was Senior Vice President and
Chief Financial Officer of Horn & Hardart, Inc. Horn & Hardart, Inc. is the
parent company for Hanover House and various other hotels and fast food chains.
From 1976 to 1986, he was President and Chief Executive Officer of Morse
Electro, Inc., which designed and sold consumer electronics products.
DON LEGATO has been the Vice President-Sales of the Company since
February 1997. From April 1994 to February 1997, he was the President of Gale
Group Ltd., Inc., a management consulting firm. >From May 1993 to April 1994, he
served as Vice President Sales and Marketing and also as a Director for Applied
Safety Inc., (makers of the "World's First" Retrofit Driver's Side Airbag System
10
<PAGE>
in the US). From June 1992 to May 1993 he was President of Technology Solutions
Distributing Inc., a computer products distribution company. From November 1972
to June 1992, he was President and CEO of T.L.D. Limited, Inc., a manufacturer's
representative company representing major electronics and computer consumer
products firm such as Sanyo, Sharp, Sony and Apple Computer. He also served on
Manufacturer's Advisory Councils for several of these companies.
JEREMIAH O'BRIEN has been Vice President and Secretary of the
Company since July 1995 and Chief Financial Officer since January 1996. From
1983 to 1989, he served as CFO and Executive Vice President for Cardiac
Resuscitator Corporation, a medical electronics manufacturer. From September
1989 through June 1991, he served as Senior Vice President of Finance for
Emerson Computer Corporation and Emerson Technologies, Inc. (both of which
manufacture and sell electronic components and products). From June 1993 through
March 1994, Mr. O'Brien was Corporate Controller for Andin International, a
jewelry manufacturing company. During the period of July 1991 through July 1995,
he also functioned as an independent consultant in financial matters to various
private corporations.
ROBERT WEBB has been the Vice President-Marketing/Technical
Development of the Company since September 1995. From June 1995 to September
1995, Mr. Webb acted as an independent consultant to various private
corporations. From July 1994 until March 1995, he was Vice President of New
Product Development for Studio Magic, Inc., a company involved in the design and
manufacture of computer video equipment, and served as a consultant for such
company from October 1993 to July 1994 and in April 1995. From October 1973
until October 1993 he was employed by Grass Valley Tektronix, which produces
broadcast television equipment. He served as a special advisor to the President
of Grass Valley Tektronix from February 1993 to September 1993; he was Division
General Manager-Graphics Systems from November 1990 to February 1993 and held
various executive positions prior to that time
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, the Company did not have any
meetings of its Stockholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET FOR COMMON EQUITY
The Company's Common Stock, par value $.01 per share ("Common
Stock"), has been traded since July 1996 on the NASDAQ SmallCap Stock Market
under the symbol "WAVE" for Common Stock and "WAVEW" for Common Stock Warrants.
Prior to that time, there was no public market for the Common Stock or Warrants.
The following table sets forth the range of high and low closing sale prices for
the Common Stock as reported on the NASDAQ SmallCap Stock Market during each of
the quarters presented. The quotations set forth below are inter-dealer
quotations, without retail mark-ups, mark-downs or commissions and do not
necessarily represent actual transactions.
11
<PAGE>
COMMON STOCK
QUARTERLY PERIOD ENDED HIGH LOW
March 31, 1998 6.63 3.88
June 30, 1998 4.50 2.94
September 30, 1998 3.50 1.38
December 31, 1998 4.19 0.66
March 31, 1999 3.50 1.50
June 30, 1999 2.41 1.31
September 30, 1999 3.63 1.94
December 31, 1999 3.50 2.00
As of March 12, 2000, there were approximately 153 holders of
record of the Company's Common Stock. This number does not include beneficial
owners of the Common Stock whose shares are held in the names of various
dealers, clearing agencies, banks, brokers and other fiduciaries.
The Company has never declared or paid any cash dividends. The
Company currently intends to retain any future earnings to finance the growth
and development of its business and future operations, and therefore does not
anticipate paying any cash dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the three months ended December 31, 1999 there were no
sales of unregistered securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SUMMARY FINANCIAL INFORMATION
The summary financial data set forth below are derived from and
should be read in conjunction with the financial statements, including the notes
thereto, filed as part of this Form 10-KSB.
12
<PAGE>
<TABLE>
<CAPTION>
JULY 17, 1995 (INCEPTION)
YEAR ENDED YEAR ENDED TO DECEMBER 31, 1999
STATEMENT OF OPERATIONS DATA: DECEMBER 31, 1998 DECEMBER 31,
1999
<S> <C> <C> <C>
Revenues $ 12,545 $ 16,553 $ 39,373
Net Loss $ 3,998,271 $ 2,690,372 $ 15,878,199
Net loss per common share $ (0.55) $ (0.32)
Weighted average number of shares 7,259,896 8,419,644
</TABLE>
DECEMBER 31, DECEMBER 31,
BALANCE SHEET DATA: 1998 1999
Working capital $ 4,904,765 $ 1,832,611
Total assets $ 5,515,352 $ 3,180,313
Total liabilities $ 261,201 $ 274,555
Deficit accumulated during $ 13,187,827 $ 15,878,199
the development stage
Stockholders' equity $ 5,254,151 $ 2,905,758
FORWARD-LOOKING STATEMENTS
This Report on Form 10-KSB contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements
other than statements of historical facts included in this Report, including
without limitation, the statements under "General," "Marketing and Sales,"
"Research and Development," "Manufacturing," "Liquidity and Capital Resources"
and "Plan of Operation" are forward-looking statements. The Company cautions
that forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those indicated in the
forward-looking statements, due to several important factors herein identified.
Important factors that could cause actual results to differ materially from
those indicated in the forward-looking statements ("Cautionary Statements")
include delays in product development, competitive products and pricing, general
economic conditions, risks of intellectual property litigation, product demand
and industry capacity, new product development, commercialization of new
technologies, the Company's ability to raise additional capital when required,
and the risk factors detailed from time to time in the Company's annual report
on Form 10-KSB and other materials filed with the Securities and Exchange
Commission ("SEC").
All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
GENERAL
The Company is a development stage enterprise organized in July
1995. Our mission is to identify and commercialize high margin, proprietary
technologies suited for high-volume, high-growth markets and, in turn achieve
attractive long-term growth for the Company. The first technologies being
commercialized are in the field of photo and video-enhancement. In this regard
we have developed proprietary video-enhancement technology designed to
significantly enhance video output devices with clearer, sharper details and
more vibrant colors when viewed on the display screen. This is known as the
NUWAVE Video Processor ("NVP") technology. We intend to license this technology
and/or have it manufactured in the form of Application Specific Integrated
Circuit ("ASICs") chips through third parties and to directly market these
products to OEMs who incorporate this enabling technology to improve picture
quality in set-top boxes, televisions, VCR's, DVD's, camcorders and other video
output devices. In addition to the NVP technology, the Company has recently
completed development of proprietary software technology with the ability to
13
<PAGE>
digitally enhance both pictures and video on PC's while the user is surfing the
Internet or working offline (see "Marketing and Sales").
In July 1996, we completed an initial public offering ("IPO") of
the Company's Common Stock and Public Warrants from which we received net
proceeds of $9,538,428 and repaid $2,000,000 principal amount of promissory
notes issued in a previous financing. On February 11, 1998, the Company received
net proceeds of $859,347 for issuance of 253,485 shares of our Common Stock to
Profutures Special Equities Fund, L.P. ("Profutures"), together with warrants to
purchase up to 100,000 shares of the Company's Common Stock. Pursuant to a
Placement Agency Agreement, dated May 11, 1998, with Janssen-Meyers Associates,
L.P. ("Janssen-Meyers"), the Company effected a private equity placement for an
aggregate of 2,742,904 shares of the Company's Common Stock and 2,057,207 Class
A Redeemable Warrants between May 19, 1998 and June 9, 1998 for net proceeds of
$5,990,924. On March 14, 2000, the Company completed a private placement with
Janssen-Meyers whereby the Company issued to certain accredited investors, as
defined under Regulation D as promulgated under the Securities Act, 2,088,608
shares of the Company's Common Stock and 1,044,304 Redeemable Common Stock
Purchase Warrants for an aggregate purchase price of $6,600,000. See
"Management's Discussion and Analysis or Plan of Operation--Liquidity and
Capital Resources."
As of December 31, 1999 the Company had accumulated a deficit
during the development stage of $15,878,199, which includes a net loss for the
year ended December 31, 1999 of $2,690,372 compared to a net loss for the year
ended December 31, 1998 of $3,998,271, a decrease in losses of $1,307,899. The
loss for the year ended December 31, 1999 included included a reduction in
research and development costs of $633,619 when compared to the year ended
December 31, 1998. Such reduction was almost exclusively due to the termination
of the Rave Development Agreement in October, 1998. General and administrative
costs for the year ended 1999 were $2,503,812 compared to $2,646,409 for 1998, a
reduction of $142,597. Such reduction included a change in legal costs from 1998
($389,366) to 1999 ($269,448) of $119,918. In addition marketing costs were
reduced in 1999 by $26,234 ($229,644 in 1998 vs. $203,410 in 1999).
Although the Company anticipates deriving some revenue from the
sale of its proprietary software (Softsets) and the NVP products during 2000, no
assurance can be given that these products will be successfully marketed during
such period. Even if revenues are produced from the sale of such products, the
Company expects to continue to incur losses for at least the next 12 months. See
"Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
From its inception until the IPO, the Company relied for all of
its funding ($2,900,000 in cash plus the cancellation of the notes in the
principal amount of $350,000) on private sales of its debt and equity securities
("Private Financings"). In July 1996, the Company completed its IPO and received
net proceeds of $9,538,428. The Company used $2,073,652 of the net proceeds of
the IPO to repay the principal and interest on the outstanding notes issued to
investors in connection with the Private Financings. On February 6, 1998, the
Company issued 253,485 shares of its Common Stock for an aggregate purchase
price of $1,000,000 to a Private Limited Partnership. On May 11, 1998, the
Company entered into a placement agency agreement with Janssen-Meyers to act as
the Company's placement agent in a private equity placement whereby the Company
issued to certain accredited investors, as defined under Regulation D as
promulgated under the Securities Act, 2,742,904 shares of the Company's Common
Stock and 2,057,207 Class A Redeemable Warrants between May 19, 1998 and June 9,
1998 for an aggregate purchase price of $7,280,546.
On March 13, 2000, the Company completed a private placement with
Janssen-Meyers whereby the Company issued to certain accredited investors, as
defined under Regulation D as promulgated under the Securities Act, 2,088,608
14
<PAGE>
shares of the Company's Common Stock and 1,044,304 Redeemable Common Stock
PurchaseWarrants for an aggregate purchase price of $6,600,000.
The Company anticipates that its available cash will be
sufficient to satisfy its contemplated cash requirements for at least through
the next twelve months.
PLAN OF OPERATION
The Company's plan of operation over the next 12 months focuses
primarily on the final phase of the development of its ASIC line of chips and
continued development of its digital software technology and Internet presence
and the marketing and sales of its line of analog and digital picture and video
enhancement products to the OEM, professional video and retail markets and the
continued effort necessary to support the sales and marketing of these products.
In addition, the Company plans to market to the same markets wireless video
technology through its strategic alliance with Memory link Corp. Also, the
Company, through its Advanced Engineering Group and agreement with third
parties, is currently conducting investigation and research and development
activities with respect to other new technologies/products to address the
digital, PC and internet markets. These activities may give rise to additional
products that may be commercialized by the Company. However, there can be no
assurance that its efforts will result in marketable products or products that
can be produced at commercially acceptable costs.
The Company anticipates, based on its current proposed plans and
assumptions relating to its operations, that it has sufficient cash to satisfy
the estimated cash requirements of the Company for the next 12 months. In the
event of unanticipated expenses, delays or other problems beyond this period,
the Company might be required to seek additional funding. In addition, in the
event that the Company receives a larger than anticipated number of initial
purchase orders upon introduction of its NVP products, it may require resources
greater than its available cash or than are otherwise available to the Company.
In such event, the Company may be required to raise additional capital. There
can be no assurance that such additional capital will be available to the
Company if needed, on commercially reasonable terms or at all.
The Company's future performance will be subject to a number of
business factors, including those beyond the Company's control, such as economic
downturns and evolving industry needs and preferences, as well as the level of
competition and the ability of the Company to successfully market its products
and technology. There can be no assurance that the Company will be able to
successfully implement a marketing strategy, generate significant revenues or
achieve profitable operations. In addition, because the Company has had only
limited operations to date, there can be no assurance that its estimates will
prove to be accurate or that unforeseen events will not occur.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following factors, among others, could cause actual results
to differ materially from those contained in forward-looking statements made in
this Annual Report on Form 10-KSB and presented elsewhere by management from
time to time.
1. Development Stage Enterprise; Absence of Operating History
----------------------------------------------------------
The Company is a development stage enterprise. It has had only a
limited operating history and has sold only a limited quantity of its products
to date (primarily for demonstration purposes). Since its inception in July
1995, the Company has been engaged primarily in: raising funds; directing
supervising, and coordinating the activities of its Advanced Engineering Group,
made up of the Company's own employees and third party consultants who work with
the Company on a project-by-project basis, in the continuing development of the
NUWAVE Video Processor and Picture Wizard 2000, pre-marketing and, more
15
<PAGE>
recently, it produced its first NUWAVE Video Processor in an application
specific integrated chip (ASIC) format for the OEM market.
The Company's prospects must be considered in light of the risks
associated with the establishment of a new business in the evolving electronic
video industry. In the Company's case this is particularly so, as further risks
will be encountered in its shift from the development to the commercialization
of new products based on innovative technology. There can be no assurance that
the Company will be able to generate revenues or achieve profitable operations.
2. Limited Revenues; Accumulated Deficit; Anticipated Future Losses
----------------------------------------------------------------
To date, the Company has received only limited revenue from the
sale of its products (primarily from sales made for demonstration purposes). It
does not anticipate significant operating revenue until its relevant technology
and one or more of its products is completely developed, manufactured in
commercial quantities and made available for commercial delivery. There can be
no assurance that its technology and products, if developed and manufactured,
will be able to compete successfully in the marketplace and/or generate
significant revenue. The Company has incurred significant costs in connection
with the development of its technologies and proposed products and there is no
assurance that it will achieve sufficient revenues to offset anticipated
operating costs. As of December 31, 1999, the Company had an accumulated deficit
of $15,878,199. Although the Company anticipates deriving some revenue from the
sale of its NUWAVE Video Processor and related products and Softsets within the
next 12 months, no assurance can be given that these products will be
successfully marketed or even completely developed and tested for commercial use
during such period. Management anticipates that the Company will continue to
incur substantial losses for at least the next 12 months. Included in such
former and future losses are research and development expenses, marketing costs,
manufacture and assembly, and general and administrative expenses. The Company
anticipates that it will continue to have high levels of operating expenses and
will be required to make significant expenditures in connection with its
continued research and development activities. The Company anticipates that its
losses will continue until it is able to generate sufficient revenues to support
its operations.
3. Significant Capital Requirements; Dependence on Available Cash; Need for
------------------------------------------------------------------------
Additional Financing
--------------------
The Company's capital requirements in connection with its
development activities have been and will continue to be significant. The
Company has been dependent upon the proceeds of sales of its securities to
private investors to fund its initial development activities. Since its initial
public offering in July 1996, the Company has obtained needed capital through
private placements of its securities. See "Management's Discussion and Analysis
or Plan of Operation--General."
The Company anticipates, based on its current proposed plans and
assumptions relating to its operations, that it has sufficient cash to satisfy
all of its estimated cash requirements for the next 12 months. In the event of
unanticipated expenses, delays or other problems, the Company might be required
to either utilize the equity financing available under the Investment Agreement
or seek additional funding elsewhere. Also, if it were to receive a larger than
anticipated number of initial purchase orders upon introduction of the Softsets
or the NUWAVE Video Processor products, the Company might require additional
capital. No assurance can be given that the Company will be able to obtain such
additional capital on commercially reasonable terms or at all. An inability to
obtain additional financing, when needed, would have a material adverse effect
on the Company, and possibly require it to curtail or cease operations. To the
extent that any future financing involves the sale the Company's equity
securities, its existing stockholders could be substantially diluted.
16
<PAGE>
4. New Concept; Uncertainty of Market Acceptance; Lack of Marketing Experience
---------------------------------------------------------------------------
The Company develops technology and products utilizing new
concepts and designs in video imagery and processing. The Company's prospects
for success will depend on its ability to successfully sell its products to key
manufacturers and distributors who may be inhibited from doing business with the
Company because of their commitment to their own technologies and products. As a
result, demand and market acceptance for the Company's technology and products
are subject to a high level of uncertainty. The Company currently has limited
financial, personnel and other resources to undertake the extensive marketing
activities that will be necessary to market its technology and products once
their development is completed. No assurance can be given that any of its
potential customers will enter into any arrangements with the Company. Further,
there is no assurance that the Company's marketing efforts will be successful.
5. Dependence on Third-Party Design Changes
----------------------------------------
Commercialization of the NUWAVE Video Processor and sale to
manufacturers of the relevant video equipment will require such manufacturers to
adopt new circuit configurations to accommodate the relevant chip in their
products. The Company anticipates that manufacturers wishing to use the NUWAVE
Video Processor will make such modifications because of the benefits derived
from the improved performance of their products and the relative simplicity of
such modifications. However, there is no assurance that such modifications will
be made. Also, the cost of such modifications may inhibit or prevent their
adoption. The Company's ability to sell and/or license its products would be
adversely affected if designers and manufacturers fail to make such
modifications.
6. Uncertainty of Product and Technology Development; Need for Product
-------------------------------------------------------------------
Testing; Technological Factors
------------------------------
Development of the Company's products are subject to all of the
risks inherent in the development of new technology and products including the
following risks: unanticipated delays; expenses; technical problems or
difficulties; and possible insufficiency of funding to complete development.
There is no assurance as to when, or whether, the Company can successfully
complete such developments. Further, there is no assurance that the Company can
develop products in commercially salable form within its projected development
schedule. If the Company is unable to complete its development activities for
its proposed products, it would have to complete development through third
parties. Management believes that the Company has sufficient resources to
complete development of its products. However, there is no assurance that it
will be able to complete such development in a timely manner, or at all. There
is also no assurance that it can enter into economically reasonable arrangements
for the completion of such products by third parties.
In connection with the development of commercially salable
prototypes, the Company must successfully complete a testing program for its
products before marketing them. Unforeseen technical problems arising out of
such testing could significantly and adversely affect its ability to manufacture
a commercially acceptable version. In addition, the Company's success will
depend upon its technology and proposed products meeting acceptable cost and
performance criteria and upon their timely introduction into the marketplace.
There can be no assurance that the Company's technology and proposed products
will satisfactorily perform the functions for which they are designed, that they
will meet applicable price or performance objectives or that unanticipated
technical or other problems will not occur. Should any such problems arise, the
result would be increased costs and/or material delays in the development of the
proposed products.
17
<PAGE>
7. Dependence on Third-Party Development and Manufacturing
-------------------------------------------------------
The Company does not plan to directly manufacture any of its
products. It intends to contract with third parties to manufacture its proposed
NUWAVE Video Processor and Softsets, and related retail products. The Company
may also license to third parties the rights to manufacture proposed products,
through direct licensing, OEM arrangements or otherwise.
The Company will be dependent on third parties to manufacture the
NVP ASIC (the application specific integrated circuit-based NUWAVE Video
Processor) and related products as well as future products the Company may
choose to commercialize. Although the Company has entered into an agreement with
a potential manufacturer of the NVP ASIC chip, there can be no assurance that
such manufacturer will dedicate sufficient production capacity to satisfy the
Company's requirements within scheduled delivery times, or at all. Failure or
delay by the Company's suppliers in fulfilling its anticipated needs would have
an adverse effect on the Company's ability to develop and market its products.
In addition, the Company will be dependent on third party vendors for many of
the components necessary for the final assembly of its products. The Company may
have difficulty in obtaining contractual agreements with suppliers of such
materials due to, among other things, possible material shortages or possible
lack of adequate purchasing power. While management believes that these
components are available from multiple sources, it is anticipated that the
Company will obtain certain of them from a single source, or limited number of
sources, of supply. In the event that certain of such suppliers are unable or
unwilling to provide the Company with such components on commercially reasonable
terms, or at all, delays in securing alternative sources of supply would result
and could have a material adverse effect on the Company's operations.
8. Competition
-----------
The markets that the Company intends to enter are characterized
by intense competition, and, particularly with respect to the market for video
editing, video production and video processing products, significant price
erosion over the life of a product. The Company's products will directly compete
with those of numerous well-established companies, such as Sony Electronics,
Inc., Panasonic Division of Matsushita Electric Industrial Co., Motorola, Inc.,
Mitsubishi International Corp. and Royal Philips Electronics, NV, which design,
manufacture and/or market video technology and other products. All of these
companies have substantially greater financial, technical, personnel and other
resources than the Company and have established reputations for success in the
development, licensing, sale and service of their products and technology.
Certain of these competitors dominate their industries and have the necessary
financial resources to enable them to withstand substantial price competition or
downturns in the market for video products.
9. Rapid Changes to Industry Standards; Product Obsolescence
---------------------------------------------------------
The markets for the technology and products being developed by
the Company are characterized by rapid changes and evolving industry standards
often resulting in product obsolescence or short product life cycles. As a
result, certain companies may be developing technologies or products of which
the Company is unaware which may be functionally similar, or superior, to some
or all of those being developed by the Company. As a result of all of the above,
the ability of the Company to compete will depend on its ability to complete
development and introduce to the marketplace in a timely and cost-competitive
manner its proposed products and technology, to continually enhance and improve
such products and technology, to adapt its proposed products to be compatible
with specific products manufactured by others, and to successfully develop and
market new products and technology. There is no assurance that the Company will
be able to compete successfully, that its competitors or future competitors will
not develop technologies or products that render the Company's products and
18
<PAGE>
technology obsolete or less marketable or that the Company will be able to
successfully enhance its proposed products or technology or adapt them
satisfactorily.
10. Enforceability of Patents and Similar Rights; Possible Issuance of Patents
--------------------------------------------------------------------------
to Competitors; Trade Secrets
-----------------------------
To the extent practicable, the Company has filed or intends to
file U.S. patents and/or copyright applications relating to certain of its
proposed products and technologies and to file corresponding applications in key
industrial countries worldwide. If granted, there is no assurance that any
patent will afford the Company commercially significant protection of its
technology or that the Company will have adequate resources to enforce its
patents. Because the Company also intends to license and/or sell its technology
and products in foreign markets, it intends to seek foreign patent protection.
With respect to foreign patents, the patent laws of other countries may differ
significantly from those of the United States as to the patentability of the
Company's products or technology. Moreover, the degree of protection afforded by
foreign patents may be different from that in the United States. Patent
applications in the United States are maintained in secrecy until patents issue,
and since publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries by several months, the Company cannot be
certain that it will be the first creator of inventions covered by any patent
applications it makes or the first to file patent applications on such
inventions.
The Company believes that the products it intends to market and
sell do not infringe the patents or other proprietary rights of third parties
and is not aware of any patents held by its competitors that will prevent, limit
or otherwise interfere with the Company's ability to make and sell the products
it intends to market. However, it is possible that competitors in both the
United States and foreign countries, many of which have substantially greater
resources and have made substantial investments in competing technologies, may
have applied for, or may in the future apply for and obtain, patents which have
an adverse impact on the Company's ability to make and sell its products. In
addition, because of the developmental stage of the Company, claims that the
Company's products infringe on the proprietary rights of others are more likely
to be asserted after commencement of commercial sales incorporating the
Company's technology. There can also be no assurance that competitors will not
infringe the Company's patents. Defense and prosecution of patent suits, even if
successful, are both costly and time consuming. An adverse outcome in the
defense of a patent suit could subject the Company to significant liabilities to
third parties, require disputed rights to be licensed from third parties or
require the Company to cease selling its products.
The Company also relies on unpatented proprietary technology, and
there can be no assurance that others may not independently develop the same or
similar technology or otherwise obtain access to the Company's unpatented
technology. To protect its trade secrets and other proprietary information, the
Company requires employees, consultants, advisors and collaborators to enter
into confidentiality agreements. There can be no assurance that these agreements
will provide meaningful protection for the Company's trade secrets, know-how or
other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information. If the Company is unable to maintain the proprietary
nature of its technologies, the Company could be adversely affected.
11. No Dividends
------------
The Company has not paid any cash dividends to date. Payment of
dividends on the Company's Common Stock is within the discretion of the Board of
Directors and will depend upon the Company's earnings, capital requirements and
financial condition, and other relevant factors. The Company does not intend to
declare any dividends on its Common Stock in the foreseeable future. Instead, it
plans to retain any earnings it receives for development of its business
operations.
19
<PAGE>
12. Limitation on Tax Loss Carryforwards
------------------------------------
As of December 31, 1999, the Company had available unused net
operating loss carryforwards ("NOLs") aggregating approximately $12,460,000 to
offset future federal taxable income. The unused NOLs expire in various years
from 2010 to 2019. Under Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), utilization of prior NOLs is limited after an ownership
change. The Company may be subject to limitations on the use of its NOLs as
provided under Section 382. Accordingly, there can be no assurance that a
significant amount of the existing NOLs will be available to use. In the event
that the Company achieves profitability, as to which there can be no assurance,
such limitation would have the effect of increasing its tax liability and
reducing its net income and available cash resources in the future.
13. Limitation on Liability of Directors and Officers
-------------------------------------------------
The Company's Certificate of Incorporation provides that: it
indemnify any of its directors, officers, employees or agents against actions,
suits or proceedings relating to the Company; and subject to certain
limitations, a director shall not be personally liable for monetary damages for
breach of his fiduciary duty. In addition, the Company has entered into an
indemnification agreement with each of its directors. Such indemnification
agreement provides that a director is entitled to indemnification to the fullest
extent permitted by law.
14. Reliance Upon Key Personnel
---------------------------
The Company's operations depend largely on the continued
employment of Mr. Gerald Zarin, Chairman of the Board, President and Chief
Executive Officer. If Mr. Zarin or other members of management or key personnel
resign or otherwise leave the Company, its business and financial condition
could be materially adversely affected.
15. Market Price Fluctuations
-------------------------
The trading price of the Company's Common Stock may be subject to
wide fluctuations in response to quarter-to-quarter variations in operating
results, general conditions in the computer, video and telecommunications
industries, changes in earnings estimates, recommendations by analysts and other
events.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is incorporated by
reference to pages F-1 through F-19 of this Annual Report on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
DISMISSAL OF INDEPENDENT ACCOUNTING FIRM
Coopers & Lybrand L.L.P. ("Coopers"), the independent accounting
firm which audited the Company's financial statements during fiscal year 1996,
was dismissed by the Company on February 11, 1998. Coopers' reports on the
Company's financial statements for the two years ended December 31, 1996 did not
contain any adverse opinions or disclaimers of opinion, and neither report was
qualified or modified as to uncertainty, audit scope, or accounting principles.
The decision to change accountants was approved by the Board of Directors of the
Company at the Meeting of the Board of Directors of the Company on February 4,
1998. During the Company's two fiscal years ended December 31, 1996, there were
20
<PAGE>
no disagreements with Coopers on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Coopers, would have caused
it to make reference to the subject matter of the disagreements in connection
with its report.
ENGAGEMENT OF NEW INDEPENDENT ACCOUNTANTS
The Company has engaged Richard A. Eisner & Company, LLP as its
new independent accountants effective February 11, 1998. During the Company's
two fiscal years ended December 31, 1996 and any subsequent interim period prior
to engaging such accountants, the Company had not consulted with Richard A.
Eisner & Company, LLP regarding any of the matters specified in Item 304(a)(2)
of Regulation S-B.
The disclosure called for by this Item 8 has been previously
disclosed by the Company under Item 4 of the Company's Current Report on Form
8-K filed with the SEC on February 18, 1998.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The information required by this item regarding directors,
promoters and control persons of the Company is incorporated by reference to the
Registrant's definitive Proxy Statement for its 2000 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission not later
than April 30, 2000.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by
reference to the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
not later than April 30, 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by
reference to the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
not later than April 30, 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by
reference to the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
not later than April 30, 2000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
21
<PAGE>
EXHIBIT DESCRIPTION
- ------- -----------
3.1* Articles of Incorporation of the Company (Delaware) (See Exhibit
3.1(a) to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
3.2* Certificate of Amendment to Articles of Incorporation of the Company
(Delaware) (See Exhibit 3.1(b) to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).
3.3* Certificate of Authority (New Jersey) (See Exhibit 3.1(c) to
Registration Statement on Form SB-2 filed with the Commission on April
2, 1996).
3.4* Amended Certificate of Authority (New Jersey) (See Exhibit 3.1(d) to
Registration Statement on Form SB-2 filed with the Commission on April
2, 1996).
3.5* Certificate of Amendment to Articles of Incorporation of the Company
(Delaware) (See Exhibit 3.1(e) to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).
3.6* By-Laws of the Company (See Exhibit 3.2 to Registration Statement on
Form SB-2 filed with the Commission on April 2, 1996).
4.1* Form of Common Stock Certificate (See Exhibit 4.1 to Amendment No. 2
to Registration Statement on Form SB-2 filed with the Commission on
July 3, 1996).
4.2* Form of Public Warrant Agreement between the Company, American Stock
Transfer & Trust Company and Rickel & Associates, Inc. (See Exhibit
4.2 to Amendment No. 1 to Registration Statement on Form SB-2 filed
with the Commission on May 22, 1996).
4.3* Form of Public Warrant Certificate (See Exhibit 4.3 to Amendment No. 2
to Registration Statement on Form SB-2 filed with the Commission on
July 3, 1996).
4.4* Form of Underwriter's Warrant Agreement (including Warrant
Certificate) between the Company and Rickel & Associates (See Exhibit
4.4 to Amendment No. 1 to Registration Statement on Form SB-2 filed
with the Commission on May 22, 1996).
4.5* Selected Dealer Agreement among Rickel & Associates, Inc. and certain
underwriters (See Exhibit 4.5 to Amendment No. 2 to Registration
Statement on Form SB-2 filed with the Commission on July 3, 1996).
10.1* Restated Employment Agreement dated as of July 20, 1995 between NUWAVE
Engineering, Inc. and Gerald Zarin (See Exhibit 10.1 to Registration
Statement on Form SB-2 filed with the Commission on April 2, 1996).
10.13* Option Agreement for the Purchase of Common Stock dated as of July 17,
1995 between NUWAVE Engineering, Inc. and Jeremiah F. O'Brien (See
Exhibit 10.14 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.14* Option Agreement for the Purchase of Common Stock dated as of
September 11, 1995 between NUWAVE Engineering, Inc. and Robert I. Webb
(See Exhibit 10.15 to Registration Statement on Form SB-2 filed with
the Commission on April 2, 1996).
10.15* Option Agreement for the Purchase of Common Stock dated as of November
9, 1995 between NUWAVE Engineering, Inc. and Lyle E. Gramley (See
Exhibit 10.16 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
22
<PAGE>
10.16* Option Agreement for Purchase of Common Stock dated as of March 1,
1996 between NUWAVE Technologies, Inc. and Jeremiah F. O'Brien (See
Exhibit 10.17 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.17* Option Agreement for Purchase of Common Stock dated as of July 20,
1995 between NUWAVE Technologies, Inc. and Gerald Zarin (See Exhibit
10.18 to Registration Statement on Form SB-2 filed with the Commission
on April 2, 1996).
10.18* Option Agreement for Purchase of Common Stock dated as of March 1,
1996 between NUWAVE Technologies, Inc. and Joseph A. Sarubbi (See
Exhibit 10.19 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.19* Option Agreement for Purchase of Common Stock dated as of March 1,
1996 between NUWAVE Technologies, Inc. and Ed Bohn (See Exhibit 10.20
to Registration Statement on Form SB-2 filed with the Commission on
April 2, 1996).
10.23* Form of Indemnification Agreement between the Company and its
directors, dated as of January 31, 1996 (See Exhibit 10.24 to
Registration Statement on Form SB-2 filed with the Commission on April
2, 1996).
10.34* Non-Employee Director Stock Option Plan (See Exhibit 10.1 to Current
Report on Form 8-K filed with the Commission on June 6, 1997).
10.35* Form of Incentive Stock Option Agreement (See Exhibit 4.3 to
Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).
10.36* Form of Non-Employee Director Stock Option Agreement (See Exhibit 4.4
to Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).
10.37* Form of Non-Qualified Stock Option Agreement covering options not
granted under either the 1996 Performance Incentive Plan or the
Non-Employee Director Stock Option Plan (See Exhibit 4.5 to
Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).
10.42* Letter Agreement, dated March 3, 1998, between NuWave Technologies,
Inc. and Janssen/Meyers Associates, L.P. (See Exhibit 10.41 to Annual
Report on Form 10-KSB filed with the Commission on March 25, 1998).
10.43* Warrant, dated March 3, 1998, executed by NuWave Technologies, Inc. in
favor of Janssen/Meyers Associates, L.P., to purchase up to 400,000
shares of Common Stock, par value $.01 per share, of NuWave
Technologies, Inc. (See Exhibit 10.41 to Annual Report on Form 10-KSB
filed with the Commission on March 25, 1998).
10.44* Letter Agreement, dated December 3, 1997, between NuWave Technologies,
Inc. and Lippert/Heilshorn & Associates, Inc. (See Exhibit 10.41 to
Annual Report on Form 10-KSB filed with the Commission on March 25,
1998).
10.45* Option Agreement, dated December 9, 1997, between NuWave Technologies,
Inc. and Lippert/Heilshorn & Associates, Inc. (See Exhibit 10.41 to
Annual Report on Form 10-KSB filed with the Commission on March 25,
1998).
10.46* First Amendment to Restated Employment Agreement, dated December 9,
1997, between NuWave Technologies, Inc. and Gerald Zarin (See Exhibit
10.41 to Annual Report on Form 10-KSB filed with the Commission on
March 25, 1998).
23
<PAGE>
10.47* Placement Agency Agreement, dated as of May 11, 1998, between
Janssen-Meyers Associates, L.P. and NuWave Technologies, Inc. (See
Exhibit 10.1 to Current Report on Form 8-K filed with the Commission
on June 11, 1998).
10.49* Warrant Agreement, dated May 15, 1998, between NuWave Technologies,
Inc. and American Stock Transfer & Trust Company (See Exhibit 10.3 to
Current Report on Form 8-K filed with the Commission on June 11,
1998).
10.50* Form of Warrant Certificate (See Exhibit 10.4 to Current Report on
Form 8-K filed with the Commission on June 11, 1998).
10.52* Form of Placement Agent Warrant Certificate (See Exhibit 10.6 to
Current Report on Form 8-K filed with the Commission on June 11,
1998).
10.53* Form of Subscription Agreement (See Exhibit 10.7 to Current Report on
Form 8-K filed with the Commission on June 11, 1998).
10.54* Agreement, dated February 1, 1999, between NuWave Technologies, Inc.
and Terk Technologies Corp.
10.55** Option Agreement for Purchase of Common Stock dated as of September
28, 1999 between NUWAVE Technologies, Inc. and Richard E. Ekstract.
10.56** Placement Agency Agreement, dated as of February 14, 2000, between
Janssen-Meyers Associates, L.P. and NUWAVE Technologies, Inc.
10.57** Warrant Agreement, dated March 13, 2000, between NUWAVE Technologies,
Inc. and American Stock Transfer & Trust Company.
10.58** Form of Warrant Certificate.
10.59** Form of Subscription Agreement.
10.60** Placement Agent Warrant Agreement, dated March 13, 2000, between
NUWAVE Technologies, Inc. Janssen-Meyers Associates, L.P.
23.1** Consent of Richard A. Eisner & Co., L.L.P.
24.1** Power of Attorney (included on signature page of this Annual Report
on Form 10-KSB).
27.1** Financial Data Schedule
* The exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such exhibits is a
reference to the copy of the exhibit heretofore filed with the
Commission, to which there have been no amendments or changes.
** Filed herewith.
(b) REPORTS ON FORM 8-K:
During the fourth quarter of 1999, the Company filed a Form 8-K dated
December 30,1999 to report on the Company's termination of the
Profutures Special Equities Fund, L.P. financing agreement and to
announce the proposed financing arrangement with Janssen-Meyers
Associates, L.P.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NUWAVE TECHNOLOGIES, INC.
(Registrant)
Date: March 25, 2000 By: /s/ Gerald Zarin
------------------------------------
Gerald Zarin
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each director and/or officer of the Company whose signature
appears below hereby appoints Gerald Zarin as his attorney-in-fact to sign in
his name and behalf, in any and all capacities stated below and to file with the
Commission any and all amendments, including post-effective amendments, to this
Registration Statement.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Gerald Zarin President, Chief Executive March 30, 2000
- ------------------------ Officer and Chairman of
Gerald Zarin the Board (Principal
Executive Officer)
/s/ Jeremiah F. O'Brien Chief Financial Officer and March 30, 2000
- ------------------------ Secretary (Principal
Jeremiah F. O'Brien Financial Officer and
Accounting Officer)
/s/ Ed Bohn Director March 30, 2000
- ------------------------
Ed Bohn
/s/ Richard Ekstract Director March 30, 2000
- ------------------------
Richard Ekstract
/s/ Lyle Gramley Director March 30, 2000
- ------------------------
Lyle Gramley
/s/ Joseph A. Sarubbi Director March 30, 2000
- ------------------------
Joseph A. Sarubbi
25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
3.1* Articles of Incorporation of the Company (Delaware) (See Exhibit
3.1(a) to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
3.2* Certificate of Amendment to Articles of Incorporation of the Company
(Delaware) (See Exhibit 3.1(b) to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).
3.3* Certificate of Authority (New Jersey) (See Exhibit 3.1(c) to
Registration Statement on Form SB-2 filed with the Commission on April
2, 1996).
3.4* Amended Certificate of Authority (New Jersey) (See Exhibit 3.1(d) to
Registration Statement on Form SB-2 filed with the Commission on April
2, 1996).
3.5* Certificate of Amendment to Articles of Incorporation of the Company
(Delaware) (See Exhibit 3.1(e) to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).
3.6* By-Laws of the Company (See Exhibit 3.2 to Registration Statement on
Form SB-2 filed with the Commission on April 2, 1996).
4.1* Form of Common Stock Certificate (See Exhibit 4.1 to Amendment No. 2
to Registration Statement on Form SB-2 filed with the Commission on
July 3, 1996).
4.2* Form of Public Warrant Agreement between the Company, American Stock
Transfer & Trust Company and Rickel & Associates, Inc. (See Exhibit
4.2 to Amendment No. 1 to Registration Statement on Form SB-2 filed
with the Commission on May 22, 1996).
4.3* Form of Public Warrant Certificate (See Exhibit 4.3 to Amendment No. 2
to Registration Statement on Form SB-2 filed with the Commission on
July 3, 1996).
4.4* Form of Underwriter's Warrant Agreement (including Warrant
Certificate) between the Company and Rickel & Associates (See Exhibit
4.4 to Amendment No. 1 to Registration Statement on Form SB-2 filed
with the Commission on May 22, 1996).
4.5* Selected Dealer Agreement among Rickel & Associates, Inc. and certain
underwriters (See Exhibit 4.5 to Amendment No. 2 to Registration
Statement on Form SB-2 filed with the Commission on July 3, 1996).
10.1* Restated Employment Agreement dated as of July 20, 1995 between NUWAVE
Engineering, Inc. and Gerald Zarin (See Exhibit 10.1 to Registration
Statement on Form SB-2 filed with the Commission on April 2, 1996).
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
10.13* Option Agreement for the Purchase of Common Stock dated as of July 17,
1995 between NUWAVE Engineering, Inc. and Jeremiah F. O'Brien (See
Exhibit 10.14 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.14* Option Agreement for the Purchase of Common Stock dated as of
September 11, 1995 between NUWAVE Engineering, Inc. and Robert I. Webb
(See Exhibit 10.15 to Registration Statement on Form SB-2 filed with
the Commission on April 2, 1996).
10.15* Option Agreement for the Purchase of Common Stock dated as of November
9, 1995 between NUWAVE Engineering, Inc. and Lyle E. Gramley (See
Exhibit 10.16 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.16* Option Agreement for Purchase of Common Stock dated as of March 1,
1996 between NUWAVE Technologies, Inc. and Jeremiah F. O'Brien (See
Exhibit 10.17 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.17* Option Agreement for Purchase of Common Stock dated as of July 20,
1995 between NUWAVE Technologies, Inc. and Gerald Zarin (See Exhibit
10.18 to Registration Statement on Form SB-2 filed with the Commission
on April 2, 1996).
10.18* Option Agreement for Purchase of Common Stock dated as of March 1,
1996 between NUWAVE Technologies, Inc. and Joseph A. Sarubbi (See
Exhibit 10.19 to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).
10.19* Option Agreement for Purchase of Common Stock dated as of March 1,
1996 between NUWAVE Technologies, Inc. and Ed Bohn (See Exhibit 10.20
to Registration Statement on Form SB-2 filed with the Commission on
April 2, 1996).
10.22* Loan and Stock Purchase Agreement dated as of December 15, 1995
between NUWAVE Engineering, Inc. and Helen Burgess (See Exhibit 10.23
to Registration Statement on Form SB-2 filed with the Commission on
April 2, 1996).
10.23* Form of Indemnification Agreement between the Company and its
directors, dated as of January 31, 1996 (See Exhibit 10.24 to
Registration Statement on Form SB-2 filed with the Commission on April
2, 1996).
10.34* Non-Employee Director Stock Option Plan (See Exhibit 10.1 to Current
Report on Form 8-K filed with the Commission on June 6, 1997).
10.35* Form of Incentive Stock Option Agreement (See Exhibit 4.3 to
Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).
10.36* Form of Non-Employee Director Stock Option Agreement (See Exhibit 4.4
to Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
10.37* Form of Non-Qualified Stock Option Agreement covering options not
granted under either the 1996 Performance Incentive Plan or the
Non-Employee Director Stock Option Plan (See Exhibit 4.5 to
Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).
10.42* Letter Agreement, dated March 3, 1998, between NuWave Technologies,
Inc. and Janssen/Meyers Associates, L.P. (See Exhibit 10.42 to Annual
Report on Form 10-KSB filed with the Commission on March 25, 1998).
10.43* Warrant, dated March 3, 1998, executed by NuWave Technologies, Inc. in
favor of Janssen/Meyers Associates, L.P., to purchase up to 400,000
shares of Common Stock, par value $.01 per share, of NuWave
Technologies, Inc. (See Exhibit 10.43 to Annual Report on Form 10-KSB
filed with the Commission on March 25, 1998).
10.44* Letter Agreement, dated December 3, 1997, between NuWave Technologies,
Inc. and Lippert/Heilshorn & Associates, Inc. (See Exhibit 10.44 to
Annual Report on Form 10-KSB filed with the Commission on March 25,
1998).
10.45* Option Agreement, dated December 9, 1997, between NuWave Technologies,
Inc. and Lippert/Heilshorn & Associates, Inc. (See Exhibit 10.45 to
Annual Report on Form 10-KSB filed with the Commission on March 25,
1998).
10.46* First Amendment to Restated Employment Agreement, dated December 9,
1997, between NuWave Technologies, Inc. and Gerald Zarin (See Exhibit
10.46 to Annual Report on Form 10-KSB filed with the Commission on
March 25, 1998).
10.47* Placement Agency Agreement, dated as of May 11, 1998, between
Janssen-Meyers Associates, L.P. and NuWave Technologies, Inc. (See
Exhibit 10.1 to Current Report on Form 8-K filed with the Commission
on June 11, 1998).
10.49* Warrant Agreement, dated May 15, 1998, between NuWave Technologies,
Inc. and American Stock Transfer & Trust Company (See Exhibit 10.3 to
Current Report on Form 8-K filed with the Commission on June 11,
1998).
10.50* Form of Warrant Certificate (See Exhibit 10.4 to Current Report on
Form 8-K filed with the Commission on June 11, 1998).
10.52* Form of Placement Agent Warrant Certificate (See Exhibit 10.6 to
Current Report on Form 8-K filed with the Commission on June 11,
1998).
10.53* Form of Subscription Agreement (See Exhibit 10.7 to Current Report on
Form 8-K filed with the Commission on June 11, 1998).
10.54* Agreement, dated February 1, 1999, between NuWave Technologies, Inc.
and Terk Technologies Corp.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
10.55* Option Agreement for Purchase of Common Stock dated as of September A-1
28, 1999 between NUWAVE Technologies, Inc. and Richard E. Ekstract.
10.56** Placement Agency Agreement, dated as of February 14, 2000, between A-2
Janssen-Meyers Associates, L.P. and NUWAVE Technologies, Inc.
10.57** Warrant Agreement, dated March 13, 2000, between NUWAVE Technologies, A-3
Inc. and American Stock Transfer & Trust Company.
10.58** Form of Warrant Certificate. A-4
10.59** Form of Subscription Agreement. A-5
10.60** Form of Placement Agent Warrant Certificate. A-6
23.1** Consent of Richard A. Eisner & Co.
24.1** Power of Attorney (included on signature page of this Annual Report A-7
on Form 10-KSB).
27.1** Financial Data Schedule A-8
</TABLE>
* The exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such exhibits is a reference
to the copy of the exhibit heretofore filed with the Commission, to which
there have been no amendments or changes.
** Filed herewith.
29
<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS
PAGE(S)
-------
Reports of Independent Accountants .................................. F-2 - F-3
Balance Sheet as of December 31, 1999 ............................... F-4
Statements of Operations for the years ended December 31, 1998 and
December 31, 1999 and for the cumulative period from July 17, 1995
(inception) to December 31, 1999 ............................... F-5
Statement of Stockholders' Equity for cumulative period from
July 17, 1995 (inception) to December 31, 1999 ................. F-6
Statements of Cash Flows for the years ended December 31, 1998 and
and December 31, 1999 and for the cumulative period from
July 17, 1995 (inception) to December 31, 1999 ................. F-7
Notes to Financial Statements ....................................... F-8 - F-20
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
NUWAVE Technologies, Inc.
Fairfield, New Jersey
We have audited the accompanying balance sheet of NUWAVE Technologies, Inc. (a
development stage enterprise) as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 1999 and the amounts for the
period from January 1, 1997 through December 31, 1999 included in the period
from July 17, 1995 (inception) to December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred above present fairly, in all
material respects, the financial position of NUWAVE Technologies, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 1999 and the amounts for
the period from January 1, 1997 through December 31, 1999 included in the
cumulative amounts for the period from July 17, 1995 (inception) to December 31,
1999, in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
March 1, 2000
With respect to Note 10
March 17, 2000
F-2
<PAGE>
PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
REPORT OF INDEPENDENT ACCOUNTANTS 1301 Avenue of the Americas
New York NY 10019-6013
Telephone (212)259 1000
Facsimile (212)259 1301
To the Board of Directors and Stockholders of
NUWAVE Technologies, Inc.
We have audited the statement of operations, cash flows of NUWAVE
Technologies, Inc. (a development stage enterprise) for the period from July 17,
1995 (inception) to December 31, 1996 included in the cumulative amounts for the
period from July 17, 1995 (inception) to December 31, 1999 (not presented
separately herein), and the related statement of stockholders' equity for the
period from July 17, 1995 (inception) to December 31, 1995 and the year ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts or disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of NUWAVE
Technologies, Inc. for the period from July 17, 1995 (inception) to December 31,
1996 included in the cumulative amounts for the period from July 17, 1995
(inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
PricewaterhouseCoopers LLP
New York, New York
March 26, 1997
F-3
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A Development Stage Enterprise)
BALANCE SHEET
ASSETS
December 31,
1999
------------
Current assets:
Cash and cash equivalents $ 1,969,292
Inventory 40,889
Prepaid expenses and other current assets 96,985
Total current assets 2,107,166
Property and equipment 100,666
Other assets 64,131
Deferred tax benefits 908,350
------------
Total assets $ 3,180,313
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 274,555
Total liabilities 274,555
Commitments and contingencies
Stockholders' equity:
Series A Convertible Preferred Stock, noncumulative,
$.01 par value; authorized 400,000 shares; issued and
outstanding - none
Preferred stock, $.01 par value; authorized 1,000,000
shares; issued and oustanding - (such preferences and
rights to be designated by the Board of Directors)
Common stock, $.01 par value; authorized 20,000,000
shares; as of December 31, 1999; issued and
outstanding 8,468,889 shares. 84,689
Additional paid in capital 18,699,268
Deficit accumulated during the development stage (15,878,199)
------------
Total stockholders' equity 2,905,758
Total liabilties and stockholders' equity $ 3,180,313
============
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
NUWAVE TECHNOLOGIES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
Cumulative from
July 17, 1995
Year Year (inception)
ended ended to
December 31, December 31, December 31,
1998 1999 1999
-------------- -------------- ------------------
<S> <C> <C> <C>
Net Sales $ 12,545 $ 16,553 $ 39,373
Cost of Sales (4,906) (2,200) (11,320)
-------------- -------------- --------------
7,639 14,353 28,053
-------------- -------------- --------------
Operating expenses:
Research and development expenses $ (1,572,364) $ (938,745) $ (6,319,909)
General and administrative expenses (2,646,409) (2,503,812) (9,712,452)
-------------- -------------- --------------
(4,218,773) (3,442,557) (16,032,361)
-------------- -------------- --------------
Loss from operations (4,211,134) (3,428,204) (16,004,308)
-------------- -------------- --------------
Other income (expense):
Interest income 212,863 174,086 742,065
Interest expense (5,709) (337,251)
Rave settlement costs (338,895) (338,895)
-------------- -------------- --------------
212,863 (170,518) 65,919
-------------- -------------- --------------
Net loss before benefit for imcome taxes
and extraordinary item (3,998,271) (3,598,722) (15,938,389)
Benefit for income taxes 908,350 908,350
-------------- -------------- --------------
Net loss before extraordinary item (3,998,271) (2,690,372) (15,030,039)
Extraordinary item (848,160)
-------------- -------------- --------------
Net loss $ (3,998,271) $ (2,690,372) $(15,878,199)
============== ============== ==============
Basic and diluted loss per share:
Weighted average number of
common shares outstanding 7,259,896 8,419,644
============== ==============
Basic and diluted loss per share $ (0.55) $ (0.32)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED DURING THE
---------------------- ---------------------- PAID-IN EQUITY DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COSTS STAGE TOTAL
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common shares issued in connec-
tion with the formation of the
company............................ 2,060,000 $ 20,600 $ 20,600
Common shares returned and retired
without consideration.............. (125,000) (1,250) $ 1,250
Sale of Series A convertible pre-
ferred stock for cash of $1.50 per
share.............................. 600,000 $ 6,000 894,000 900,000
Common shares issued with initial
bridge notes payable for cash of
$1.50 per share.................... 70,000 700 104,300 105,000
Costs incurred in connection with
equity financing................... $(38,400) (38,400)
Net loss for the period from July
17, 1995 (inception) to December
31, 1995........................... $ (910,591) (910,591)
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
Balance at December 31, 1995.......... 600,000 6,000 2,005,000 20,050 999,550 (38,400) (910,591) 76,609
Common shares issued in connec- tion
with the exchange of the initial
bridge notes for 14 bridge
units.............................. 70,000 700 139,300 140,000
Common shares issued with bridge
notes payable for cash of $2.00
per share.......................... 330,000 3,300 656,700 660,000
Costs incurred in connection with
the private placement offering
relating to the equity financing... (134,000)$ 13,400 (120,600)
Common shares issued in connec-
tion with the initial public offering
for cash of $5.00 per share....... 2,300,000 23,000 11,477,000 11,500,000
2,530,000 common stock purchase
warrants issued in connection with
the initial public offering for cash
of $0.10 per warrant................ 253,000 253,000
220,000 common stock purchase warrants
and 220,000 redeemable warrants
issued to the underwriter in
connection with the initial public
offering for cash of $10.00........ 10 10
Conversion of 600,000 preferred
shares into 600,000 common
shares in connection with the
initial public offering............ (600,000) (6,000) 600,000 6,000 -
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED DURING THE
---------------------- ---------------------- PAID-IN EQUITY DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COSTS STAGE TOTAL
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs incurred in connection with
the initial public offering........ (2,214,582) 25,000 (2,189,582)
Common shares issued in connection
with the exercise of 20,000 stock
options for cash of $1.50 per
share............................ 20,000 200 29,800 30,000
Net loss for the year ended
December 31, 1996.................. (4,430,649)(4,430,649)
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
Balance at December 31, 1996....... $ - 5,325,000 $ 53,250 $11,206,778 $ - $(5,341,240)$5,918,788
Common shares issued in connection
with the exercise of 23,334 stock
options for cash of $2.00 per
share............................ 23,334 233 46,435 46,668
Net loss for the year ended
December 31, 1997.................. (3,848,316)(3,848,316)
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
Balance at December 31, 1997....... - $ - 5,348,334 $ 53,483 $11,253,213 $ - $(9,189,556)$2,117,140
Common shares issued in connection
with a private placement for cash
of $3.95 per share with 50,000
warrants and 50,000 supplemental
warrants............. 253,485 2,535 997,465 1,000,000
Costs incurred in connection with
private placement................... (140,652) (140,652)
Common shares issued in connection
with the exercise of 11,666 stock
options for cash of $2.00 per
share.............................. 11,666 117 23,215 23,332
Warrants to purchase common stock
issued in connection with a
consulting agreement............... 217,040 217,040
2,742,904 Common shares issued with
2,057,207 class A warrants to
purchase common shares in
connection with a private placement
for a cash price
ranging from $2.50 to
$3.06 per share.................... 2,742,904 27,429 7,253,117 7,280,546
18.2 Unit Warrants issued in
connection with private placement 6 6
Costs incurred in connection with
private placement................... (1,244,990) (1,244,990)
Net loss for the year ended
December 31, 1998.................. (3,998,271)(3,998,271)
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
Balance at December 31, 1998....... - - 8,356,389 83,564 18,358,414 - (13,187,827) 5,254,151
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED DURING THE
---------------------- ---------------------- PAID-IN EQUITY DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COSTS STAGE TOTAL
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock in connection
with an arbitration settlement 100,000 1,000 145,200 146,200
Issuance of options in connection with
an arbitration settlement 17,695 17,695
Common shares issued in connection
with the exercise of 12,500 stock
options for cash of $1.462 per
share.............................. 12,500 125 18,150 18,275
Costs incurred in connection with
private placement.................. (44,638) (44,638)
Warrants to purchase common stock
issued in connection with a
consulting agreements.............. 204,447 204,447
Net loss for the year ended
December 31, 1999.................. (2,690,372)(2,690,372)
---------- ----------- ----------- ---------- ----------- -------- -------------- -----------
Balance at December 31, 1999 - $ - 8,468,889 $ 84,689 $18,699,268 $ - $(15,878,199)$2,905,758
========== =========== =========== ========== =========== ======== ============== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
NUWAVE TECHNOLOGIES, INC.
( A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Cumulative
from
July 17, 1995
Year Year (inception)
ended ended to
December 31, December 31, December 31,
1998 1999 1999
-------------- ------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,998,271) $ (2,690,372) $ (15,878,199)
Adjustments to reconcile net loss to
net cash used in operating activities:
Extraordinary item 848,160
Depreciation expense 52,690 52,026 166,785
Amortization of unamortized debt discount 168,778
Amortization of deferred financing costs 89,062
(Increase) Decrease in inventory 10,745 8,184 (40,889)
(Increase) Decrease in prepaid expenses
and other current assets (15,730) 29,749 (96,985)
(Increase) Decrease in other assets (80,079) 98,148 (64,131)
(Increase) in Deferred tax benefits (908,350) (908,350)
Increase in accounts payable and
accrued liabilities 107,578 13,354 274,555
Issuance of warrants in connection with
consultant agreements 217,040 204,447 421,487
Issuance of common stock in connection with
an arbitration settlement 146,200 146,200
Issuance of options in connection with
an arbitration settlement 17,695 17,695
Issuance of common stock for services rendered 20,600
-------------- ------------- --------------
Net cash used in operating
activities (3,706,027) (3,028,919) (14,835,232)
-------------- ------------- --------------
Cash flows from investing activities:
Purchase of property and equipment (60,247) (41,663) (267,451)
-------------- ------------- --------------
Net cash used in investing
activities (60,247) (41,663) (267,451)
-------------- ------------- --------------
Cash flows from financing activities:
Proceeds from sales of Series A Convertible
Preferred Stock 900,000
Proceeds from issuance of initial bridge units 350,000
Proceeds from issuance of bridge units, net of
exchange of initial bridge notes 1,650,000
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
<TABLE>
<CAPTION>
Cumulative
from
July 17, 1995
Year Year (inception)
ended ended to
December 31, December 31, December 31,
1998 1999 1999
-------------- ------------- --------------
<S> <C> <C> <C>
Proceeds from IPO 11,753,010
Proceeds from equity offering -
February 6, 1998 1,000,000 1,000,000
Proceeds from equity offering May 19 to
June 6, 1998 7,280,546 7,280,546
Repayment of notes issued in connection with
initial bridge notes (2,000,000)
Costs incurred for equity offerings and
warrants (1,385,636) (44,638) (3,778,856)
Issuance of common stock in connection with
exercise of stock options 23,332 18,275 118,275
Release of restricted cash 145,403 76,078 -
Deferred financing costs (201,000)
-------------- ------------- --------------
Net cash provided (used in) by financing
activities 7,063,645 49,715 17,071,975
-------------- ------------- --------------
Net increase (decrease) in cash and cash
equivalents 3,297,371 (3,020,867) 1,969,292
Cash and cash equivalents at the beginning of
the period 1,692,788 4,990,159 -
-------------- ------------- --------------
Cash and cash equivalents at the end of
the period $4,990,159 $ 1,969,292 $ 1,969,292
============== ============= ==============
Supplemental disclosure of cash flow information:
Interest paid during the period $ 5,709 $ 73,702
============= ==============
Supplemental disclosure of non cash investing and
financing activities:
Deferred financing costs incurred in connection with the
exchange of the initial bridge notes for 14 bridge units $ 140,000
==============
Deferred equity costs charged to additional paid in
capital in connection with the PPO $ 13,400
==============
Deferred financing costs charged to additional
paid-in capital in connection with the IPO $ 25,000
==============
600,000 Series A Convertible Preferred Stock converted
into Common Stock $ 6,000
==============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
<PAGE>
1. ORGANIZATION AND BUSINESS
NUWAVE Technologies, Inc. (the "Company"), a development stage
enterprise, was incorporated in Delaware on July 17, 1995. It has had only a
limited operating history and has had only limited sales of its products to
date. Since its inception in July 1995, the Company has been engaged primarily
in the research and development of proprietary video enhancement technology
designed to significantly enhance video output devices with clearer sharper
details and more vibrant colors when viewed on the display screen. This
technology is known as the NUWAVE Video Processor ("NVP") technology. The
Company intends to license this technology or have it manufactured in the form
of Application Specific Integrated Circuits ("ASIC") through third parties and
to directly market products which use this technology to improve picture quality
in set-top boxes, televisions, VCR's, DVD's, camcorders and other video devices.
In addition to the NVP technology the Company has recently completed development
of proprietary software technology with the ability to digitally enhance both
pictures and videos on PC's while the user is surfing the Internet or working
offline. The Company conducts its operations primarily in the United States.
There is no assurance that the Company's research and development and
marketing efforts will be successful, that the Company will ever have
commercially accepted products, or that the Company will achieve significant
sales of any such products. The Company has incurred net losses and negative
cash flows from operations since its inception. In addition, the Company
operates in an environment of rapid change in technology and is dependent upon
the services of its employees and its consultants. If the Company is unable to
successfully market its NUWAVE Video Processor and related products it is
unlikely that the Company could continue its business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amount of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. The
most significant estimates relate to the valuation allowance in connection with
deferred tax assets. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash balances, money market
instruments, and other highly liquid investments with insignificant interest
rate risk and original maturities of three months or less. At December 31, 1999,
$1,969,292 of money market accounts and commercial checking accounts, the fair
value of which approximate cost, are included in cash and cash equivalents.
INVENTORY
Inventory is stated at the lower of cost (first-in, first-out method)
or market.
F-8
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated
depreciation. The cost of maintenance and repairs is charged against results of
operations as incurred.
Depreciation is charged against results of operations by an
accelerated method over the estimated useful lives of the related assets.
Sales and retirements of depreciable property are recorded by removing
the related cost and accumulated depreciation from the accounts. Gains or losses
on sales and retirements of property and equipment are reflected in the results
of operations.
RESEARCH AND DEVELOPMENT EXPENSES
Expenditures for research and development are expensed as incurred.
ADVERTISING EXPENSES
The Company expenses advertising costs which consist primarily of
promotional items and print media. Advertising and promotional expenses charged
to operations for the cumulative period from July 17, 1995 (inception) to
December 31, 1999 amounted to $570,983 and for the years ended December 31, 1999
and December 31, 1998 amounted to $33,083 and $116,776, respectively.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations
of credit risk consist of cash and cash equivalents. The Company places its cash
and cash equivalents in high quality institutions with three types of accounts,
1) an operating account where the cash balance is in excess of the FDIC
insurance limit, 2) a money market fund which invests only in U.S. Government
securities and 3) certificates of deposit.
PER SHARE DATA
The basic per share data has been computed on the basis of the loss
for the period divided by the historic weighted average number of shares of
common stock outstanding. All potentially dilutive securities have been excluded
from the computations since they would be antidilutive (see note 5).
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined on the basis of the differences between the tax basis
of assets and liabilities and their respective financial reporting amounts
("temporary differences") at enacted tax rates in effect for the years in which
the differences are expected to reverse.
F-9
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
USEFUL LIVES IN DECEMBER 31,
YEARS 1999
---------------- --------------
Furniture and Fixtures........................ 10 $ 5,523
Computers..................................... 5 170,918
Equipment..................................... 5 91,010
----------
$ 267,451
Less, accumulated depreciation............. 166,785
----------
$ 100,666
==========
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
DECEMBER 31,
1999
------------
Accounts payable..................................... $ 202,281
Legal and accounting fees............................ 72,274
---------
$ 274,555
=========
5. CAPITAL TRANSACTIONS
COMMON STOCK
On July 17, 1995, the Company issued 2,060,000 shares of common stock
for a fair market value of $.01 per share as consideration for services rendered
in connection with the formation of the Company, as follows:
o 1,090,000 shares to Prime Technologies, Inc. ("Prime"). Rave Engineering
Corp. ("Rave") and two members of the Company's Board of Directors have
ownership interests in Prime of 22%, 22% and 16%, respectively;
o 450,000 shares to the Company's President;
o 450,000 shares to three entities affiliated with an individual who was a
member of the Company's Board of Directors (125,000 of such shares were
subsequently returned and retired without consideration); and
o 70,000 shares to individuals who were either employees of, or consultants
to, the Company.
On April 30, 1996, the board of directors and the Company's
stockholders authorized the increase in the shares of common stock to 20,000,000
common shares, par value $.01 per share.
In July 1996 the Company completed an IPO in which it sold 2,300,000
common shares and 2,530,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") to purchase an additional 2,530,000 common shares. The Warrants
became exercisable at $5.50 per share on July 3, 1997, and have an expiration
date of July 3, 2001. The Warrants are redeemable by the Company at any time on
not less than 30 days prior written notice to the holders of the Warrants,
provided the average closing bid quotation of the Common Stock as reported on
the NASDAQ Stock Market, if traded thereon, or if not traded thereon, the
F-10
<PAGE>
average closing sale price of the Common Stock if listed on a national
securities exchange (or other reporting system that provides last sale prices),
has been at least 150% of the then current exercise price of the Warrants
(currently $6.225) for a period of 20 consecutive trading days ending on the
third day prior to the date on which the Company gives notice of redemption. The
Warrants will be exercisable until the close of business on the day immediately
preceding the date fixed for redemption. The Underwriter will receive from the
Company a Warrant Solicitation fee of five percent (5%) of the aggregate
exercise price of the Warrants if the market price of the Common Stock is
greater than the exercise price of the Warrants on the date of exercise.
Also in connection with the IPO, the Company issued to the
Underwriter, for an aggregate purchase price of $10.00, warrants to purchase
220,000 Common Stock and Redeemable Warrants to purchase 220,000 Redeemable
Warrants (the "Underwriter's Warrants"). The Underwriter's Warrants are at
$8.25. The warrants expire July, 2001.
On February 6, 1998, the Company entered into a two-year agreement
with an investor whereby the Company issued 253,485 shares of the Company's
common stock, par value $0.01 per share ("Common Stock"), for an aggregate
purchase price of $1,000,000. In addition, subject to certain conditions, the
agreement provided that, from time to time over the life of the agreement the
Company could put shares of the Company's Common Stock for a minimum of $250,000
and a maximum of $750,000. The agreement required that a total aggregate value
of Puts over the life of the agreement must be a minimum of $1,000,000. In
connection with the agreement the Company issued to the investor warrants to
purchase an aggregate of 50,000 shares of Common Stock at a purchase price of
$6.41 per share and additional warrants (the "supplemental warrants") to
purchase an aggregate of 50,000 shares of Common Stock at a purchase price of
$3.95 per share. On December 20, 1999, the agreement, along with any remaining
obligations of either party was terminated by mutual consent. In connection with
the termination the investor returned the 100,000 warrants and the warrants were
cancelled.
On March 3, 1998, the Company entered into a consulting agreement with
an organization (the "Consultant") whereby the Consultant will perform
consulting services relating to corporate finance and other financial services
matters. As compensation for such services, the Company paid the consultant
$5,000 per month during an initial term ending September 3, 1999 subject to
automatic one-year renewal terms unless either the Company or the Consultant
gave written notice of termination at least 30 days prior to the end of the
initial or subsequent terms. On November 2, 1999 the consulting agreement was
extended to May 31, 2001.
In connection with such consultant agreement, the Company issued to
the Consultant warrants to purchase 400,000 shares of common stock. The warrants
have an exercise price of $4 per share, became exercisable September 3, 1999,
and expire on March 3, 2003. The fair value of these warrants was estimated at
$386,805 and has been charged to operations over the life of the initial term of
the consulting agreement, $169,765 and $217,040 was charged against operations
for the years ended December 31, 1999 and 1998, respectively.
On May 11, 1998 the Company entered into a placement agency agreement
with the Consultant to act as the Company's placement agent in a private equity
placement whereby the Company issued to certain accredited investors, as defined
under Regulation D as promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), 2,742,904 shares of the Company's Common Stock and
2,057,207 Class A Redeemable Warrants ("Class A Warrants") between May 19, 1998
and June 6, 1998 for an aggregate purchase price of $7,280,546. Each Class A
Warrant entitles the holder thereof to purchase one share of Common Stock at an
F-11
<PAGE>
exercise price per share of $3.24, subject to adjustment upon the occurrence of
certain events to prevent dilution, at any time during the period commencing
from June 6, 1998 and expiring on May 11, 2003. The Class A Warrants are subject
to redemption by the Company at $.01 per Warrant 12 months after the effective
date of a registration statement covering the Warrants on not less than 30 days
prior written notice to the holders of the Warrants, provided the average
closing bid price of the Common Stock has been at least 250% of the then current
exercise price of the Warrants for a period of thirty consecutive trading days
ending on the day prior to the day on which the Company gives notice of
redemption. The Class A Warrants will be exercisable until the close of business
on the day immediately preceding the date fixed for redemption.
The Consultant, for acting as placement agent, received a commission
of 10% ($728,055) of the gross proceeds from the sale of the Units, as well as a
3% non-accountable expense allowance ($218,416) and reimbursement of other
costs, including legal expenses relating to the offering ($77,171). In addition,
the Consultant, as part of its compensation, received warrants exercisable until
May 11, 2003 to purchase up to (i) 688,084 shares of the Company's Common Stock
at a price per share ranging from $2.50 to $3.06 and (ii) warrants to purchase
up to 516,068 shares of the Company's common stock at a price per share of
$3.24.
As a result of the above capital transactions and in accordance with
the provisions of the Warrant Agreement dated as of July 3, 1996, between the
Company, Rickel & Associates, Inc. and American Stock Transfer & Trust Company,
adjustments have been made to the exercise price (the "Warrant Price") for the
warrants issued pursuant to such Agreement (the Public Warrants") and to the
number of shares of Common Stock issuable on exercise of the Public Warrants.
The Warrant Price has been reduced from $5.50 to $4.15. In addition, for every
share of Common Stock the warrant holders were entitled to prior to the dilutive
transactions (2,530,000 shares), the warrant holders are now entitled to 1.325
shares (3,352,250 shares). Also, pursuant to the Warrant Agreement, the Company
can redeem the Public Warrants in the event that the average closing price of
the Company's Common Stock is at least 150% of the then current Warrant Price of
the Public Warrants for a period of 20 consecutive trading days: consequently,
the average closing price now required is $6.225.
On May 28, 1999, in accordance with the terms of Rave Settlement
Agreement, the Company issued 100,000 shares of its Common Stock and options to
purchase 50,000 shares of the Company's Common Stock at an exercise price of
$1.46. Operations has been charged $163,895, the estimated fair value of the
Common Stock and options on May, 28 1999.
PREFERRED STOCK
During July and August 1995, the Company sold 600,000 shares of Series
A Convertible Preferred Stock for $900,000 to several investors, one of whom was
the purchaser of the initial bridge notes. The preferred shares converted into
common shares on a one-for-one basis, at the IPO date.
On April 30, 1996, the board of directors and the Company's
stockholders authorized an additional 1,000,000 shares of preferred stock, $.01
par value, which may have such preferences and rights as the board of directors
may designate.
F-12
<PAGE>
BRIDGE UNITS
On December 15, 1995, the Company issued to a Series A Convertible
Preferred stockholder 14 initial bridge units, each unit consisting of the
Company's unsecured initial bridge notes in the principal amount of $25,000 with
a stated interest rate of 10% per annum and 5,000 shares of the Company's common
stock with a fair market value of $1.50 per share for proceeds of $350,000.
After giving effect to the amortization of the initial bridge notes debt
discount, the effective interest rate of the initial bridge notes was 33% per
annum.
On March 1, 1996, based upon an offer from the Company, the initial
bridge noteholder elected to exchange the 14 initial bridge units for 14 bridge
units.
On March 1 and March 27, 1996, the Company sold and exchanged to
accredited investors an accumulative total of 80 units (the "bridge units")
respectively, in its PPO. Each bridge unit consisted of (i) a senior
subordinated non-negotiable promissory note ("Bridge Notes") in the principal
amount of $25,000, with a stated interest rate of 10% per annum, and (ii) 5,000
shares of common stock with a fair market value of $2.00 per share. After giving
effect to the amortization of the Bridge Notes debt discount, the effective
interest rate of the Bridge Notes was 49%.
On July 9, 1996, the aggregate principal amount of the Bridge Notes of
$2,000,000 and accrued interest of $73,652 was repaid upon the consummation, and
out of the proceeds, of the IPO.
STOCK OPTIONS
The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
No. 25"). Under APB No. 25, generally, no compensation expense is recognized in
the financial statements in connection with the awarding of stock option grants
to employees provided that, as of the grant date, all terms associated with the
award are fixed and the quoted market price of the Company's stock, as of the
grant date, is not more than the amount an employee must pay to acquire the
stock as defined; however, to the extent that stock options are granted to non
employees, for goods or services, the fair value of these options is included in
operating results as an expense.
F-13
<PAGE>
A summary of the Company's stock option activity under its plans, and
related information, is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE NUMBER OF
COMMON EXERCISE PRICE EXERCISE SHARES
SHARES RANGE PER SHARE PRICE EXERCISABLE
------ ---------------- ----- -----------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1996....... 362,000 $ 1.50 - $ 5.75 $ 1.72 311,524
=======
Granted................................ 192,500 $ 5.78 - $ 6.88 $ 6.54
Exercised.............................. (23,334) $ 2.00 $ 2.00
Canceled............................... (25,000) $ 6.38 - $ 6.81 $ 6.64
---------
Outstanding at December 31, 1997....... 506,166 $ 1.50 - $ 6.75 $ 2.92 401,000
=======
Granted................................ 733,000 $ 1.50 - $ 3.25 $ 3.13
Exercised.............................. (11,666) $ 2.00 $ 2.00
Canceled............................... (13,000) $ 3.00 - $ 6.75 $ 5.23
---------
Outstanding at December 31, 1998....... 1,214,500 $ 1.50 - $ 6.88 $ 3.18 633,503
=======
Granted 205,000 $1.97 - $2.50 $ 2.03
Cancelled (25,000) $3.00 - $3.25 $ 3.20
---------
Outstanding at December 31, 1999....... 1,394,500 $1.50 - $6.88 $ 3.02 1,199,338
========= =========
</TABLE>
Disclosures required by Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), including pro
forma operating results had the Company prepared its financial statements in
accordance with the fair value based method of accounting for stock-based
compensation are shown below.
Exercise prices and weighted-average contractual lives for stock
options outstanding as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ---------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.50 - $ 2.50 570,000 4.48 $1.71 390,004 $1.61
$ 3.00 - $3.25 653,000 3.40 $3.25 653,000 $3.25
$ 5.87 - $ 6.88 171,500 3.08 $6.50 156,334 $6.49
</TABLE>
The following table summarizes the pro forma operating results of the
Company had compensation costs for the stock options granted been determined in
accordance with the fair- value-based method of accounting for stock based
compensation as prescribed by SFAS No. 123. Since certain option grants awarded
during 1999 and 1998 vest over several years and additional awards are expected
to be issued in the future, the pro forma results noted below are not likely to
be representative of the effects on future years of the application of the
fair-value-based method.
<TABLE>
<CAPTION>
YEAR ENDED
------------------- ------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
<S> <C> <C>
Pro forma net loss................................ $ (4,285,280) $ (2,986,914)
Pro forma basic and diluted loss per share........ $ (.59) $ (.35)
</TABLE>
For the purpose of the above pro forma information, the fair value of these
options was estimated at the date of grant using the Black-Scholes option
pricing model. The weighted-average fair value of the options granted during
F-14
<PAGE>
1999 and 1998 was $1.52 and $.85, respectively. The following weighted-average
assumptions were used in computing the fair value of option grants for 1999 and
1998: weighted-average risk-free interest rates ranged from 5.50% to 6.39% for
1999 and 4.26% to 5.60% for 1998; zero dividend yields for both years;
volatility of the Company's Common Stock of 60% for 1999 and 30% for 1998; and
an expected life of the options of ten years for 1999 and three years for 1998,
respectively.
Performance Incentive Stock Option Plan
On January 31, 1996, the Company adopted its 1996 Performance
Incentive Stock Option Plan (the "Plan"). Under the Plan, incentive and
nonqualified stock options, stock appreciation rights and restricted stock may
be granted to key employees and consultants (the "Participants") by certain
disinterested directors of the Board of Directors. Any incentive option granted
under the Plan will have an exercise price of not less than 100% of the fair
market value of the shares on the date on which such option is granted. With
respect to an incentive option granted to a Participant who owns more than 10%
of the total combined voting stock of the Company or of any parent or subsidiary
of the Company, the exercise price for such option must be at least 110% of the
fair market value of the shares subject to the option on the date on which the
option is granted. A nonqualified option granted under the Plan (i.e., an option
to purchase the common stock that does not meet the Internal Revenue Code's
requirements for incentive options) must have an exercise price of at least the
par value of the stock. Stock appreciation rights may be granted in conjunction
with the grant of an incentive or nonqualified option under the Plan or
independently of any such stock option. The directors determine the vesting of
the options under the Plan at the date of grant. A maximum of 1,205,000 options
can be awarded under the Plan (as amended May 26, 1998). As of December 31, 1996
no options had been issued. During 1997, 172,500 options were granted and 25,000
options were canceled under the plan. During 1998, 605,000 options were granted
under the plan. During 1999, 145,000 options were granted under the plan.
Non-Employee Director Stock Option Plan
On November 25, 1996, the Company established a Non-Employee Director
Stock Option Plan (the "Director's Plan"). The Director's Plan provides that
each member of the Board of Directors (an "Eligible Director") who otherwise (1)
is not currently an employee of the Company, or (2) is not a former employee
still receiving compensation for prior services (other than benefits under a
tax-qualified pension plan) shall be eligible for the grant of stock options
under the Director's Plan. Each Eligible Director at the time of his election to
the Board of Directors, shall be granted an option to purchase 3,000 shares of
the Company's common stock at an exercise price equal to closing price of such
common stock at close of business at the date of such grant, such option to vest
immediately and to expire five years from the date of such grant.
Beginning with the annual meeting of the stockholders of the Company
held on May 29, 1997 and provided that a sufficient number of shares remain
available under the Director's Plan, each year immediately following the date of
the annual meeting of the Company there automatically will be granted to each
Eligible Director who is then serving on the Board an option to purchase 5,000
shares of the Company's Common Stock. The first 1,000 options vest immediately,
the remainder vest equally over the next four years from the date of grant and
are exercisable at the closing price of such shares of common stock at the date
of grant. Such options expire five years from the date of vesting.
F-15
<PAGE>
On November 25, 1996, four Eligible Directors were each granted 3,000
stock options at an exercise price of $5.75 per share. On May 29, 1997, four
Eligible Directors were each granted 5,000 stock options at an exercise price of
$6.75 per share. On May 26, 1998, one eligible director was granted 53,000
options at an excise price of $3.25 per share and the three remaining Eligible
Directors were each granted 25,000 stock options at $3.25 per share. The maximum
number of shares of Common Stock with respect to which options may be granted
under the Director's Plan (as amended May 26, 1998) is 235,000 shares. During
1998, 13,000 options previously granted under the plan were cancelled. During
1999, 60,000 options were granted, 45,000 options at $2.56 per share and 15,000
options at 2.06 per share, under the plan. As of December 31, 1999, there are
48,000 stock options reserved for issuance in the Director's Plan.
6. RAVE SETTLEMENT
On November 13, 1998, pursuant to the provisions of an Exclusive
Worldwide Licensing Agreement the "License Agreement" and a Development
Agreement, both dated July 21,1995 the Company commenced an arbitration
proceeding against Rave and its principal Randy Burnworth seeking (a) damages
for the injuries to the Company caused by Rave's and Burnworth's breaches of
their contractual and common law obligations to the Company, including but not
limited to those referred to above, and (b) a declaration that, among other
things, Rave is not entitled to any royalties or other payments with respect to
the Company's technology and that the Company continues to have exclusive
license rights to the "Licensed Product" and "Licensed Process" under the
License Agreement.
On May 28, 1999, a Settlement Agreement was reached, the Arbitration
was resolved and the License Agreement was terminated. As a result of the
Settlement Agreement, the Company continues to maintain exclusive worldwide
license rights to make, market and license its video enhancement technology free
of any claims of ownership or inventorship by Rave; in return, Rave and certain
individuals associated with Rave received $175,000 in cash as well as 100,000
shares of the Company's Common Stock and options to purchase 50,000 shares of
the Company's Common Stock at an exercise price of $1.46.
7. INCOME TAXES
There is no benefit for federal income taxes for the year ended
December 31, 1998, since the Company has incurred operating losses. In addition,
the Company has fully reserved the net potential future tax benefits resulting
from its temporary differences and net operating loss carryforwards.
The tax effect of temporary differences consists of the following:
DECEMBER 31,
1999
------------
Deferred tax assets:
Start up costs.......................... $1,260,061
Property and equipment.................. 19,954
Net operating loss carryforward......... 4,975,964
------------
6,255,979
Valuation allowance..................... (5,347,629)
------------
$ 908,350
============
F-16
<PAGE>
In accordance with New Jersey statues, the Company has entered into an
agreement to sell certain New Jersey net operating losses and research and
development credits accordingly, a state income tax benefit and deferred tax
asset has been recognized in 1999. There was no provision for income taxes for
the year ended December 31, 1998.
During the years ended December 31,1999 and 1998, the benefit for
deferred taxes before change in valuation allowances aggregated $1,053,041 and
$1,437,000, respectively. The change in valuation allowances for the years ended
December 31, 1999 and 1998 were $144,691 and $1,437,000, respectively.
The difference between the statutory federal income tax rate and the
effective rate for the Company's income tax benefit for each of the years ended
December 31, 1999 and 1998, respectively, is summarized as follows:
1999 1998
---- ----
Statutory federal income tax rate 34.0% 34.0%
State income tax benefit, net of federal tax effect 16.7%
Increase in valuation allowance (25.0)% (29.0)%
Miscellaneous (0.4)% (5.0)%
---------- ---------
Effective income tax rate 25.3% 0.0%
---------- ---------
As of December 31, 1999, the Company has unused net operating loss
carryforwards of $12,460,000 available for federal income tax purposes. The
unused net operating loss carryforwards expire in various years from 2010 to
2019. The Company, in the future, may be subject to limitations on the use of
its NOL's as provided under Section 382 of the Internal Revenue Code.
8. COMMITMENTS AND CONTINGENCIES
CONSULTING AND REPRESENTATIVE AGREEMENTS
On June 1, 1998, the Company contracted with Innovation Partners
International, Inc. ("IPI") to provide sales management and engineering services
for the Company in Japan and other designated countries, for the purpose of
securing the Company's product sales to the Asian Original Equipment
Manufacturers market. In return for such services the Company agreed to pay IPI
a fee of $6,000 per month plus normal business expenses. At December 31, 1999, a
total of $133,085 had been paid under the terms of the contract, representing
consulting fees and out of the pocket expenses, which have been charged to
operations.
On July 22, 1998, the Company contracted with David Kwong
("consultant") to sell and license products in China and to maintain a sales
office for the Company in China. The contract may be terminated, by either
party, any time subsequent to September 30, 1999 by giving the other party at
F-17
<PAGE>
least 90 days' notice of termination. In return for such services the Company
agreed to pay the consultant a monetary commission and grant certain stock
options upon attaining determined sales levels. In addition the consultant will
receive a monthly consulting. The Company further agreed to pay the costs to
establish and maintain an office in China within the limits of an approved
budget. As of December 31, 1999 a total of $222,316 had been paid under the
terms of the contract, representing consulting fees of $106,500, office expenses
of $90,492 and travel costs of $31,448. No commissions had been earned and no
stock options had been granted through December 31, 1999 pursuant to this
agreement.
On November 11, 1999 the Company contracted with Wolfe Axelrod
Associates (WAA) to provide various Investor Relations and Public Relations
services for the Company. The contract is for an initial period of twelve months
and provides for automatic renewal for an additional one-year period unless
terminated by NUWAVE's written notification at least 30 days prior to the end of
the 12 month term provided however that NUWAVE may terminate this agreement upon
30 days written notice within the initial seven months of the contract. In
return for such services the Company granted to WAA 300,000 options for the
purchase of the Company's common stock at $2.00 per share (market price on date
of grant). The 300,000 options vest as follows: 125,000 on July 14, 2000;
100,000 on November 15, 2000 provided that the contract remained in force beyond
July 14, 2000 and 75,000 on November 15, 2000 provided that the contract remains
in force on that date. The estimated fair value of the options at date of issue
was $342,286 and is being amortized over twelve months. For the year ended
December 31, 1999 the Company recognized an expense of $34,682 relating to this
agreement. In addition the Company agreed to pay WAA a fee of $10,000 per month
plus normal business expenses. As of December 31, 1999 $30,162 had been paid
under the terms of the contract.
LEASES
The Company leases shared office space on a month-to-month basis for a
monthly rental of $6,600. Rent expense incurred for the cumulative period from
July 17, 1995 (inception) to December 31, 1999 amounted to $273,918; and for the
years ended December 31, 1999 and December 31, 1998 amounted to $77,471 and
$74,098, respectively.
9. EMPLOYMENT AGREEMENTS
Mr. Zarin entered into an employment agreement with the Company, dated
as of July 20, 1995, pursuant to which he agreed to serve as the Company's
President and Chief Executive Officer through December 31, 2000. In December
1997, the term of the agreement was extended for two additional years to
December 31, 2002. The agreement provided for an initial salary of $90,000 per
year and increased to $120,000 on March 15, 1996. Mr. Zarin is also entitled to
an annual bonus equal to (i) 30% of his base compensation if the Company's net
profits before taxes are equal to projections to be approved by the Company's
Board of Directors, (ii) 60% of his base compensation if the Company's net
profits before taxes are equal to 110% of such projections, and (iii) 100% of
his base compensation if the Company's net profits before taxes are equal to
120% of such projections. Mr. Zarin can terminate the agreement upon 180 days
notice. The Company can terminate the agreement for good cause at any time. If
the Company terminates the agreement other than for good cause, or otherwise
materially breaches the agreement, Mr. Zarin will receive a single payment equal
to the remaining payments he would have been entitled to receive during the
unexpired portion of the agreement. Pursuant to the employment agreement
provides Mr. Zarin was granted an option to purchase 200,000 shares of Common
Stock at $1.50 per share. The option expires December 31, 2000 and terminates if
Mr. Zarin voluntarily leaves the Company or the employment agreement is
terminated by the Company for good cause. In connection with services rendered
F-18
<PAGE>
in establishing the Company and creating its business plan and projections, Mr.
Zarin received 450,000 shares of the Company's Common Stock valued at $.01 per
share.
Mr. Webb entered into an employment agreement with the Company, dated
as of September 11, 1995, pursuant to which Mr. Webb was appointed Vice
President-Marketing of the Company. In March 1997, his title was changed to Vice
President-Marketing/Technical Development in order to more accurately reflect
his duties. The employment agreement continued until March 31, 1996 and
thereafter has been continuing for successive 3-month periods. Mr. Webb's
initial salary was $5,000 per month and was increased to $108,000 per year as of
August 14, 1996. In connection with his employment agreement, Mr. Webb received
options to purchase 70,000 shares of the Company's Common Stock at $1.50 per
share.
Mr. Legato entered into an employment agreement with the Company,
dated as of February 11, 1997, pursuant to which Mr. Legato was appointed Vice
President-Sales of the Company. The employment agreement continued until August
1997 and thereafter has been continuing for successive 3-month periods. Mr.
Legato's initial salary was $150,000 per year and has not been increased. In
connection with his employment agreement, Mr. Legato received options to
purchase 60,000 shares of the Company's Common Stock at $6.875 per share.
In connection with services performed by Mr. O'Brien, on July 17,
1995, he received 5,000 shares of the Company's Common Stock valued at $.01 per
share and has been granted options to purchase 25,000 shares of the Company's
Common Stock at $1.50 per share and 5,000 shares of the Company's Common Stock
at $2.00 per share.
On September 4, 1998 the Company entered into an employment agreement
with its Vice President - Engineering. As part of the agreement, the Company
granted to this individual, under the Company's Plan, options to purchase 50,000
shares of common stock at $1.50 per share, the underlying value of the Company's
common stock at October 1, 1998, the date of grant: 10,000 options vested on
March 16, 1999; 13,334 options vest on March 16, 2000; 13,333 options vest on
March 16, 2001; 13,333 options vest on March 16, 2002.
10. EXTRAORDINARY ITEM
The terms of the Bridge Notes of the Company contained early repayment
provisions in the event the Company completed an IPO. As a result of the
Company's completing an IPO in July 1996, the Bridge Notes were repaid and the
unamortized financing costs of $251,938 and the unamortized debt discount of
$596,222 as of that date, totaling $848,160, were written off and recorded as an
extraordinary item for the year ended December 31, 1996.
11. SUBSEQUENT EVENTS
On February 9, 2000 the Company held a Special Meeting of Stockholders
to (i) approve the issuance of shares of the Company's common stock and related
warrants aggregating a minimum of $3,000,000 and a maximum of $6,000,000 in a
private offering, to fulfill NASDAQ Stock Market Rule 4310 (C) (25) (H), and
(ii) approve a proposed amendment to the Company's Certificate of Incorporation
to increase the authorized shares of common stock by 20,000,000 shares to
40,000,000 shares. Both matters were approved by a majority of the stockholders.
F-19
<PAGE>
On February 14, 2000 the Company entered into a placement agency
agreement with Janssen-Meyers Associates, L.P. ("JMA") to act as the Company's
placement agent in a private equity placement whereby the Company issued to
certain accredited investors, as defined under Regulation D as promulgated under
the Securities Act of 1933, as amended (the " Securities Act"), 2,088,608 shares
of the Company's Common Stock and 1,044,304 Redeemable Common Stock Purchase
Warrants ("Common Stock Purchase Warrants") on March 14, 2000 for an aggregate
purchase price of $6,600,000. Each Common Stock Purchase Warrant entitles the
holder thereof to purchase one share of Common Stock at an exercise price per
share of $3.95, subject to adjustment upon the occurrence of certain events to
prevent dilution, at any time during the period commencing from March 14, 2000
and expiring on March 14, 2003. The Common Stock Purchase Warrants are subject
to redemption by the Company at $.01 per Warrant 12 months after the effective
date of a registration statement covering the Warrants on not less than 30 days
prior written notice to the holders of the Warrants, provided the average
closing bid price of the Common Stock has been at least 250% of the then current
exercise price of the Warrants for a period of thirty consecutive trading days
ending within five days prior to the date on which the Company gives notice of
redemption. The Common Stock Purchase Warrants will be exercisable until 5:00
P.M. on March 14, 2003 New York time.
Janssen-Meyers Associates for acting as placement agent received a
commission of 10% ($660,000) of the gross proceeds from the sale of the Units,
as well as a 3% non-accountable expense allowance ($198,000) and reimbursement
of other costs, including legal expenses relating to the offering ($54,399). In
addition, JMA received as part of its compensation, warrants exercisable until
March 14, 2003 to purchase up to 522,152 shares of the Company's Common Stock at
a price per share of $3.95.
F-20
Exhibit 10.55
Option Agreement for Purchase of Common Stock dated as of September 28, 1999
between NUWAVE Technologies, Inc. and Richard E. Ekstract.
<PAGE>
OPTION AGREEMENT
----------------
AGREEMENT, dated as of September 28, 1999, by and between NUWAVE
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and RICHARD E.
EKSTRACT (the "Optionee").
W I T N E S S E T H
-------------------
WHEREAS, in consideration of the Optionee agreeing to assist the
Company in obtaining orders for the Company's products and in entering into
strategic relationships, the Company desires to provide the Optionee with an
opportunity to acquire shares of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), and thereby obtain a proprietary interest in the
continued progress and success of the business of the Company, and the Optionee
desires to so obtain such proprietary interest, subject to the terms and
conditions herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Company and the Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to the
---------------
Optionee an option (the "Option") to purchase an aggregate of 100,000 shares
(the "Option Shares") of Common Stock at an exercise price of $2.56 per share
(the "Exercise Price"), and the Optionee hereby accepts the grant of the Option,
subject to vesting as provided in Section 2 hereof, and subject to adjustment as
provided in Section 6 hereof.
<PAGE>
2. Vesting of Option.
-----------------
2.1 Initial Vesting. The Option shall vest to the
---------------
extent of 15,000 Option Shares (A) for each (i) OEM order obtained or (ii)
alliance or partnership entered into between the Company and a third party as a
result of the Optionee's efforts (any such order, alliance or partnership shall
be a "Transaction"), up to a maximum of five (5) such Transactions or an
aggregate of 75,000 Option Shares, and (B) a majority of the non-employee
directors of the Company then in office (excluding the Optionee if he is then a
non-employee director) authorized the Company to enter into the Transaction and
also agreed that the Transaction would give rise to vesting of the Option under
this Section 2.1 or Section 2.2 hereof (any such approved Transaction shall be a
"Vesting Transaction"). The non-employee directors' approval of a Transaction
and agreement that such Transaction would be a Vesting Transaction shall be in
their discretion, and such decision shall be final and binding on the Company
and the Optionee. The Company shall give notice to the Optionee of the decision
of the non-employee directors as to whether a proposed Transaction became a
Vested Transaction.
2.2 Aggregate Vesting. The Option shall vest for
-----------------
25,000 Option Shares after either five (5) OEM orders have been placed with the
Company or five (5) alliances or partnerships with the Company have been
created, or an aggregate of five (5) orders, alliances or partnerships have
occurred as a result of the Optionee's efforts, provided that at least two (2)
of the Vesting Transactions were OEM orders. The terms of the Transactions which
may give rise to Vesting under this Section 2.2 must be approved in advance and
become vested by the non-employee directors of the Company as provided for in
Section 2.1 hereof.
2.3 Notice of Transaction. Upon the Optionee
---------------------
identifying a third party which has indicated a desire to place an OEM order or
enter into an alliance or partnership with the Company which may result in a
2
<PAGE>
Transaction, the Optionee shall notify the Company's President specifying the
terms of the Transaction. Upon the request of the Company, the Optionee shall
cooperate with the Company in seeking to consummate the Transaction.
2.4 Expiration. Any Option Shares which do not vest
----------
pursuant to Sections 2.1 and 2.2 hereof by March 28, 2001 (or the Cancellation
Date by reason of Section 2.5 hereof) shall be forfeited. Forfeiture of unvested
Option Shares shall not effect Option Shares which become vested prior to the
aforementioned forfeiture.
2.5 Review of Option in One Year. At any time after
----------------------------
September 28, 2000 and prior to March 28, 2001, the non-employee directors of
the Company may review the nature of the proposed Transactions previously
presented by the Optionee and based upon their review recommend that the Board
of Directors cancel this Agreement as to any future Transactions. The effective
date of such cancellation of this Agreement shall be the "Cancellation Date."
Such cancellation shall not effect Options which have vested prior to the
Cancellation Date. Additionally, if a proposed Transaction that would give rise
to vesting of a portion of Option Shares under Section 2.1 hereof is entered
into within six (6) months after the Cancellation Date, such cancellation shall
not prevent such Transaction from vesting subsequent to the Cancellation Date.
Notwithstanding the previous sentence, if at the time the Board of Directors
cancels this Agreement pursuant to this Section 2.5 there are fewer than five
(5) Vesting Transactions whereby the Option for the final 25,000 Option Shares,
as described in Section 2.2 hereof, has not vested as of the Cancellation Date,
the Option for those 25,000 Option Shares shall be terminated as of the
Cancellation Date.
3
<PAGE>
3. Exercise of Option.
------------------
3.1 Exercise. The Option may be exercised at any time,
--------
or from time to time, in whole or in part, for the Option Shares which have
vested pursuant to Section 2 hereof, commencing upon the respective vesting date
thereof and terminating at 5:00 p.m., Eastern Time, on September 27, 2005 (the
"Expiration Date"), and may not be exercised thereafter.
3.2 Method of Exercise. The Option will be exercisable
------------------
by notice (the "Exercise Notice") and payment in accordance with the procedure
prescribed herein. Each Exercise Notice shall state the election to exercise the
Option and the number of Option Shares (the "Purchased Shares") in respect of
which it is being exercised, the name, address and tax identification number of
the persons to whom the Purchased Shares are to be issued and delivered, and if
the Purchased Shares are not registered under the Securities Act of 1933, as
amended (the "Securities Act"), contain a representation and agreement as to
investment intent with respect to the Purchased Shares, and an acknowledgment as
to restrictions on resale or transfer of such Purchased Shares by reason of the
Securities Act. Accompanying the Exercise Notice shall be a certified check or a
wire transfer payable to the order of the Company in the full amount of the
purchase price for the Purchased Shares.
3.3 Stock Certificate. Upon receipt of the documents
----------------
to be provided for in Section 3.2 hereof, the Company shall deliver to the
Optionee or other person specified in the Exercise Notice certificates for the
Purchased Shares. If required under the Securities Act, each certificate shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
PUBLICLY BE OFFERED FOR SALE, SOLD OR DELIVERED AFTER SALE IN THE
4
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ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SUCH ACT EXCEPT AS AUTHORIZED UNDER SAID ACT, AND UNLESS
HEREAFTER REGISTERED WILL NOT BE TRANSFERRED UPON THE RECORDS OF THE
CORPORATION IN THE ABSENCE OF AN OPINION OF COUNSEL TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
4. Rights of Holder. The Optionee shall not, by virtue
----------------
hereof, have any rights to dividends or any other rights (including voting
rights) of a stockholder with respect to the Option Shares subject to the Option
until such Shares shall have been issued to him, as evidenced by the appropriate
entry on the transfer books of the Company upon purchase of such Option Shares
upon exercise of the Option.
5. Transferability of Option. The Option shall not be
-------------------------
transferable in whole or in part by the Optionee other than (i) by will or the
laws of descent and distribution, (ii) to an entity wholly-owned by the Optionee
or (iii) to a member of the immediate family (which shall be a spouse, parent or
child) of the Optionee, and such transferee agrees to be bound by this Section
5. Any transfer or attempted transfer of the Option in violation of this Section
5 shall be null and void, and of no force or effect.
6. Adjustments; Anti-Dilution. In the event of a stock
--------------------------
dividend, stock split-up, share combination, exchange of shares,
recapitalization, merger, consolidation, acquisition or disposition of property
or shares, reorganization, liquidation or other similar changes or transactions,
of or by the Company, the Board of Directors of the Company shall make (or shall
undertake to have the Board of Directors of any corporation which merges with,
or acquires the stock or assets of, the Company make) such adjustment of the
number and class of Option Shares then covered by the Option, or of the Exercise
Price, or both. To the extent practicable, the Company shall give the Optionee
5
<PAGE>
prior notice of any such event, provided that the failure by the Company to give
such notice shall not subject the Company to any liability herein. After an
event which results in an adjustment in the Option, the Company shall give
notice to the Optionee specifying the adjusted number or type of Option Shares
or other security and/or the Exercise Price, together with a calculation of the
adjustment. The determination of the adjustment by the Company shall be final
and binding on the Optionee.
7. Reservation of Shares. The Company shall at all times
---------------------
during the term of the Option reserve and keep available such number of Option
Shares or such other class of stock then subject to the Option as shall be
sufficient to satisfy the requirements of this Agreement.
8. Registration. At any time after the initial vesting of
------------
Option Shares the Optionee may request the Company to file a registration
statement on Form S-8 (or successor form) under the Securities Act with respect
to the Option Shares. Assuming the Company is eligible to file a Form S-8 (or
successor form) for the Option Shares, it shall use its best efforts to file and
cause such registration statement to become effective and thereafter maintain
the effectiveness thereof for at least the earliest of (i) one year after the
Expiration Date, (ii) the termination of this Agreement, assuming no Option
Shares have been purchased hereunder or (iii) the date when all the Purchased
Shares may be sold in accordance with Rule 144 under the Securities Act. The
Company shall bear all costs related to such registration statement.
9. Notices. Any notice to be given under this Agreement
-------
shall be in writing and delivered in person, by facsimile, express mail, courier
or by certified mail to the following address.
6
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If to the Company:
NUWAVE Technologies, Inc.
One Passaic Avenue
Fairfield, New Jersey 07004
Attn: President.
FAX: (973) 882-8812
If to the Optionee:
Mr. Richard E. Ekstract
c/o Advanstar
270 Madison Avenue
New York, New York 10016
FAX: (212) 951-6714
Either party hereto may designate a new address by notice to that effect duly
given to the other party hereto.
10. Miscellaneous.
-------------
10.1 Benefits of Agreement. This Agreement shall inure
---------------------
to the benefit of and be binding upon the parties hereto, and their respective
successors, assigns, heirs and administrators.
10.2 Entire Agreement. This Agreement contains the
----------------
complete and exclusive agreement between the parties hereto as to the subject
matter herein, and supersedes any and all other prior agreements, oral or
written, between them as to the subject matter herein. The Option granted herein
constitutes the full compensation payable by the Company to the Optionee for his
services in connection with finding and helping to negotiate a Transaction.
10.3 Amendments. This Agreement may not be amended,
----------
modified, supplemented or terminated nor any term or condition hereof waived
except in writing signed by the parties hereto.
7
<PAGE>
10.4 Governing Law. This Agreement shall be construed
--------------
in accordance with and governed by the laws of the State of Delaware.
10.5 Severability. In the event one or more provisions
------------
of this Agreement are held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof shall not be
affected or impaired hereby.
10.6 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, and all of which shall
constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first set forth above.
THE OPTIONEE:
-----------------------------
RICHARD E. EKSTRACT
NUWAVE TECHNOLOGIES, INC.
By:
-------------------------
Gerald Zarin
President
8
Exhibit 10.56
Placement Agency Agreement, dated as of February 14, 2000, between
Janssen-Meyers Associates, L.P. and NUWAVE Technologies, Inc.
<PAGE>
NUWAVE TECHNOLOGIES, INC.
Private Placement of not less than 30 Units
and not more than 60 Units
PLACEMENT AGENCY AGREEMENT
Dated as of February 14, 2000
Janssen-Meyers Associates, L.P.
17 State Street
New York, New York 10004
Gentlemen:
NUWAVE Technologies, Inc. (the "Company") proposes to offer for
sale (the "Offering") in a private offering pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), and/or Rule 506 of Regulation D
promulgated thereunder, an aggregate of not less than 30 and not more than 60
Units ("Units"), each Unit comprised of (i) a number of shares of common stock,
par value $.01 per share ("Common Stock"), of the Company, determined by
dividing the purchase price per Unit of $100,000 (the "Offering Price") by
eighty percent (80%) of the "Average Closing Sale Price" which shall be the
average closing sale price for the Common Stock for the eight (8) consecutive
trading days prior to each closing date (a "Closing Date") of the Offering, and
(ii) Redeemable Common Stock Purchase Warrants (the "Warrants") to purchase
fifty percent (50%) of such number of shares of Common Stock of the Company (the
"Warrant Shares") included in each Unit as more particularly described in the
Offering Memorandum as defined below. The Offering shall be made on a "best
efforts - all or none" basis as to 30 Units (the "Minimum Offering") and on a
"best efforts" basis as to an additional 30 additional Units (the "Maximum
Offering"). Unless the Minimum Offering is sold, no Units will be sold and all
subscriptions will be returned to the subscribers without interest or
deductions. This agreement shall confirm our agreement concerning Janssen-Meyers
Associates, L.P. acting as our exclusive placement agent (the "Placement Agent")
in connection with the sale of the Units.
The Company shall prepare and deliver to the Placement Agent
copies of a Confidential Private Placement Memorandum (the "Offering
Memorandum"), relating to, among other things, the Company, the Units and the
terms of the sale of the Units. The Offering Memorandum, including all exhibits
and appendices thereto and documents delivered therewith, are referred to herein
as the "Offering Documents" and shall include any supplements or amendments in
accordance with this Agreement. The Offering Memorandum shall be in form
satisfactory to the Placement Agent.
1. APPOINTMENT OF PLACEMENT AGENT
1
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On the basis of the representations and warranties contained
herein, and subject to the terms and conditions set forth herein, the Company
hereby appoints Janssen-Meyers Associates, L.P. as its Placement Agent and
grants to you the exclusive right to offer, as its agent, the Units pursuant to
the terms of this Agreement. On the basis of such representations and
warranties, and subject to such conditions, you hereby accept such appointment
and agree to use your reasonable best efforts to secure subscriptions to
purchase not less than 30 Units and not more than 60 Units.
2. TERMS OF THE OFFERING
(a) The Offering shall consist of not less than 30 Units and
not more than 60 Units of the Company at a purchase price equal to $100,000 per
Unit. The Offering shall be made on a "best efforts - all or none" basis as to
30 Units and on a "best efforts" basis as to an additional 30 Units. Each Unit
shall consist of: (i) a number of shares of Common Stock determined by dividing
the purchase price per Unit of $100,000 by eighty percent (80%) of the "Average
Closing Sale Price" which shall be the average closing sale price for the Common
Stock for the eight (8) consecutive trading days for the initial closing of the
Offering and also for each subsequent closing; and (ii) Warrants to purchase
fifty percent (50%) of such number of shares of Common Stock of the Company in
the Units. The Common Stock and the Warrants are being offered as Units and may
not be purchased separately. Unless the Minimum Offering is sold, no Units will
be sold and all subscriptions will be returned to subscribers without interest
or deductions. The Company and the Placement Agent may, in their discretion,
accept subscriptions for partial Units. Upon mutual agreement, the Company and
the Placement Agent may allow for an increase of up to 10% of the total number
of Units to be sold in the Offering.
(b) Provided that the Company has delivered the Offering
Memorandum to the Placement Agent, the Offering shall commence on or about the
date hereof and shall expire at 5:00 p.m., New York time, on March 23, 2000 and
may be extended up to thirty (30) additional days at the option and discretion
of Placement Agent and the Company. Such period, as same may be so extended,
shall hereinafter be referred to as the "Offering Period."
(c) The Offering shall be made solely to "accredited
investors" (as defined in Rule 501 of Regulation D). Each prospective subscriber
(the "Prospective Investor") who desires to purchase Units shall deliver to the
Placement Agent two copies of a subscription agreement (a "Subscription
Agreement"), in the form annexed to the Offering Memorandum, one copy of the
Confidential Qualified Purchaser Questionnaire (the "Investor Questionnaire"),
and payment of the purchase price for the number of Units such Prospective
Investor desires to purchase. The Placement Agent shall not have any obligation
to independently verify the accuracy or completeness of any information
contained in any Subscription Agreement or the authenticity, sufficiency, or
validity of any check delivered by any Prospective Investor in payment for
Units.
(d) The Placement Agent and the Company shall establish an
escrow account (the "Escrow Account") with HSBC Bank USA (the "Escrow Agent").
The Placement Agent shall deliver each check received from a Prospective
Investor to the Escrow Agent for deposit in the Escrow Account and shall deliver
2
<PAGE>
the executed copies of the Subscription Agreement and Investor Questionnaire
received from each Prospective Investor to the Company or its counsel. The
Company shall notify the Placement Agent promptly of the acceptance or rejection
of any subscription.
(e) If subscriptions for the Minimum Offering are not
received from Prospective Investors and accepted by the Company prior to the
expiration of the Offering Period, the Offering shall be canceled, all funds
received and held in the Escrow Account shall be refunded in full without
interest or deduction and this Agreement and the agency created hereby shall be
terminated without any further obligation on the part of either party, except as
provided in Sections 12 and 13 hereof.
(f) You may engage other persons selected by you to assist
you in the Offering (each such broker/dealers being hereinafter referred to as a
"Selling Group Member") and you may allow such Selling Group Member such part of
the compensation and payment of expenses payable to you under Section 6 hereof
as you shall determine. Any such Selling Group Member shall be a member firm in
good standing as a broker-dealer under the rules of the National Association of
Securities Dealers ("NASD"). The Company hereby agrees to make such
representations and warranties to, and covenants and agreements with, any
Selling Group Member (including an agreement to indemnify such Selling Group
Member on terms substantially similar to Section 13 hereof) as provided herein.
3. RIGHT OF FIRST REFUSAL
In the event that there shall have been an Initial Closing
hereunder prior to the expiration of the Offering Period, the Placement Agent
shall thereafter have an irrevocable right of first refusal until 18 months from
the Initial Closing Date to purchase for its account or to sell for the account
of the Company or, a subsidiary or successor of the Company, any securities of
the Company or any such subsidiary or successor of the Company, any securities
of the Company or any such subsidiary or successor of the Company (except
nonconvertible debt financing furnished by a financial institution), that the
Company or any such subsidiary or successor may seek to sell through an
underwriter, placement agent or broker-dealer whether pursuant to registration
under the Act or otherwise. The Company, any such subsidiary or successor will
consult with the Placement Agent with regard to any such offering and will
offer, in writing, the Placement Agent the opportunity to purchase or sell any
such securities on terms not more favorable to the Company, any such subsidiary
or successor than it or they can secure elsewhere. If the Placement Agent fails
to accept such offer within 10 business days after the mailing of a notice
containing such offer by registered mail addressed to the Placement Agent, then
the Placement Agent shall have no further claim or right with respect to the
financing proposal contained in such notice. If, however, the terms of such
proposal are subsequently modified in any material respect, the preferential
right referred to herein shall apply to such modified proposal as if the
original proposal had not been made. The Placement Agent's failure to exercise
its preferential right with respect to any particular proposal shall not affect
its preferential rights relative to future proposals. The Company represents and
warrants that there are presently no other rights of first refusal for future
financing now outstanding except for Trinity Capital Advisors, Inc.'s
3
<PAGE>
("Trinity") right of first refusal and those previously granted to the Placement
Agent. The right contained in this paragraph 3 is subordinate to the right of
Trinity.
4. INTERIM CLOSINGS/FINAL CLOSING
(a) If subscriptions for the Minimum Offering have been
received in escrow and accepted by the Company prior to the expiration of the
Offering Period , a closing under this Agreement (the "Initial Closing") shall
be held at the offices of the Placement Agent, or such other place as the
parties may agree, as soon as practicable (but not later than ten (10) business
days) following the date upon which the Placement Agent and the Company confirm
in writing to each other that subscriptions for the Minimum Offering have been
accepted or at such other place, time, or date as the Company and you shall
agree upon. The date upon which the Initial Closing is held shall hereinafter be
referred to as the "Initial Closing Date."
(b) At any time prior to the expiration of the Offering
Period following the Initial Closing and after receipt in escrow and acceptance
by the Company of subscriptions for the sale of additional Units in increments
of at least $500,000 of Units ("Interim Closing Amount") up to the Maximum
Offering, one or more closings (each an "Interim Closing") shall take place in
the manner herein set forth with respect to the Initial Closing. In the event
that the Offering Period expires prior to receipt in escrow and acceptance by
the Company of an Interim Closing Amount, a final closing shall be held at such
time regardless of the amount then held in escrow. The final Interim Closing to
be held in accordance herewith shall be deemed the "Final Closing" and the date
thereof shall be the "Final Closing Date". References herein to a "Closing"
shall mean the Initial Closing, any Interim Closing or the Final Closing, as the
context requires, and the date thereof shall be referred to as a "Closing Date."
5. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT
The Placement Agent represents and warrants to the Company
as follows:
(a) The Placement Agent is duly formed and validly existing
and in good standing under the laws of its state of formation.
(b) The Placement Agent is, and at the time of each Closing
will be, a member in good standing of the NASD. No NASD approval of the
compensation which the Placement Agent is to receive with respect to the
Offering is required.
(c) Sales of Units by the Placement Agent will only be made
in such jurisdictions in which the Placement Agent or a Selling Group Member is
a registered broker-dealer or where an applicable exemption from such
registration exists.
(d) Offers and sales of Units by the Placement Agent will be
made only in accordance with this Placement Agency Agreement and in compliance
with the provisions of Rule 506 of Regulation D (to the extent applicable to the
Placement Agent) (it being understood and agreed that the Placement Agent shall
be entitled to rely upon the information and statements provided by the
Prospective Investor in the Subscription Agreement and Investor Questionnaires),
4
<PAGE>
and the Placement Agent will furnish to each Prospective Investor a copy of the
Offering Documents prior to accepting any subscription for the Units.
6. COMPENSATION
(a) If subscriptions for the Minimum Offering are received
in escrow prior to the expiration of the Offering Period and accepted by the
Company, you shall be entitled, on each Closing Date, as compensation for your
services as Placement Agent under this Agreement, to selling commissions equal
to 10% of the gross proceeds received by the Company from the sale of the Units
effected at each Closing and 3% of the gross proceeds from the sale of the Units
effected at each Closing in payment for a non-accountable expense allowance. Any
amounts payable hereunder may be deducted by you out of the funds received from
the sale of the Units and deposited in the Escrow Account, on each Closing Date.
The Company shall also pay the fees of the Placement Agent's Counsel, Goldstein
& DiGioia, LLP in the amount of $30,000 plus expenses for long distance
telephone, photocopying and mailing and similar expenses.
(b) In addition to the compensation payable to the Placement
Agent set forth in clause (a) above, the Company shall sell to the Placement
Agent, at each Closing, Unit Purchase Warrants ("Placement Agent Warrants") at a
price of $.001 to purchase 25% of the aggregate number of Units sold in the
Offering at an exercise price equal to the Offering Price until five (5) years
from the Initial Closing Date. The Placement Agent Warrants shall entitle the
Placement Agent to purchase the same securities as contained in the Units. The
Placement Agent Warrants shall be subject to anti-dilution in certain events.
The Placement Agent Warrants shall contain registration rights similar to those
provided to Prospective Investors in the Offering. The Placement Agent Warrants
shall contain cashless exercise provisions and shall not be redeemable.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(a) The Company represents and warrants to, and agrees with,
the Placement Agent that:
(i) Assuming the accuracy of the representations and
warranties of the Prospective Investors set forth in the Subscription Agreements
and the Investor Questionnaires and the representations and warranties of the
Placement Agent set forth herein, the Offering Documents (A) contain, and at all
times during the period from the date hereof to and including each Closing Date,
will contain, all information required to be contained therein, if any, pursuant
to Rules 502 and 506 of Regulation D and all applicable federal and/or state
securities laws, and (B) do not, and during the Offering Period will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances made therein not misleading. Each contract,
agreement, instrument, lease, license, or other document required to be
described in the Offering Documents shall be, and have been, accurately
described therein in all material respects.
(ii) No Offering Documents or information provided by
the Company to Prospective Investors pursuant to Section 8(g) hereof shall
contain any untrue statement of a material fact or omit to state any material
5
<PAGE>
fact required to be stated therein or necessary to make the statements therein
in light of circumstances made therein not misleading.
(iii) The Company has not, directly or indirectly,
solicited any offer to buy or offered to sell any Units or any other securities
of the Company during the twelve-month period ending on the date hereof except
as may be properly described in the Offering Documents or in any filings by the
Company with the Securities and Exchange Commission ("SEC Filings") and has no
present intention to solicit any offer to buy or to offer to sell any Units or
any other securities of the Company other than pursuant to this Agreement or as
described in the Offering Documents or any SEC Filings;
(iv) The Company is, and at all times during the
period from the date hereof to and including each Closing Date will be, a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority, and has
obtained all necessary consents, authorizations, approvals, orders, licenses,
certificates, and permits and declarations of and from, and has made filings
with, all federal, state and local authorities, to own, lease, license, and use
its properties and assets and to conduct its business as presently conducted as
described in the Offering Documents and/or in any such case where the failure to
have any of the foregoing would not have a material adverse effect on the
Company's presently conducted business. As of the date hereof, the Company is,
and at all times during the period from the date hereof to and including each
Closing Date, duly qualified to do business and is in good standing in every
jurisdiction in which its ownership, leasing, licensing, or use of property and
assets or the conduct of its business makes such qualification necessary except
where the failure to be so qualified would not have a material adverse effect on
the Company's business.
(v) The Company has, as of the date hereof, and shall
have at each Closing (except as effected by the transactions contemplated hereby
and/or disclosed in the Offering Documents or any SEC Filings) an authorized
capitalization consisting of: (i) 2,000,000 shares of Preferred Stock, par value
$.01 per share, none of which are issued and outstanding; and (ii) 40,000,000
shares of Common Stock, par value $.01 per share, of which 8,468,889 shares are
issued and outstanding. Each issued and outstanding share of Common Stock is
duly authorized, validly issued, fully paid, and non-assessable, without any
personal liability attaching to the ownership thereof solely by being such a
holder, and has not been issued and is not owned or held in violation of any
preemptive rights of stockholders. There is no commitment, plan, or arrangement
to issue, and no outstanding option, warrant, or other right calling for the
issuance of, any share of capital stock of the Company or any security or other
instrument which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company other than as described in the
Offering Documents or in any of the Company's SEC Filings. There is outstanding
no security or other instrument which by its terms is convertible into or
exchangeable for any class of capital stock of the Company, except as may be
properly described in the Offering Documents or in any of the Company's SEC
Filings.
(vi) The audited financial statements for the fiscal
years ended December 31, 1997 and 1998 and the unaudited financial statement for
the nine (9) months ended September 30, 1999 (together, the "Financial
Statements") of the Company included in the Offering Documents fairly present in
6
<PAGE>
accordance with generally accepted accounting principles the financial position,
the results of operations, and the other information with respect to the Company
purported to be shown therein at the respective dates and for the respective
periods to which they apply. The Financial Statements have been prepared in
accordance with generally accepted accounting principles (except to the extent
certain footnote disclosures regarding any stub period may have been omitted in
accordance with applicable rules of the Securities and Exchange Commission
consistently applied throughout the periods involved), are correct and complete
in all material respects, and are in accordance with the books and records of
the Company. There has at no time been a material adverse change in the
financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company from the latest information set
forth in the Offering Documents, except as may be properly described in the
Offering Documents as having occurred or as may occur. The Company's current
audit firm, Richard A. Eisner & Company LLP, and the Company's former audit
firm, PriceWaterhouse Coopers, L.L.P., who have certified certain financial
statements of the Company and delivered their report with respect to the audited
financial statements included in the Offering Documents, are independent public
accountants as required by the Act.
(vii) As of the date hereof, there is no, and as of
each Closing Date there shall not be any, litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending,
or to the Company's knowledge threatened, with respect to the Company, or its
operations, businesses, properties, or assets, except as properly described in
the Offering Documents or in any SEC Filings or such as individually or in the
aggregate do not now have and may not be reasonably expected in the future, to
have a material adverse effect upon the operations, business, properties, or
assets of the Company. The Company is not now, nor as of each Closing Date shall
be, in violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as properly described in the Offering
Documents, or in any SEC Filings or such as individually or in the aggregate do
not have and may not be reasonably expected in the future to have a material
adverse effect upon the operations, business, properties, or assets of the
Company; nor is the Company required to take any action in order to avoid any
such violation or default.
(viii) As of the date hereof, the Company does not own
any real property and does not intend to purchase any real property between the
date hereof and the Final Closing Date.
(ix) As of the date hereof, the Company is not, and at
all times during the period from the date hereof to and including the Final
Closing Date, shall not be, in violation or breach of, or in default with
respect to complying with any material provision of any material contract,
agreement, instrument, lease, license, or arrangement, other than any such
violation or breach which would not have, individually or in the aggregate, a
material adverse effect on the Company's business, and each such contract,
agreement, instrument, lease, license, and arrangement is in full force and
effect and is the legal, valid, and binding obligation of the parties thereto
enforceable as to them in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and an implied covenant of good faith and fair
dealing. The Company enjoys peaceful and undisturbed possession under all leases
7
<PAGE>
and licenses under which it is operating as of the date hereof. As of the date
hereof, the Company is not a party to or bound by any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject to any
charter or other restriction, which has had or may in the future have a material
adverse effect on the financial condition, results of operations, business,
properties, assets or liabilities of the Company. The Company is not in
violation or breach of, or in default with respect to, any term of its
Certificate of Incorporation or By-Laws, each as amended to date.
(x) There is no right under any patent, patent
application, trademark, trademark application, trade name, service mark,
copyright, franchise, or other intangible property or asset (all of the
foregoing being herein called "Intangibles") necessary to the business of the
Company as presently conducted, except as disclosed in the Offering Documents or
in any SEC Filings. To the knowledge of the Company, there is no Intangible of
others which has had or may in the future have a materially adverse effect on
the financial condition, results of operations, business, properties, assets or
liabilities of the Company, except as disclosed in the Offering Documents or in
any SEC Filings.
(xi) To its best knowledge and except as disclosed in
the Offering Documents or in any SEC Filings, the Company has not infringed, is
infringing, or has received notice of infringement with respect to asserted
Intangibles of others. To the best knowledge of the Company and except as
disclosed in the Offering Documents or in any SEC Filings, none of the patents,
patent applications, trademarks, service marks, trade names and copyrights, and
licenses and rights to the foregoing presently owned or held by the Company, if
any, materially infringe upon any like right of any other person or entity. The
Company (i) owns or has the right to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other restrictions
of any kind whatsoever, sufficient patents, trademarks, service marks, trade
names, copyrights, licenses and right with respect to the foregoing, to conduct
its business as presently conducted except as set forth in the Offering
Documents or in any SEC Filings and (ii) except as set forth in the Offering
Documents or in any SEC Filings, 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 patent, trademark, service mark,
trade name, copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business as
now conducted or otherwise. The Company has direct ownership of title or right
to all its intellectual property (including all United States and foreign patent
applications and patents), other proprietary rights, confidential information
and know-how; owns all the rights to its Intangibles as are currently used in or
have potential for use in its business except as set forth in the Offering
Documents or in any SEC Filings.
(xii) The Company has all requisite corporate power
and authority to execute, deliver, and perform this Agreement and to consummate
the transactions contemplated hereby. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery, and
performance by the Company of this Agreement, the Warrants and the Placement
Agent Warrants and the consummation of the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Company,
and assuming due authorization, execution and delivery by the Placement Agent,
this Agreement will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms except as the enforceability
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may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and an implied covenant of good faith and fair dealing. Each of the
Units has been duly authorized by the Company, and, upon issuance thereof on a
Closing Date, will have been validly executed and delivered by the Company. When
each of the Units has been duly executed and delivered by the Company, each of
the Units will be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and an implied covenant of good faith and fair
dealing. Each of the Placement Agent Warrants has been duly authorized by the
Company, and, upon issuance thereof on a Closing Date, will have been validly
executed and delivered by the Company. When each of the Placement Agent Warrants
has been duly executed and delivered by the Company, each of the Placement Agent
Warrants will be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and an implied covenant of good faith and fair
dealing. Assuming the accuracy of the representations and warranties of the
Prospective Investors set forth in the Subscription Agreements and the Investor
Questionnaires and the representations and warranties of the Placement Agent set
forth herein, no consent, authorization, approval, order, license, certificate,
or permit of or from, or registration, qualification, declaration, or filing
with, any federal, state, local, foreign, or other governmental authority or any
court or other tribunal is required by the Company for the execution, delivery,
or performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby, except the filing of a Notice of Sale of
Securities on Form D pursuant to Regulation D, and such consents,
authorizations, approvals, registrations, and qualifications as may be required
under all applicable federal and/or state securities laws in connection with the
issuance, sale, and delivery of the certificates representing the shares of
Common Stock and the Warrants comprising the Units pursuant to this Agreement
and/or the Subscription Agreements. No consent of any party to any material
contract, agreement, instrument, lease, license, arrangement, or understanding
to which the Company is a party, or to which any of its properties or assets are
subject, is required for the execution, delivery, or performance of this
Agreement or the Subscription Agreement, and the consummation of the
transactions contemplated hereby and thereby, and such execution, delivery and
performance will not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle any party
to terminate or call a default under any such contract, agreement, instrument,
lease, license, arrangement, or understanding, violate or result in a breach of
any term of the certificate of incorporation or by-laws of the Company, or
assuming the accuracy of the representations and warranties of the Prospective
Investors set forth in the Subscription Agreements and Investor Questionnaires
and the representations and warranties of the Placement Agent set forth herein,
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on the Company or to which any of its
operations, businesses, properties, or assets are subject.
(xiii) The Units, Common Stock, Warrants and Placement
Agent Warrants shall conform to all statements relating thereto as contained in
the Offering Documents. The Common Stock and Warrants when issued and delivered
to the Prospective Investor pursuant to the terms of the Subscription Agreement
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and this Agreement shall be duly authorized, validly issued, fully paid and
nonassessable, without any personal liability attaching to the ownership thereof
solely by being such holder and shall not have been issued in violation of any
preemptive rights of stockholders.
(xiv) Except and to the extent described in or
referred to in the Offering Documents or in any SEC Filings or as provided in
the private placement offering completed in June 1998 through the Placement
Agent: (A) no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company on any registration
statement to be filed by the Company or to require the Company to file a
registration statement under the Securities Act of 1933, as amended, and (B) no
person or entity holds any securities of the Company which contain anti-dilution
rights which will be affected by the transactions contemplated hereby.
(xv) Except in connection with the exercise of
outstanding options and warrants disclosed in the Offering Documents or the SEC
Filings, during the period commencing on the date hereof and ending on the Final
Closing Date, the Company shall not, without prior notice to and consent of the
Placement Agent: (A) issue any securities or incur any liability or obligation,
primary or contingent, for borrowed money; (B) enter into any transaction not in
the ordinary course of business; or (C) declare or pay any dividend on its
capital stock.
(xvi) Neither the Company nor any of its officers,
directors, or affiliates, has engaged or will engage, directly or indirectly, in
any act or activity that may jeopardize the status of the Offering and sale of
the Units an exempt transaction under the Act or under all applicable federal
and/or state securities or "blue sky" laws of any jurisdiction in which the
Units may be offered or sold.
(xvii) The Company has filed all foreign, federal,
state and local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file would not
have a material adverse effect on the Company), and has paid all taxes required
to be paid by it and any other assessment, fine or penalty levied against it to
the extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as described in or contemplated under the Offering Documents.
(xviii) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that: (A)
transactions are executed in accordance with management's general or specific
authorizations; (B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (C) access to assets is
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(xix) Subsequent to the dates as of which information
is given in the Offering Documents, and except as may otherwise be properly
described in the Offering Documents or in any SEC Filings: (A) the Company has
not, except in the ordinary course of business, incurred any liability or
obligation, primary or contingent, for borrowed money; (B) there has not been
any material change in the capital stock, short-term debt or long-term debt of
the Company; (C) the Company has not purchased any of its outstanding capital
stock nor declared or paid any dividend or distribution of any kind on its
capital stock; (D) the Company has not sustained any material loss or
interference with its businesses or properties from fire, floor, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding; and (E) there has not
been any material adverse change or any development which the Company reasonably
believes could result in a material adverse change in the financial condition,
results of operations, business, properties, assets or liabilities of the
Company.
(xx) No labor dispute with the employees of the
Company exists or is threatened or imminent that could result in a material
adverse change in the financial condition, results of operations, business,
properties, assets or liabilities of the Company, except as described in or
contemplated under the Offering Documents.
(xxi) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which they are engaged; the
Company has not been refused any insurance coverage sought or applied for; and
the Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from insurers of recognized financial responsibility as may be
necessary to continue its business at a cost that would not materially and
adversely affect the financial condition, results of operations, business,
properties, assets or liabilities of the Company, except as described in or
contemplated by the Offering Documents.
8. COVENANTS OF THE COMPANY
The Company covenants that it will:
(a) Notify you immediately, and confirm such notice in
writing: (i) when any event shall have occurred during the period commencing on
the date hereof and ending on the Final Closing Date, as a result of which the
Offering Documents would include 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 under which they were
made, not misleading; and (ii) of the receipt of any notification with respect
to the modification, rescission, withdrawal, or suspension of the qualification
or registration of the Units, or of an exemption from such registration or
qualification, in any jurisdiction. The Company will use its best efforts to
prevent the issuance of any such modification, rescission, withdrawal, or
suspension and if you so request, to obtain the lifting thereof as promptly as
possible.
(b) Not make any supplement or amendment to the Offering
Documents unless such supplement or amendment complies with the requirements of
the Act and Regulation D and the applicable federal and/or state securities and
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"blue sky" laws and unless you shall have approved of such supplement or
amendment in writing. If, at any time during the period commencing on the date
hereof and ending on the Final Closing Date, any event shall have occurred as a
result of which the Offering Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or if, in the
opinion of counsel to the Company or counsel to the Placement Agent, it is
necessary at any time to supplement or amend the Offering Documents to comply
with the Act, Regulation D, or any applicable securities or "blue sky" laws, the
Company will promptly prepare an appropriate supplement or amendment (in form
and substance satisfactory to you) which will correct such statement or omission
or which will effect such compliance.
(c) Deliver without charge to the Placement Agent such
number of copies of the Offering Documents and any supplement or amendment
thereto as may reasonably be requested by the Placement Agent.
(d) Not, directly or indirectly, solicit any offer to buy
from, or offer to sell to any person any Units or Common Stock or Warrants
underlying the Units, except through the Placement Agent.
(e) Cooperate with the Placement Agent's counsel to qualify
or register the Units, Common Stock and Warrants for offering and sale under, or
establish an exemption from such qualification or registration under, the
securities or "blue sky" laws of such jurisdictions as you may reasonably
request; provided, however, that the Company will not be obligated to qualify to
do business as a dealer in securities in any jurisdiction in which it is not so
qualified. The Company will not consummate any sale of Units in any jurisdiction
or in any manner in which such sale may not be lawfully made; in this regard the
Company shall be entitled to rely on the Placement Agent's representations
herein, and the representations of Prospective Investors in the Subscription
Agreements and Purchaser Questionnaires and on the blue sky qualifications
effected by the Placement Agent's counsel.
(f) At all times during the period commencing on the date
hereof and ending on the Final Closing Date, provide to each Prospective
Investor or his Purchaser Representative (as defined in Regulation D), if any,
on request, such information (in addition to that contained in the Offering
Documents) concerning the Offering, the Company and any other relevant matters,
as it possesses or can acquire without unreasonable effort or expense, and to
extend to each Prospective Investor or his Purchaser Representative, if any, the
opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering and the business of the
Company and to obtain any other additional information, to the extent it
possesses the same or can acquire it without unreasonable effort or expense, as
such Prospective Investor or Purchaser Representative may consider necessary in
making an informed investment decision or in order to verify the accuracy of the
information furnished to such Prospective Investor or Purchaser Representative,
as the case may be.
(g) Provide to each Prospective Investor or his Purchaser
Representative any information required to be delivered by Rule 502(b) of
Regulation D.
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(h) Disclose to each Prospective Investor, in writing, any
material relationship between such Prospective Investor's Purchaser
Representative, if any, or its affiliates, on the one hand, and the Company or
its affiliates, on the other hand, which, to the knowledge of the Company, then
exists or is understood to be contemplated or has existed at any time during the
previous two years and any compensation received or to be received as a result
of such relationship.
(i) Cooperate with counsel to the Placement Agent in order
to file five copies of a Notice of Sales of Securities on Form D with the
Securities and Exchange Commission (the "Commission") no later than 15 days
after the first sale of the Units and file a final notice on Form D with the
Commission no later than 30 days after the last sale of Units. The Company shall
file promptly such amendments to such Notice on Form D as shall become necessary
and, as requested by you, shall also comply with any filing requirement imposed
by the laws of any state or jurisdiction in which offers and sales are made.
(j) Not, directly or indirectly, engage in any act or
activity which may jeopardize the status of the Offering and sale of the Units
as exempt transactions under the Act or under the securities or "blue sky" laws
of any jurisdiction in which the Offering maybe made. Without limiting the
generality of the foregoing, and notwithstanding anything contained herein to
the contrary, the Company shall not, directly or indirectly, engage in any
offering of securities which, if integrated with the Offering in the manner
prescribed by Rule 502(a) of Regulation D and applicable releases of the
Commission, may jeopardize the status of the offering and sale of the Units as
exempt transactions under Regulation D.
(k) Apply the net proceeds from the sale of the Units as set
forth in the Offering Memorandum.
(l) Not, during the period commencing on the date hereof and
ending on the Final Closing Date, issue any press release or other
communication, or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without your prior written consent, which consent
shall not be unreasonably withheld, except as required by applicable securities
laws.
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9. PAYMENT OF EXPENSES
The Company hereby agrees to pay all fees, charges, and expenses
incident to the performance by the Company of its obligations hereunder,
including, without limitation, all fees, charges, and expenses in connection
with: (i) the preparation, printing, filing, distribution, and mailing of the
Offering Documents, and all other documents relating to the Offering, purchase,
sale, and delivery of the Units (and component parts), and any supplements or
amendments thereto, including the cost of all copies thereof; (ii) the
preparation and reproduction of this Agreement, the Common Stock certificates
and the Warrants; (iii) the issuance, sale, transfer, and delivery of the Units,
including any transfer or other taxes payable thereon and the fees of any
transfer agent or registrar; (iv) the registration or qualification of the Units
or the securing of an exemption therefrom under state or foreign "blue sky" or
securities laws, including without limitation, filing fees payable in the
jurisdictions in which such registration or qualification or exemption therefrom
is sought, disbursements in connection therewith, and the fees of counsel for
the Placement Agent in connection therewith in an amount equal to $5,000 which
shall be paid at the Initial Closing; (v) filing fees payable to the Commission,
if any; and (vi) the retention of the Escrow Agent, including the fees and
expenses of the Escrow Agent for serving as such and the fees and expenses of
its counsel, if any.
10. CONDITIONS OF PLACEMENT AGENT'S OBLIGATIONS
The obligations of the Placement Agent pursuant to this
Agreement shall be subject, in its discretion, to the continuing accuracy, in
all material respects, of the representations and warranties of the Company
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to the Placement Agent, as of the date hereof and as
of each Closing Date, with respect to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) At the initial Closing, the Placement Agent shall have
received the opinion of Thelen Reid & Priest LLP, counsel for the Company, dated
each Closing Date, addressed to the Placement Agent, and in form and scope
satisfactory to counsel for the Placement Agent in the form of Exhibit A annexed
hereto. With respect to subsequent closings, counsel may provide a "bring down"
opinion.
In rendering such opinion, counsel for the Company may rely:
(A) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company; and (B) to the extent they deem proper,
upon written statements or certificates of officers of departments of various
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 counsel for the Placement Agent.
(b) On or prior to the Initial Closing Date, the Placement
Agent shall have been furnished such information, documents, certificates, and
opinions as it may reasonably require for the purpose of enabling it to review
the matters referred to in Section 7, and in order to evidence the accuracy,
completeness, or satisfaction of any of the representations, warranties,
covenants, agreements, or conditions herein contained, or as it may otherwise
reasonably request.
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(c) At each Closing, the Placement Agent shall have received
a certificate of the chief executive officer and of the chief financial officer
of the Company, dated the applicable Closing Date to the effect that, as of the
date of this Agreement and as of the applicable Closing Date the representations
and warranties of the Company contained herein were and are accurate in all
material respects, and that as of the Closing Date the obligations to be
performed by the Company hereunder on or prior thereto have been fully
performed.
(d) All proceedings taken in connection with the issuance,
sale, and delivery of the Units shall be satisfactory in form and substance to
you and your counsel.
(e) There shall not have occurred after the date hereof, at
any time prior to each Closing: (A) any domestic or international event, act, or
occurrence which has materially disrupted, or in your opinion will in the
immediate future materially disrupt the securities markets; (B) a general
suspension of, or a general limitation on prices for, trading in securities on
the Nasdaq SmallCap Market or the over-the-counter market; (C) any banking
moratorium declared by a state or federal authority; (D) any material
interruption in the mail service or other means of communication within the
United States; (E) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or (F) any
change in the market for securities in general or in political, financial, or
economic conditions which, in your judgment, makes it inadvisable to proceed
with the offering, sale, and delivery of the Units.
Any certificate or other document signed by any officer of
the Company and delivered to you or to your counsel at a Closing shall be deemed
a representation and warranty by the Company hereunder as to the statements made
therein. If any condition to your obligations hereunder has not been fulfilled
as and when required to be so fulfilled, you may terminate this Agreement or, if
you so elect, in writing waive any such conditions which have not been fulfilled
or extend the time for their fulfillment. In the event that you elect to
terminate this Agreement, you shall notify the Company of such election in
writing. Upon such termination, neither party shall have any further liability
or obligation to the other except as provided in Section 11 hereof.
11. TERMINATION
The Placement Agent shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Placement Agent's commercially
reasonable opinion will in the immediate future materially disrupt general
securities markets in the United States; or (ii) if trading on the New York
Stock Exchange, the American Stock Exchange, or in the over-the-counter market
shall have been suspended or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been required
on the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iii) if the United States
shall have become involved in a war or major hostilities; or (iv) if a banking
moratorium has been declared by a New York State or federal authority; or (v) if
a moratorium in foreign exchange trading has been declared; or (vi) if the
Company shall have sustained a material loss, whether or not insured, by reason
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of fire, flood, accident or other calamity; or (vii) if there shall have been
such material adverse change in the conditions or prospects of the Company; or
(viii) if there shall have been such material adverse change in general
economic, political or financial conditions as in the Placement Agent's judgment
would make it inadvisable or impracticable to proceed with the Offering, sale or
delivery of the Units.
12. SOLICITATION PROHIBITION
The Company agrees that, for a period of three (3) years
from the date hereof, it shall not solicit any offer to buy from or offer to
sell to any person introduced to the Company by the Placement Agent in
connection with the Offering, directly or indirectly, any securities of the
Company or of any other entity, or provide the name of any such person to any
other securities broker or dealer or selling agent. The Placement Agent shall
provide a written list of all such persons following the Final Closing of the
Offering. In the event that the Company or any of its affiliates, directly or
indirectly, solicits, offers to buy from or offers to sell to any such person
any such securities (other than in connection with a rights offering to existing
shareholders), or provides the name of any such person to any other securities
broker or dealer or selling agent, and such person purchases such securities or
purchases securities from any other securities broker or dealer or selling
agent, the Company shall pay to the Placement Agent an amount equal to 10% of
the aggregate purchase price of the securities so purchased by such person.
13. INDEMNIFICATION AND CONTRIBUTION
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, its officers, directors, partners, employees, agents, and
counsel, and each person, if any, who controls the Placement Agent within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), against any and all loss, liability,
claim, damage, and expense whatsoever (which shall include, for all purposes of
this Section 13, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Offering Documents
or in any document delivered or written statement made pursuant to Section 8(g),
or in any application or other document or communication (it being understood
that neither the Company nor any officer, director or employee shall provide any
information to any Prospective Investor which is not contained in the Offering
Documents) (in this Section 13 collectively called an "application") executed by
or on behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to register or qualify
the Units under the state or securities laws thereof or in order to secure an
exemption from such registration or qualification or filed with the Commission;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to the Placement
Agent expressly for inclusion in the Offering Documents or in any application,
as the case may be; or (ii) any material breach of any representation, warranty,
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covenant, or agreement of the Company contained in this Agreement; and (iii) any
act or omission of the Placement Agent in violation of federal or state
securities. The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Agreement.
If any action is brought against the Placement Agent or any
of its officers, directors, partners, employees, agent, or counsel, or any
controlling persons of the Placement Agent (an "indemnified party"), in respect
of which indemnify may be sought against the Company pursuant to the foregoing
paragraph, such indemnified party or parties shall promptly notify the Company
(the "indemnifying party") in writing of the institution of such action (but the
failure so to notify shall not relieve the indemnifying party from any liability
it may have other than pursuant to this Section 13(a) unless, and to the extent
the indemnifying party is prejudiced thereby) and the indemnifying party shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party shall have the right to employ its own counsel
in any such case, but the fees and expense of such counsel shall be at the
expense of such indemnified party unless the employment of such counsel shall
have been authorized in writing by the indemnifying party in connection with the
defense of such action or the indemnifying party shall not have promptly
employed counsel satisfactory to such indemnified party or parties to have
charge of the defense of such action or such indemnified party or parties shall
have reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties which are different from or
additional to those available to one or more of the indemnifying parties, in any
of which events such fees and expenses of one such counsel shall be borne by the
indemnifying party and the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties.
Anything in this paragraph to the contrary notwithstanding, the indemnifying
party shall not be liable for any settlement of any such claim or action
effected without its written consent. The Company agrees promptly to notify the
Placement Agent of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of the
Units, the Offering Documents, or any application.
(b) The Placement Agent agrees to indemnify and hold
harmless the Company, its officers, directors, employees, agents, and counsel,
and each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the Placement Agent in Section
13(a), with respect to any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 13, but not be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon, or
in connection with (i) statements or omissions, if any, made in the Offering
Documents or applications in reliance upon and in conformity with written
information furnished to the Company with respect to the Placement Agent
expressly for inclusion in the Offering Documents or applications; (ii) the
failure of the Placement Agent to comply with the provisions of Section 2(c)
hereof or with the "blue sky" or securities laws of the jurisdictions in which
the Placement Agent solicits offers to buy or offers to sell any Units; (iii)
any breach of any representation, warranty, covenant or agreement of the
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Placement Agent contained in this Agreement; or (iv) any act or omission of the
Placement Agent in violation of federal or state securities laws. The foregoing
agreement to indemnify shall be in addition to any liability the Placement Agent
may otherwise have, including liabilities arising under this Agreement. If any
action shall be brought against the Company or any other person so indemnified
based on the Offering Documents and in respect of which indemnity may be sought
against the Placement Agent pursuant to this Section 13(b), the Placement Agent
shall have the rights and duties given to the indemnifying party, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 13(a).
(c) To provide for just and equitable contribution, if: (i)
an indemnified party makes a claim for indemnification pursuant to Section 13(a)
or 13(b) but it is found in a final judicial determination, not subject to
further appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee, agent, or
counsel of the Company, or any controlling person of the Company), on the one
hand, and the Placement Agent (including for this purpose any contribution made
by or on behalf of an indemnified party), on the other hand, shall contribute to
the losses, liabilities, claims, damages, and expenses whatsoever to which any
of them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Placement
Agent, on the other hand; provided, however, that if applicable law does not
permit such allocation, then other relevant equitable considerations such as the
relative fault of the Company and the Placement Agent in connection with the
facts which resulted in such losses, liabilities, claims, damages, and expenses
shall also be considered. The relative benefits received by the Company, on the
one hand, and the Placement Agent, on the other hand, shall be deemed to be in
the same proportion as (x) the total proceeds from the Offering (net of
compensation payable to the Placement Agent pursuant to Section 6(a) hereof but
before deducting expenses) received by the Company, and (y) the compensation
received by the Placement Agent pursuant to Section 6(a) hereof.
The relative fault, in the case of an untrue statement,
alleged untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by the
Placement Agent, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. The Company and the Placement Agent
agree that it would be unjust and inequitable if the respective obligations of
the Company and the Placement Agent for contribution were determined by pro rata
or per capita allocation of the aggregate losses, liabilities, claims, damages,
and expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section l3(c). In no case shall the
Placement Agent be responsible for a portion of the contribution obligation in
excess of the compensation received by it pursuant to Section 6(a) hereof. No
person guilty of a fraudulent misrepresentation shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section l3(c), each person, if any, who
controls the Placement Agent within the meaning of Section l5 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partners,
18
<PAGE>
employee, agent, and counsel of the Placement Agent, shall have the same rights
to contribution as the Placement Agent, and each person, if any, who controls
the Company within the meaning of Section l5 of the Act or Section 20(a) of the
Exchange Act and each officer, director, employee, agent, and counsel of the
Company, shall have the same rights to contribution as the Company, subject in
each case to the provisions of this Section l3(c). Anything in this Section
l3(c) to the contrary notwithstanding, no party shall be liable for contribution
with respect to the settlement of any claim or action effected without its
written consent. This Section l3(c) is intended to supersede any right to
contribution under the Act, the Exchange Act, or otherwise.
14. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY
All representations, warranties, covenants, and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants, and agreements at the Closing Date and, such representations,
warranties, covenants, and agreements, including the indemnification and
contribution agreements contained in Section 13, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Placement Agent or any indemnified person, or by or on behalf of the Company
or any person or entity which is entitled to be indemnified under Section l3(b),
and shall survive termination of this Agreement or the issuance, sale, and
delivery of the Units for a period of three years. In addition, notwithstanding
any election hereunder or any termination of this Agreement, and whether or not
the terms of this Agreement are otherwise carried out, the provisions of
Sections 12, 13 and 14 shall survive termination of this Agreement and shall not
be affected in any way by such election or termination or failure to carry out
the terms of this Agreement or any part thereof.
15. NOTICES
All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Placement
Agent, shall be mailed, delivered, or faxed and confirmed by letter, to
Janssen-Meyers Associates L.P., 17 State Street, New York, New York 10004,
Attention: Bruce Meyers, with a copy to Goldstein & DiGioia, LLP, 369 Lexington
Avenue, New York, New York 10017, Attention: Victor J. DiGioia, Esq.; or if sent
to the Company, shall be mailed, delivered or faxed and confirmed by letter, to
One Passaic Avenue, Fairfield, New Jersey 07004 Attention: Mr. Jeremiah F.
O'Brien, with a copy to Thelen Reid & Priest LLP, 40 West 57th Street, New York,
New York 10019, Attention: Bruce Rich, Esq. All notices hereunder shall be
effective upon receipt by the party to which it is addressed.
19
<PAGE>
16. PARTIES
This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Placement Agent and the Company and the persons and
entities referred to in Section l3 who are entitled to indemnification or
contribution, and their respective successors, legal representatives, and
assigns (which shall not include any purchaser, as such, of Units), 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 provision
herein contained.
17. GOVERNING LAW/CONSTRUCTION/JURISDICTION
(a) This Agreement shall be construed in accordance with the
laws of the State of New York, without giving effect to conflict of laws.
(b) The Company (i) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (ii) waives
any objection which the Company may have now or hereafter to the venue of any
such suit, action or proceeding, and (iii) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or procedure. Each of the Company and the Placement Agent further
agrees to accept and acknowledge service of any and all process which may be
served in any suit, action or proceeding in the New York State Supreme Court for
the Southern District of New York, and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the Company in any such suit,
action or proceeding. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
[remainder of page intentionally left blank]
20
<PAGE>
18. COUNTERPARTS
This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which, when taken together, shall
constitute one agreement.
If the foregoing correctly sets forth the understanding
between us, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
NUWAVE TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
Accepted as of the date first above written:
JANSSEN-MEYERS ASSOCIATES L.P.
By Meyers-Janssen Securities Corp.General Partner
By:
-------------------------------
Name: Bruce Meyers
Title: President
21
Exhibit 10.57
Warrant Agreement, dated March 13, 2000, between NUWAVE Technologies, Inc.
and American Stock Transfer & Trust Company.
<PAGE>
WARRANT AGREEMENT
By and Between
NUWAVE TECHNOLOGIES, INC.,
a Delaware corporation
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
Section 1. Appointment of Warrant Agent; Issuance of Warrants.............1
Section 2. Form of Warrant................................................1
Section 3. Countersignature and Registration..............................2
Section 4. Transfers and Exchanges........................................2
Section 5. Exercise of Warrants...........................................3
Section 6. Payment of Taxes...............................................4
Section 7. Mutilated or Missing Warrants..................................4
Section 8. Reservation of Common Stock....................................5
Section 9. Adjustments of Exercise Price and Number of Securities.........5
Section 10. Registration...................................................7
Section 11. Indemnification................................................8
Section 12. Disposition of Proceeds on Exercise of Warrants...............11
Section 13. Redemption of Warrants........................................11
Section 14. Merger or Consolidation or Change of Name of Warrant Agent....12
Section 15. Duties of Warrant Agent.......................................12
Section 16. Change of Warrant Agent.......................................14
Section 17. Legends.......................................................14
Section 18. Notices.......................................................15
Section 19. Supplements and Amendments....................................15
Section 20. New York Contract.............................................16
Section 21. Benefits of this Agreement....................................16
Section 22. Successors....................................................16
i
<PAGE>
WARRANT AGREEMENT, dated as of March 10, 2000, between NUWAVE
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and AMERICAN STOCK
TRANSFER & TRUST COMPANY, as warrant agent (the "Warrant Agent").
WHEREAS, the Company proposes to offer for sale in a private offering
(the "Offering") pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), and/or Rule 506 of Regulation D promulgated
thereunder, an aggregate of not less than 30 and not more than 60 Units
("Units"), each Unit comprised of (i) a number of shares of common stock, par
value $.0l per share (the "Common Stock"), of the Company, determined by
dividing the purchase price per Unit of $100,000 (the "Offering Price") by, for
each closing of the Offering, eighty percent (80%) of the then "Average Closing
Sale Price," and (ii) Common Stock Purchase Warrants (the "Warrants") to
purchase fifty percent (50%) of such number of shares of Common Stock of the
Company (the "Warrant Shares") included in each Unit. The Average Closing Sale
Price shall be the average closing sale price for the Common Stock for the eight
(8) consecutive trading days preceding the initial closing (the "Initial
Closing") date or each subsequent closing date (a "Closing Date") of the
Offering, as more particularly described in the Confidential Private Placement
Memorandum dated February 14, 2000 (the "Offering Memorandum");
WHEREAS, in connection with the Offering, and in partial compensation
for acting as placement agent therein, the Company will give to Janssen-Meyers
Associates, L.P. ("Janssen-Meyers") Placement Agent Warrants (the "Placement
Agent Warrants") to purchase 25% of the aggregate number of shares sold in the
Offering at an exercise price equal to the Exercise Price until March 14,
2003; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent; Issuance of Warrants.
--------------------------------------------------
(a) The Company hereby appoints the Warrant Agent to act as
warrant agent for the Company in accordance with the instructions hereinafter
set forth in this Agreement, and the Warrant Agent hereby accepts such
appointment.
(b) At each Closing contemplated in the Offering
Memorandum, and upon exercise of the Placement Agent Warrants as provided
therein, appropriate number of Warrants shall be executed by the Company and
delivered to the Warrant Agent.
Section 2. Form of Warrant.
---------------
The text of the Warrants and the forms of election to purchase Common
Stock attached to the Warrants shall be substantially as set forth in Exhibit A
attached hereto (the provisions of which are hereby incorporated herein). All of
the certificates for the Warrants may have such letters, numbers or other marks
of identification or designation and such legends, summaries or endorsements
<PAGE>
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. Each Warrant shall initially
entitle the registered holder thereof to purchase one share of Common Stock at a
purchase price equal to the Initial Average Closing Sale Price (as adjusted as
hereinafter provided, the "Exercise Price"), at any time during the period (the
"Exercise Period") commencing on the Final Closing Date (as defined in the
Offering Memorandum) and expiring at 5:00 p.m. Eastern Time on March ___, 2003.
The Exercise Price and the number of shares of Common Stock issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, all as hereinafter provided. The Warrants shall be executed on
behalf of the Company by the manual or facsimile signature of the present or any
future President or Vice President of the Company, and attested to by the manual
or facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company.
Warrants shall be dated as of the date of issuance by the Warrant
Agent either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration date of the Warrants falls on a
day that is not a business day, then the Warrants shall expire at 5:00 p.m. New
York time on the next succeeding business day. For purposes hereof, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in New York City, New York, are authorized or
obligated by law to be closed.
Section 3. Countersignature and Registration.
---------------------------------
The Warrant Agent shall maintain books (the "Warrant Register") for
the transfer and registration of the Warrants. Upon the initial issuance of the
Warrants, the Warrant Agent shall issue and register the Warrants in the names
of the respective holders thereof. The Warrants shall be countersigned manually
or by facsimile by the Warrant Agent (or by any successor to the Warrant Agent
then acting as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. The Warrants may, however, be so
countersigned by the Warrant Agent (or by its successor as Warrant Agent) and be
delivered by the Warrant Agent, notwithstanding that the persons whose manual or
facsimile signatures appear thereon as proper officers of the Company shall have
ceased to be such officers at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges.
-----------------------
The Warrant Agent shall transfer, from time to time, any outstanding
Warrants upon the books to be maintained by the Warrant Agent for that purpose,
upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer. Upon any such transfer, a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be cancelled
by the Warrant Agent. Warrants so cancelled shall be delivered by the Warrant
Agent to the Company from time to time upon request. Warrants may be exchanged
at the option of the holder thereof, when surrendered at the office of the
Warrant Agent, for another Warrant, or other Warrants of different denominations
of like tenor and representing in the aggregate the right to purchase a like
2
<PAGE>
number of shares of Common Stock. No certificates for Warrants shall be issued
except for (i) Warrants initially issued hereunder in accordance with Section 1
hereof, (ii) Warrants issued upon any transfer or exchange of Warrants, (iii)
Warrants issued in replacement of lost, stolen, destroyed or mutilated
certificates for Warrants pursuant to Section 7 hereof, and (iv) at the option
of the Board of Directors of the Company, Warrants in such form as may be
approved by its Board of Directors, to reflect any adjustment or change in the
Exercise Price or the number of shares of Common Stock purchasable upon exercise
of the Warrants made pursuant to Section 9 hereof. Notwithstanding any of the
foregoing, the Warrant Agent and the Company shall have no obligation to cause
Warrants to be transferred on the Warrant Register to any person if, in the
opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act and the rules and regulations promulgated
thereunder.
Section 5. Exercise of Warrants.
--------------------
(a) The Warrant may be exercised, in whole or in part, at
any time and from time to time during the Exercise Period by delivery to the
Warrant Agent of (i) the Warrant; (ii) the Cash Exercise Form attached to the
Warrant duly executed by the registered holder and (iii) the full Exercise Price
for each share of Warrant Shares as to which the Warrant is exercised.. Payment
of any Exercise Price shall be made by wire transfer in cash or by certified or
bank check payable to the Company.
(b) Subject to Section 6 hereof, upon receipt by the
Company of the Warrant, the Cash Exercise Form and the aggregate Exercise Price
for the Warrant Shares, the registered holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise; provided, however,
that if the date of such receipt is a date upon which the transfer books of the
Company are closed, the registered holder shall be deemed to be the record
holder on the next succeeding business day on which such books are open. As soon
as practicable after each such exercise of the Warrant, the Warrant Agent shall
issue and cause to be delivered to the registered holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the holder or its designee. If the Warrant should be exercised in
part only, the Warrant Agent shall, upon surrender of the Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
holder to purchase the remaining unexercised balance of the Warrant Shares (or
portions thereof) subject to purchase thereunder. The Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrants
pursuant to the provisions of this Section and the Company, whenever requested
by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed
on behalf of the Company for such purpose. Upon the exercise of any one or more
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 the provisions below, shall cause all payments of an amount (if any), by wire
transfer or in cash or by check made payable to the order of the Company, equal
to the aggregate Exercise Price for such Warrants to be deposited promptly in
the Company's bank account. The Company and Warrant Agent shall determine, in
their sole and absolute discretion, whether a Warrant certificate has been
properly completed for exercise by the registered holder thereof.
3
<PAGE>
(c) The Warrant Agent and the Company shall be entitled
to treat the registered holder of any Warrant on the Warrant Register as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any other
person, and shall not be liable for any registration or transfer of Warrants
which are registered or to be registered in the name of a fiduciary or the
nominee of a fiduciary unless made with the actual knowledge that a fiduciary or
nominee is committing a breach of trust in requesting such registration or
transfer, or with the knowledge of such facts that its participation therein
amounts to bad faith.
(d) Notwithstanding anything to the contrary contained
herein, no Warrant will be exercisable and the Company shall not be obligated to
deliver any securities pursuant to the exercise of any Warrant unless at the
time of exercise (i) the Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), covering the securities issuable
upon exercise of such Warrant and such registration statement shall have been
declared and shall remain effective and shall be current, and such shares have
been registered or qualified or be exempt under the securities laws of the state
or other jurisdiction of residence of the holder of such Warrant and the
exercise of such Warrant in any such state or other jurisdiction shall not
otherwise be unlawful, or (ii) the Company has received an opinion of counsel to
the registered holder of such Warrant, which counsel and opinion are reasonably
satisfactory to the Company, that such securities may be issued in the manner
contemplated without an effective registration statement under the Securities
Act or applicable state securities laws.
Section 6. Payment of Taxes.
----------------
The issuance of any shares or other securities upon the exercise of
the Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the registered
holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer or delivery of the Warrant to a person other than, or the
issuance and delivery of any certificate in a name other than, that of the
registered holder and the Company shall not be required to issue or deliver any
new Warrant or such certificate unless and until the person or persons
requesting the issue thereof 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.
Section 7. Mutilated or Missing Warrants.
-----------------------------
In case any of the Warrants shall be mutilated, lost, stolen or
destroyed, the Company may, in its discretion, issue and the Warrant Agent shall
countersign and deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant, or in lieu of and in substitution for the Warrant
lost, stolen or destroyed, a new Warrant of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction and, in
case of a lost, stolen or destroyed Warrant, indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such reasonable charges as the
Company or the Warrant Agent may prescribe.
4
<PAGE>
Section 8. Reservation of Common Stock.
---------------------------
There have been reserved, and the Company shall at all times keep
reserved, out of its authorized shares of Common Stock, a number of shares of
Common Stock sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the transfer agent for the shares of Common
Stock and every subsequent transfer agent for any shares of Common Stock
issuable upon the exercise of any of the aforesaid rights of purchase are
irrevocably authorized and directed at all times to reserve such number of
authorized shares of Common Stock as shall be required for such purpose. The
Company agrees that all shares of Common Stock issued upon exercise of the
Warrants shall be, at the time of delivery of the certificates for such shares
against payment of the Exercise Price therefor, if any, validly issued, fully
paid and nonassessable. The Company will keep a copy of this Agreement on file
with the transfer agent for the shares of Common Stock (which may be the Warrant
Agent) and with every subsequent transfer agent for any shares of Common Stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is irrevocably authorized to requisition from time
to time from such transfer agent stock certificates required to honor
outstanding Warrants. The Company will supply such transfer agent with duly
executed stock certificates for that purpose. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be cancelled by the Warrant Agent
and shall thereafter be delivered to the Company, and such cancelled Warrants
shall constitute sufficient evidence of the number of shares of Common Stock
which have been issued upon the exercise of such Warrants. Promptly after the
date of expiration of the Warrants, the Warrant Agent shall certify to the
Company the total aggregate amount of Warrants then outstanding, and thereafter
no shares of Common Stock shall be subject to reservation in respect of such
Warrants which shall have expired.
Section 9. Adjustments of Exercise Price and Number of Securities.
------------------------------------------------------
(a) (i) In case the Company shall at any time after the date
the Warrant is first issued (A) declare a dividend on any class of the
outstanding capital stock of the Company (the "Capital Stock") payable in shares
of its Capital Stock, (B) subdivide any class of the outstanding Capital Stock,
or (C) combine any class of the outstanding Capital Stock into a smaller number
of shares, but only if such combination is effective after such time as, were an
exercise of the Warrant to take place, in whole or in part, then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
the Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, or combination, shall be proportionately
adjusted so that the holder after such time shall be entitled to receive the
aggregate number and kind of shares for such consideration which, if such
Warrant had been exercised immediately prior to such time at the then-current
Exercise Price, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, or combination. Such adjustment
shall be made successively whenever any event listed above shall occur.
(ii) No adjustment in the Exercise Price shall be
required if such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this Section 9(a)(ii) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 9(a) shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
5
<PAGE>
(iii)Whenever there shall be an adjustment as provided
in this Section 9(a), the Company shall promptly cause written notice thereof to
be sent by certified mail, postage prepaid, to the Warrant Agent and the
holders, at its address as it shall appear in the Warrant Register, which notice
shall be accompanied by an officer's certificate setting forth the number of
Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment and the computation thereof, which officer's
certificate shall be conclusive evidence of the correctness of any such
adjustment absent manifest error.
(iv) The Company shall not be required to issue
fractions of shares of Common Stock of the Company upon the exercise of the
Warrant. If any fraction of a share would be issuable on the exercise of the
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the current market
price of such share of Common Stock on the date of exercise of the Warrant.
(b) (i) In case of any consolidation with or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the surviving or continuing corporation), or in case of
any sale, lease, or conveyance to another corporation of the property and assets
of any nature of the Company as an entirety or substantially as an entirety,
such successor, leasing, or purchasing corporation, as the case may be, shall
(i) provide the registered holder with an executed agreement stating that the
holder shall have the right thereafter to receive upon exercise of the Warrant
solely the kind and amount of shares of stock and other securities, property,
cash, or any combination thereof receivable upon such consolidation, merger,
sale, lease, or conveyance by a holder of the number of shares of Common Stock
for which the Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease, or conveyance. Such agreement shall provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 9(a).
(ii) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of the Warrant (other than a
change in par value or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), or in case of any consolidation
or merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), the registered holder shall have the right thereafter to receive upon
exercise of the Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which the Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 9(a).
6
<PAGE>
(iii)The above provisions of this Section 9(b) shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales, leases, or conveyances.
(c) Notwithstanding anything herein to the contrary, no
adjustment of the Exercise Price shall be made:
(i) Upon the issuance or sale of the Placement Agent
Warrants, the shares of Common Stock or Warrants issuable upon the exercise of
the Placement Agent Warrants or the shares of Common Stock issuable upon
exercise of the Warrants underlying the Placement Agent Warrants; or
(ii) Upon the issuance or sale of (A) the shares of
Common Stock or Warrants issued by the Company in the Offering, or (B) the
shares of Common Stock (or other securities) issuable upon exercise of Warrants;
or
(iii)Upon (A) the issuance of options pursuant to the
Company's incentive stock option plan in effect on the date hereof or as
hereafter amended in accordance with the terms thereof or any other employee or
executive stock option plan approved by the stockholders of the Company or the
sale by the Company of any shares of Common Stock pursuant to the exercise of
any such options, or (B) the sale by the Company of any shares of Common Stock
pursuant to the exercise of any options or warrants issued and outstanding on
the date hereof.
(d) In case of the dissolution, liquidation or winding-up of
the Company, all rights under the Warrants and the Placement Agent Warrants
shall terminate on a date fixed by the Company, such date to be no earlier than
ten (10) days prior to the effectiveness of such dissolution, liquidation or
winding-up and not later than five (5) days prior to such effectiveness. Notice
of such termination of purchase rights shall be given to each registered holder
of the Warrants, as the same shall appear on the books of the Company maintained
by the Warrant Agent, by registered mail at least thirty (30) days prior to such
termination date.
Section 10. Registration.
-------------
(a) The Company will use its best efforts to file a
registration statement (the "Registration Statement") under the Securities Act,
therein registering the Warrants and the Warrant Shares (the "Registrable
Securities") upon demand by a majority of the holders of the Shares or the
Warrant Shares, after 180 days of the final closing of the Offering (the "Filing
Date"), and use its best efforts to have the Registration Statement declared
effective by the Commission as soon as possible thereafter (the "Effective
Date"). In the event the Registration Statement is not declared effective within
60 days after a demand for registration, the then number of Warrants shall be
increased by two percent (2%), effective as of the end of such 60 day period and
by an additional two percent (2%) on each one month anniversary thereafter,
until such time that the number of Warrants should equal 120% of the original
number of Warrants. The Company agrees to keep the Registration Statement
effective until the expiration period of the Warrants.
7
<PAGE>
(b) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall use its best efforts to cause
the Registrable Securities so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the holder or
such holders (the "Eligible Holders") may reasonably request; provided, however,
that the Company shall not by reason of this Section 10(b) be required to
qualify to do business in any state in which it is not otherwise required to
qualify to do business or to file a general consent to service of process.
(c) The Company shall keep effective any registration or
qualification contemplated by this Section 10 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Registrable Securities covered thereby.
(d) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall furnish to each Eligible Holder
such reasonable number of copies of the registration statement and of each
amendment and supplement thereto (in each case, including all exhibits), such
reasonable number of copies of each prospectus contained in such registration
statement and each supplement or amendment thereto (including each preliminary
prospectus), all of which shall conform to the requirements of the Securities
Act and the rules and regulations thereunder, and such other documents, as any
Eligible Holder may reasonably request to facilitate the disposition of the
Registrable Securities included in such registration.
(e) In the event of a registration pursuant to the provision
of this Section 10, the Company and each Eligible Holder shall enter into a
cross-indemnity agreement and a contribution agreement, each in customary form,
with each underwriter, if any, and, if requested, enter into an underwriting
agreement containing customary representations, warranties, allocation of
expenses, and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Registrable Securities.
(f) The Company agrees that until all the Registrable
Securities have been sold under a registration statement or pursuant to Rule 144
under the Securities Act, it shall keep current in filing all reports,
statements and other materials required to be filed with the Commission to
permit holders of the Registrable Securities to sell such securities under Rule
144.
Section 11. Indemnification.
---------------
(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless each Eligible Holder, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls any such person within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), from and against any and all loss, liability, charge, claim, damage, and
expense whatsoever (which shall include, for all purposes of this Section 11,
without limitation, reasonable attorneys, fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
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<PAGE>
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with, any breach of any
representation, warranty, covenant, or agreement of the Company contained in any
of the Warrants, any untrue statement or alleged untrue statement of a material
fact contained (i) in any registration statement, preliminary prospectus, or
final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, relating to the sale of any of the Registrable
Securities, or (ii) in any application or other document or communication (in
this Section 11, collectively called an "application") executed by or on behalf
of the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to register or qualify any of the
Registrable Securities under the securities or Blue Sky laws thereof or filed
with the commission or any securities exchange; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to such Eligible Holder by or on behalf of such
person expressly for inclusion in any registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. Notwithstanding the foregoing, the Company
shall not be responsible for any failure of Janssen-Meyers to file, on behalf of
the Company, blue sky applications in jurisdictions where Janssen-Meyers is
offering Units and where such application is required by law. The foregoing
agreement to indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under any of the Warrants.
If any action is brought against any Eligible Holder or any of
its officers, directors, partners, employees, agents, or counsel, or any
controlling persons of such person (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company in writing
of the institution of such action (but the failure to so notify shall not
relieve the Company from any liability under this Section 11(a) unless the
Company shall have been materially prejudiced by such failure or relieve the
Company from any liability other than pursuant to this Section 11(a)) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this Section
11 to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Company agrees promptly to notify
the Eligible Holders of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with the
sale of any Registrable Securities or any preliminary prospectus, final
prospectus, registration statement, or amendment or supplement thereto, or any
9
<PAGE>
application relating to any sale of any Registrable Securities.
(b) The registered holder of Warrants agrees to indemnify
and hold harmless the Company, each director of the Company, each officer of the
Company who shall have signed any registration statement covering Registrable
Securities held by the holder, each other person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, and its or their respective counsel, to the same extent as
the foregoing indemnity from the Company to the Eligible Holders in Section
11(a), but only with respect to statements or omissions, if any, made in any
registration statement, preliminary prospectus, or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto,
or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the registered holder by or
on behalf of the registered holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified (an "indemnified party") based on any such registration statement,
preliminary prospectus, or final prospectus, or any amendment or supplement
thereto, or in any application, and in respect of which indemnity may be sought
against the registered holder pursuant to this Section 11(b), the registered
holder shall have the rights and duties given to the Company, and the Company
and each other person so indemnified shall have the rights and duties given to
the indemnified parties, by the provisions of Section 11(a).
(c) To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to Section 11(a)
or 11(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company, as one entity, and the Eligible Holders of the Registrable
Securities included in such registration in the aggregate, as a second entity,
shall contribute to the losses, liabilities, claims, damages, and expenses
whatsoever to which any of them may be subject, on the basis of relevant
equitable considerations such as the relative fault of the Company and such
Eligible Holders in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses. The relative fault, in the case of
an untrue statement, alleged untrue statement, omission, or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission, or alleged omission relates to information supplied by the
Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company and the
Eligible Holders agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Eligible Holders and the
other indemnified parties were treated as one entity for such purpose) or by any
other method of allocation that does not reflect the equitable considerations
referred to in this Section 11(c). In no case shall any Eligible Holder be
responsible for a portion of the contribution obligation imposed on all Eligible
10
<PAGE>
Holders in excess of its pro rata share based on the number of shares of Common
Stock owned (or which would be owned upon exercise of all Registrable
Securities) by it and included in such registration as compared to the number of
shares of Common Stock owned (or which would be owned upon exercise of all
Registrable Securities) by all Eligible Holders and included in such
registration. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
representation. For purposes of this Section 11(c), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent, and counsel of each such Eligible Holder or control person
shall have the same rights to contribution as each Eligible Holder or control
person and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed any such registration statement,
each director of the Company, and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 11(c). Anything in this Section 11(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 11(c) is intended to supersede any right to contribution under the
Securities Act, the Exchange Act or otherwise.
Section 12. Disposition of Proceeds on Exercise of Warrants.
-----------------------------------------------
(a) The Warrant Agent shall promptly forward to the Company
all monies received by the Warrant Agent for the purchase of shares of Common
Stock through the exercise of the Warrants.
(b) The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.
Section 13. Redemption of Warrants.
----------------------
The Warrants are redeemable by the Company commencing twelve (12)
months after the Effective Date, in whole or in part, on not less than thirty
(30) days prior written notice at a redemption price of $.01 per Warrant (or
earlier with the prior consent of Janssen-Meyers), provided the average closing
bid quotation of the Common Stock as reported on the Nasdaq SmallCap Market, if
traded thereon, or if not traded thereon, the average closing sale price if
listed on a national securities exchange (or other reporting system that
provides last sale prices), has been at least 250% of the then current Exercise
Price of the Warrants, for a period of 30 consecutive trading days ending within
five days prior to the date on which the Company gives notice of redemption. Any
redemption in part shall be made pro rata to all Warrant holders. The redemption
notice shall be mailed to the holders of the Warrants at their respective
addresses appearing in the Warrant Register. Any such notice mailed in the
manner provided herein shall be conclusively presumed to have been duly given in
accordance with this Agreement whether or not the registered holder receives
such notice. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a registered holder of a Warrant (i) to whom notice was not mailed
or (ii) whose notice was defective. An affidavit of the Warrant Agent or the
Secretary or Assistant Secretary of the Company that notice of redemption has
11
<PAGE>
been mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. Holders of the Warrants will have exercise rights until the
close of business on the day immediately preceding the date fixed for
redemption. On and after the date fixed for redemption, the holder shall have no
right with respect to the Warrant except to receive $.01 per Warrant upon
surrender of the Warrant.
Notwithstanding anything to the contrary contained herein, no Warrant
will be redeemable unless at the time of redemption, the Company has filed with
the Commission a registration statement under the Securities Act, covering the
Warrant Shares and such registration statement shall have been declared and
shall remain effective and shall be current, and such Warrant Shares have been
registered or qualified or be exempt under the securities laws of the state or
other jurisdiction of residence of the holder of such Warrant and the redemption
of such Warrant in any such state or other jurisdiction shall not otherwise be
unlawful.
Section 14. Merger or Consolidation or Change of Name of Warrant
----------------------------------------------------
Agent.
-----
Any corporation or company which may succeed to the corporate trust
business of the Warrant Agent by any merger or consolidation or otherwise shall
be the successor to the Warrant Agent hereunder without the execution or filing
of any paper or any further act on the part of any of the parties hereto;
provided, that such corporation would be eligible for appointment as a successor
Warrant Agent under the provisions of Section 16 of this Agreement. In case at
the time such successor to the Warrant Agent shall succeed to the agency created
by this Agreement any of the Warrants shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrants so
countersigned.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned. In all such cases such Warrants shall
have the full force provided in the Warrants and in this Agreement.
Section 15. Duties of Warrant Agent.
-----------------------
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Warrants, by their acceptance thereof, shall be
bound:
(a) The statements of fact and recitals contained herein and
in the Warrants shall be taken as statements of the Company, and the Warrant
Agent assumes no responsibility for the correctness of any of the same except as
such describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the covenants in this Agreement or
in the Warrants.
12
<PAGE>
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges incurred by the Warrant Agent
in the execution of this Agreement and to indemnify the Warrant Agent and save
it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding.
(g) The Warrant Agent and any stockholder, director,
officer, partner or employee of the Warrant Agent may buy, sell or deal in any
of the Warrants or other securities of the Company or become peculiarly
interested in any transaction in which the Company may be interested, or
contract with or lend money to or otherwise act as fully and freely as though it
were not the Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent
and its duties shall be determined solely by the provisions hereof.
(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any such attorneys, agents or employees or
for any loss to the Company resulting from such neglect or misconduct provided
reasonable care had been exercised in the selection and continued employment
thereof.
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<PAGE>
(j) Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 16. Change of Warrant Agent.
-----------------------
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and to the holders of
the Warrants notice by mailing such notice to the holders at their respective
addresses appearing on the Warrant Register, of such resignation, specifying a
date when such resignation shall take effect. The Warrant Agent may be removed
by like notice to the Warrant Agent from the Company and the like mailing of
notice to the holders of the Warrants. If the Warrant Agent shall resign or be
removed or shall otherwise become incapable of action, the Company shall appoint
a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Warrant Agent or after the Company has received such notice
from a registered holder of a Warrant (who shall, with such notice, submit his
Warrant for inspection by the Company), then the registered holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or by such a court, shall be a bank or trust company, in good
standing, incorporated under New York or federal law. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibility as if it had been originally named as Warrant Agent without
further act or deed and the former Warrant Agent shall deliver and transfer to
the successor Warrant Agent all canceled Warrants, records and property at the
time held by it hereunder, and execute and deliver any further assurance or
conveyance necessary for this purpose. Failure to file or mail any notice
provided for in this Section, however, or any defect therein, shall not affect
the validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be.
Section 17. Legends.
-------
Unless registered pursuant to the provisions of Section 10 hereof, the
Warrant Shares issued upon exercise of the Warrants shall be subject to a stop
transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
14
<PAGE>
IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO
THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS."
In addition, unless registered pursuant to the provisions of Section
10 hereof, any Warrants issued upon transfer or any new Warrants issued shall
bear a similar legend.
Section 18. Notices.
--------
Any notice pursuant to this Agreement to be given by the Warrant Agent
or the registered holder of any Warrant to the Company, shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another is
filed in writing by the Company with the Warrant Agent) as follows:
NUWAVE Technologies, Inc.
One Passaic Avenue
Fairfield, New Jersey 07004
Attention: President
and a copy thereof to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Bruce A. Rich, Esq.
Any notice pursuant to this Agreement to be given by the Company or
the registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Executive Vice President
Section 19. Supplements and Amendments.
---------------------------
The Company and the Warrant Agent may from time to time supplement or
amend this Agreement in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
15
<PAGE>
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and which shall not materially adversely affect the interest of
the holders of Warrants; and in addition the Company and the Warrant Agent may
modify, supplement or alter this Agreement with the consent in writing of the
registered holders of the Warrants representing not less than a majority of the
Warrants then outstanding.
Section 20. New York Contract.
-----------------
This Agreement and each Warrant issued hereunder shall be deemed to be
a contract made under the laws of the State of New York and shall be construed
in accordance with the laws of New York without regard to the conflicts of law
principles thereof.
Section 21. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of the Warrants any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent and the registered holders of the Warrants.
Section 22. Successors.
----------
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
16
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
NUWAVE TECHNOLOGIES, INC.
By: /s/ Jeremiah F. O'Brien
-------------------------------
Name: Jeremiah F. O'Brien
Title: Chief Financial Officer and
Corporate Secretary
AMERICAN STOCK
TRANSFER & TRUST COMPANY
By: /s/ Herbert J. Lemmer
-------------------------------
Name: Herbert J. Lemmer
Title: Vice President
17
Exhibit 10.58
Form of Warrant Certificate.
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS
(1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS.
NUWAVE TECHNOLOGIES, INC.
Redeemable Warrant for the Purchase of Shares of Common Stock,
par value $0.01 per share
No. VOID AFTER MARCH 14, 2003
--------------------------
WARRANTS
CUSIP 67065M 13 6
THIS CERTIFIES that, for value received,
,
------------------------
with an address at
------------------------
(including any registered assignee, the "Holder" ), is entitled to subscribe for
and purchase from NUWAVE Technologies, Inc., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein and the Warrant
Agreement (as herein defined), at any time and from time to time from the date
of the final closing of the Offering (as defined in the Warrant Agreement) until
5:00 p.m. on March 13, 2003, New York time (the "Exercise Period"), one share of
the Company's common stock, par value $0.01 per share (the "Common Stock") for
each warrant represented by this certificate, at a price per share (the
"Exercise Price") equal to $3.95.
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, dated as of _________, 2000 (the "Warrant
<PAGE>
Agreement"), between the Company and American Stock Transfer & Trust Company
(the "Warrant Agent").
The Warrants may be exercised by the Holder, in whole or in part,
at any time and from time to time during the Exercise Period through a cash
exercise upon presentation and surrender of this Warrant Certificate with the
cash exercise form duly executed, at the corporate office of the Warrant Agent
at 40 Wall Street, New York, New York 10005, accompanied by payment of the full
Exercise Price for the Warrants in lawful money of the United States of America
in cash or by certified or bank check made payable to the Company or wire
transfer, as more fully described in the Warrant Agreement.
In the event of certain contingencies provided for in the Warrant
Agreement, the Exercise 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 Holder, but no fractional shares 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 Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Warrants.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of the Warrants represented hereby unless at the time
of exercise (i) the Company has filed with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), covering the securities issuable upon exercise of the
Warrants represented hereby and such registration statement has been declared
and shall remain effective and shall be current, and such securities have been
registered or qualified or be exempt under the securities laws of the state or
other jurisdiction of residence of the Holder and the exercise of the Warrants
represented hereby in any such state or other jurisdiction shall not otherwise
be unlawful, or (ii) the Company has received an opinion of counsel to the
Holder, which counsel and opinion are reasonably satisfactory to the Company,
that such securities may be issued in the manner contemplated without an
effective registration statement under the Securities Act or applicable state
securities laws.
Prior to the exercise of any Warrant represented hereby, the
Holder, as such, 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 by the Company, in whole or in part, at $.01 per Warrant at any
time commencing twelve (12) months after the Effective Date (as defined in the
Warrant Agreement), or earlier with the prior written consent of Janssen-Meyers
Associates, L.P., on not less than 30 days prior written notice to the Holder,
provided the average closing bid quotation of the Common Stock as reported on
the Nasdaq SmallCap Market, if traded thereon, or, if not traded thereon, the
average closing bid quotation of the Common Stock if listed on a national
securities exchange (or other reporting system that provides last sale prices),
has been at least 250% of the then current Exercise Price of the Warrants, for a
2
<PAGE>
period of 30 consecutive trading days ending within five days prior to the date
on which the Company gives notice of redemption. On and after the date fixed for
redemption, the Holder shall have no right with respect to this Warrant except
to receive $.01 per Warrant upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the 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 regard to the
conflicts of law principles thereof.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
Dated _________ ____, 2000
NUWAVE TECHNOLOGIES, INC.
By:
-------------------------------
President
Attest:
By:
-------------------------------
Secretary
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By:
------------------------------------
Authorized officer
3
Exhibit 10.59
Form of Subscription Agreement.
<PAGE>
SUBSCRIPTION AGREEMENT
February 14, 2000
NUWAVE Technologies, Inc.
One Passaic Avenue
Fairfield, New Jersey 07004
Ladies and Gentlemen:
1. Subscription.
------------
(a) The undersigned, intending to be legally bound, hereby
irrevocably subscribes to purchase from NUWAVE Technologies, Inc., a Delaware
corporation (the "Company"), the number of units (the "Units") set forth on the
signature page hereof, for a purchase price of $100,000 per Unit (the "Purchase
Price"). Each Unit consists of (i) a number of shares of common stock, par value
$.0l per share (the "Common Stock"), of the Company, determined by dividing the
purchase price per Unit of $100,000 (the "Offering Price") by, for each closing
of the Offering, eighty percent (80%) of the then "Average Closing Sale Price,"
and (ii) Common Stock Purchase Warrants (the "Warrants") to purchase fifty
percent (50%) of such number of shares of Common Stock of the Company (the
"Warrant Shares") included in each Unit. The Average Closing Sale Price shall be
the average closing sale price for the Common Stock for the eight (8)
consecutive trading days ending on the date that cleared funds are then in
escrow (A) for the minimum offering amount, preceding the initial closing (the
"Initial Closing") date or (B) with respect to each subsequent closing date (a
"Closing Date") of the Offering the date that $500,000 of cleared funds are then
in escrow. This subscription is submitted to you in accordance with and subject
to the terms and conditions described in this Agreement and the Confidential
Private Placement Memorandum, dated February 14, 2000, as it may be supplemented
and amended (the "Memorandum"), relating to an offering (the "Offering") of a
minimum of 30 Units and a maximum of 60 Units. If the undersigned is purchasing
a fractional Unit, all components of the Unit and the Purchase Price will be
calculated by multiplying the respective numbers for one full Unit by the
fraction to be purchased.
(b) Subscription payments should be made payable to "HSBC Bank
USA, as Escrow Agent for NUWAVE Technologies, Inc." and should be delivered,
together with two executed and properly completed copies of this Agreement
(along with an executed and properly completed copy of the appropriate
Confidential Purchaser Questionnaire in the form supplied herewith), to
Janssen-Meyers Associates, L.P. ("JMA"), 17 State Street, New York, New York
10004, Attention: Bruce Meyers. Subscription payments may also be made via wire
transfer. If the subscriber wishes to make payment in this manner, wire transfer
instructions will be supplied on request to the address above. If the
subscription is not accepted in whole or in part by the Company, the full or
ratable amount, as the case may be, of any subscription payment received will be
<PAGE>
promptly refunded to the subscriber without deduction therefrom or interest
thereon.
(c) If this subscription is accepted by the Company, in whole or
in part, and subject to the conditions set forth in Section 2 of this Agreement,
the Company shall deliver to the undersigned the Common Stock and the Warrants
subscribed for hereby, dated the date of closing of the Offering of such Units
(the "Closing") and a fully executed copy of this Agreement.
(d) The Company has engaged JMA to introduce the Company to
persons who may be interested in purchasing Units and to advise the Company in
connection with the structure, terms and conditions of the Offering. As
consideration for its services, JMA will receive (i) a fee of 10% of the
aggregate gross proceeds from the sale of the Units in the Offering, (ii) a 3%
non-accountable expense allowance, (iii) a warrant to purchase a number of Units
equal to 25% of the Units sold in the Offering and (iv) reimbursement of certain
reasonable expenses, subject to receipt by the Company of appropriate
documentation. JMA, its officers, directors, employees, agents, consultants
and/or affiliates may participate in the Offering. JMA did not prepare any of
the information relating to the Company or its operations to be delivered to
prospective investors in connection with the Offering. Prospective investors are
advised to conduct their own review of the business, properties and affairs of
the Company before subscribing to purchase Units.
(e) The undersigned may not withdraw this subscription or any
amount paid pursuant thereto, except as otherwise provided below.
2. Conditions. It is understood and agreed that this subscription is
----------
made, subject to the following terms and conditions:
(a) The Company and JMA shall have the right to accept or reject
this subscription in whole or in part. Unless this subscription is accepted in
whole or in part by the Company prior to the expiration of the Offering Period
(as defined in the Memorandum), this subscription shall be deemed rejected in
whole. Subscriptions accepted in whole or in part by the Company or JMA shall be
irrevocable, except as otherwise provided by law. Subscriptions need not be
accepted in the order received.
(b) At the date of the Closing, JMA shall have been furnished
with such information, documents, certificates, and opinions as it may
reasonably require to evidence the accuracy, completeness, or satisfaction of
the representations, warranties, covenants, agreements, and conditions herein
contained or as it otherwise may reasonably request.
3. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with the undersigned as follows, in each
case as of the date hereof and in all material respects as of the date of the
Closing except for any changes resulting solely from the Offering:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to own, lease, license and use its properties and assets and to conduct the
2
<PAGE>
business in which it is engaged as described in the Memorandum. The Company is
duly qualified to transact the business in which it is engaged as described in
the Memorandum and is in good standing as a foreign corporation in every
jurisdiction in which its ownership, leasing, licensing or use of its property
or assets or the conduct of its business make such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the Company. The Company has no subsidiaries.
(b) The authorized capital stock of the Company consists of
2,000,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), and 40,000,000 shares of Common Stock, par value $.01 per share. There
are no outstanding shares of Preferred Stock. Each outstanding share of Common
Stock is duly authorized, validly issued, fully paid and non-assessable.
(c) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement, to issue, sell and
deliver the securities underlying the Units. This Agreement has been duly
authorized by the Company, and when executed and delivered by the Company, will
constitute the legal, valid and binding obligation of the Company, enforceable
as to the Company in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance or transfer, moratorium or other laws or court decisions, now or
hereinafter in effect, relating to or affecting the rights of creditors
generally and as may be limited by general principles of equity and the
discretion of the court having jurisdiction in an enforcement action (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(d) Except for Form D filing with the Securities and Exchange
Commission and any required "blue sky" filings, no consent, authorization,
approval, order, license, certificate or permit of or from, or declaration or
filing with, any federal, state, local or other governmental authority or any
court or any other tribunal is required by the Company for the execution,
delivery or performance by the Company of this Agreement or the execution,
issuance, sale or delivery of the Units.
(e) No consent of any party to any material contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company is
a party or to which any of its properties or assets are subject is required for
the execution, delivery or performance by the Company of this Agreement, or the
execution, issuance, sale or delivery of the Units.
(f) The execution, delivery and performance of this Agreement
will not violate, result in a breach of, conflict with (with or without the
giving of notice or the passage of time or both) or entitle any party to
terminate or call a default under, any material contract, agreement, instrument,
lease, license, arrangement or understanding or violate or result in a breach of
any term of the certificate of incorporation or by-laws of, or conflict with any
law, rule, regulation, order, judgment or decree binding upon, the Company or to
which any of its operations, businesses, properties or assets are subject which
individually or in the aggregate do not have a material adverse effect upon the
operations, business, properties or assets of the Company.
3
<PAGE>
(g) The securities underlying the Units, upon delivery to the
subscriber, will be validly issued, fully paid and non-assessable and will not
be issued in violation of any preemptive or other rights of stockholders known
to the Company except as described in the Memorandum.
4. Representations and Warranties of the Subscriber. The undersigned
------------------------------------------------
hereby represents and warrants to, and agrees with, the Company as follows:
(a) The undersigned is an "accredited investor" as that term is
defined in Rule 501 (a) of Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"). Specifically, the undersigned is (check
appropriate items(s)):
[ ] (i) A bank, as defined in Section 3(a)(2) of the
Securities Act, or a savings and loan association or other institution, as
defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its
individual or fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended; an insurance
company as defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, as amended, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;
[ ] (ii) A private business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;
[ ] (iii) An organization described in Section 501(c)(3) of
the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or
similar business trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess in $5,000,000;
[ ] (iv) A director or executive officer of the Company;
[ ] (v) (v) A natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of his or her purchase
exceeds $1,000,000;
[ ] (vi) A natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
4
<PAGE>
[ ] (vii) A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) (i.e., a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment); or
[ ] (viii) An entity in which all of the equity owners are
accredited investors. (If this alternative is checked, the undersigned must
identify each equity owner and provide statements signed by each demonstrating
how each is qualified as an accredited investor.)
(b) If a natural person, the undersigned is: a bona fide resident
of the State contained in the address set forth on the signature page of this
Agreement as the undersigned's home address; at least 21 years of age; and
legally competent to execute this Agreement. If an entity, the undersigned is
duly authorized to execute this Agreement and this Agreement constitutes the
legal, valid and binding obligation of the undersigned enforceable against the
undersigned in accordance with its terms.
(c) The undersigned has received, read carefully and is familiar
with this Agreement and the Memorandum. Respecting the Company, the undersigned
is familiar with the Company's business, plans and financial condition, the
terms of the Offering and any other matters relating to the Offering; the
undersigned has received all materials which have been requested by the
undersigned; has had a reasonable opportunity to ask questions of the Company
and its representatives; and the Company has answered all inquiries that the
undersigned or the undersigned's representatives have put to it. The undersigned
has had access to all additional information necessary to verify the accuracy of
the information set forth in this Agreement and the Memorandum and any other
materials furnished herewith or therewith, and has taken all the steps necessary
to evaluate the merits and risks of an investment as proposed hereunder.
(d) The undersigned or the undersigned's purchaser representative
has such knowledge and experience in finance, securities, investments and other
business matters so as to be able to protect the interests of the undersigned in
connection with this transaction, and the undersigned's investment in the
Company hereunder is not material when compared to the undersigned's total
financial capacity.
(e) The undersigned understands the various risks of an
investment in the Company as proposed herein and can afford to bear such risks,
including, without limitation, the risks of losing the entire investment.
(f) The undersigned understands that JMA does not make any
representation or warranty concerning the accuracy or completeness of any
information, relating to the Company or its operations to be delivered to
prospective investors in connection with the Offering.
(g) The undersigned acknowledges that no market for the Units or
Warrants presently exists and none may develop in the future and that the
undersigned may find it impossible to liquidate the investment at a time when it
5
<PAGE>
may be desirable to do so, or at any other time.
(h) The undersigned has been advised by the Company that none of
the Units, nor the Common Stock and the Warrants underlying the Units nor the
Warrant Shares (collectively, the "Securities") have been registered under the
Securities Act, that the Securities will be issued on the basis of the statutory
exemption provided by Section 4(2) of the Securities Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering and under similar exemptions under certain state
securities laws, that this transaction has not been reviewed by, passed on or
submitted to any federal or state agency or self-regulatory organization where
an exemption is being relied upon, and that the Company's reliance thereon is
based in part upon the representations made by the undersigned in this
Agreement. The undersigned acknowledges that the undersigned is familiar with
the nature of the limitations imposed by the Securities Act and the rules and
regulations thereunder on the transfer of Securities. In particular, the
undersigned agrees that no sale, assignment or transfer of any of the Securities
shall be valid or effective, and the Company shall not be required to give any
effect to such a sale, assignment or transfer, unless (i) the sale, assignment
or transfer of such Securities is registered under the Securities Act, it being
understood that the Securities are not currently registered for sale and that
the Company has no obligation or intention to so register the Securities except
as contemplated by the terms of this Agreement and the Warrants, or (ii) such
Securities are sold, assigned or transferred in accordance with all the
requirements and limitations of Rule 144 under the Securities Act, it being
understood that Rule 144 is not available at the present time for the sale of
the Securities, or (iii) such sale, assignment or transfer is otherwise exempt
from registration under the Securities Act. The undersigned further understands
that an opinion of counsel and other documents may be required to transfer the
Securities. The undersigned acknowledges that the Securities shall be subject to
a stop transfer order and the certificate or certificates evidencing any
Securities shall bear the following or a substantially similar legend or such
other legend as may appear on the form of Warrants and such other legends as may
be required by state blue sky laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
(2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF
SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
6
<PAGE>
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR APPLICABLE STATE SECURITIES LAWS."
(i) The undersigned will acquire the Securities for the
undersigned's own account (or for the joint account of the undersigned and the
undersigned's spouse either in joint tenancy, tenancy by the entirety or tenancy
in common) for investment and not with a view to the sale or distribution
thereof or the granting of any participation therein, and has no present
intention of distributing or selling to others any of such interest or granting
any participation therein.
(j) It never has been represented, guaranteed or warranted by any
broker, the Company, JMA, any of the Company's or JMA's officers, directors,
stockholders, partners, employees or agents, or any other persons, whether
expressly or by implication, that: (i) the Company or the undersigned will
realize any given percentage of profits and/or amount or type of consideration,
profit or loss as a result of the Company's activities or the undersigned's
investment in the Company; or (ii) the past performance or experience of the
management of the Company, or of any other person, will in any way indicate the
predictable results of the ownership of the Securities or of the Company's
activities.
(k) No oral or written representations have been made other than
as stated in the Memorandum and this Agreement, and no oral or written
information furnished to the undersigned or the undersigned's advisor(s) in
connection with the Offering were in any way inconsistent with the information
stated in the Memorandum or this Agreement.
(l) The undersigned is not subscribing for Units as a result of
or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, posted on the World Wide Web of the Internet, or presented
at any seminar or meeting, or any solicitation of a subscription by a person
other than a representative of JMA or the Company with which the undersigned had
a pre-existing relationship in connection with investments in securities
generally.
(m) The undersigned is not relying on the Company with respect to
the tax and other economic considerations of an investment.
(n) The undersigned understands that the net proceeds from all
subscriptions paid and accepted pursuant to the Offering (after deduction for
expenses of the Offering, including the fees and expenses payable to JMA) will
be used in all material respects for the purposes set forth in the Memorandum.
(o) The undersigned acknowledges that the representations,
warranties and agreements made by the undersigned herein shall survive the
execution and delivery of this Agreement and the purchase of the Units.
(p) The undersigned has consulted his own financial, legal and
tax advisors with respect to the economic, legal and tax consequences of an
investment in the Units and has not relied on the Memorandum or the Company, its
7
<PAGE>
officers, directors or professional advisors for advice as to such consequences.
5. Registration Rights.
-------------------
(a) The Company will use its best efforts to file a registration
statement (the "Registration Statement") under the Securities Act registering
the shares of Common Stock and the Warrant Shares underlying the Units
(together, the "Registrable Securities"), upon demand, after 180 days of the
Final Closing (as defined in the Memorandum) of the Offering (the "Filing
Date"), and use its best efforts to have the Registration Statement declared
effective by the Securities and Exchange Commission (the "Commission") as soon
as possible thereafter (the "Effective Date"). In the event the Registration
Statement is not declared effective within 60 days after a demand for
registration, the then number of Warrants shall be increased by two percent
(2%), effective as of the end of such 60 day period and by an additional two
percent (2%) on each one month anniversary thereafter, until such time that the
number of Warrants should equal 120% of the original number of Warrants. The
Company agrees to keep the effective any registration statement or qualification
contemplated by this Section 5 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication until the expiration date
of the Warrants.
(b) In the event of a registration pursuant to the provisions of
this Section 5, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the holder or such holders
(the "Eligible Holders") may reasonably request; provided, however, that the
Company shall not by reason of this Section 5(b) be required to qualify to do
business in any state in which it is not otherwise required to qualify to do
business or to file a general consent to service of process.
(c) In the event of a registration pursuant to the provisions of
this Section 5, the Company shall furnish to each Eligible Holder such
reasonable number of copies of the registration statement and of each amendment
and supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Securities Act and the
rules and regulations thereunder, and such other documents, as any Eligible
Holder may reasonably request to facilitate the disposition of the Registrable
Securities included in such registration.
(d) In the event of a registration pursuant to the provision of
this Section 5, the Company and each Eligible Holder shall enter into a
cross-indemnity agreement and a contribution agreement, each in customary form,
with each underwriter, if any, and, if requested, enter into an underwriting
agreement containing customary representations, warranties, allocation of
expenses, and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Registrable Securities.
8
<PAGE>
(e) The Company agrees that until all the Registrable Securities
have been sold under a registration statement or pursuant to Rule 144 under the
Securities Act, it shall keep current in filing all reports, statements and
other materials required to be filed with the Commission to permit holders of
the Registrable Securities to sell such securities under Rule 144.
6. Indemnification. The undersigned acknowledges that the
---------------
undersigned understands the meaning and legal consequences of the
representations and warranties contained in Section 4 hereof, and agrees to
indemnify and hold harmless the Company, JMA, its partners, and each
incorporator, officer, director, partner, employee, agent and controlling person
of each thereof, past, present or future, from and against any and all loss,
damage or liability due to or arising out of a breach of any such representation
or warranty.
7. Transferability. Neither this Agreement, nor any interest of the
---------------
undersigned herein, shall be assignable or transferable by the undersigned in
whole or in part except by operation of law.
8. Miscellaneous.
-------------
(a) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements- among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or by
Federal Express, Express Mail or similar overnight delivery or courier service
or delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt to the party to whom it is to be given, (i) if to the
Company, at the address set forth on the first page hereof, (ii) if to the
undersigned, at the address set forth on the signature page hereof, or (iii) in
either case, to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 8(b). Notice to the estate of
any party shall be sufficient if addressed to the party as provided in this
Section 8(b). Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party address which shall be deemed given at the time of receipt thereof. Any
notice given by other means permitted by this Section 8(b) shall be deemed given
at the time of receipt thereof.
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto, the successors and assigns of the Company, and the
permitted successors, assigns, heirs and personal representatives of the
undersigned (including permitted transferees of the Securities).
(d) The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
9
<PAGE>
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of law.
(g) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Sections 6, 8(c) and 8(g)); provided, that JMA shall be
entitled to rely on, and shall be a third party beneficiary of, the
representations, warranties and agreements contained in this Agreement.
(h) The parties hereto irrevocably consent to the jurisdiction of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of or relating to
this Agreement, any document or instrument delivered pursuant to, in connection
with or simultaneously with this Agreement, or a breach of this Agreement or any
such document or instrument. In any such action or proceeding, each party hereto
waives personal service of any summons, complaint or other process and agrees
that service thereof may be made in accordance with Section 8(b). Within 30 days
after such service, or such other time as may be mutually agreed upon in writing
by the attorneys for the parties to such action or proceeding, the party so
served shall appear or answer such summons, complaint or other process.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year this subscription has been accepted by the Company as set
forth below.
Number of Units Print Name of Subscriber:
Being Purchased:
----------------------------------------
- ------------------- By:
($100,000 per Unit) -------------------------------------
(Signature of Subscriber or Authorized
Signatory)
Social security Number or other Taxpayer
Identification Number:
----------------------------------------
Address:
----------------------------------------
----------------------------------------
If the Units will be held as joint
tenants, tenants in common, or
community property, please complete the
following:
----------------------------------------
Print name of spouse or other co-subscriber
----------------------------------------
Signature of spouse or other co-subscriber
----------------------------------------
Print manner in which Units will be held
----------------------------------------
Social Security Number of spouse or other
co-subscriber
ACCEPTED BY:
NUWAVE Technologies, Inc.
By:
--------------------------
Name:
Title:
Date: , 2000
----------------
11
Exhibit 10.60
Form of Placement Agent Warrant Certificate.
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, March 14, 2005
No. NWJMA1 Warrants
---------
WARRANT CERTIFICATE
This Warrant Certificate certifies that Janssen Meyers Associates LP
or registered assigns, is the registered holder of 16.5 Warrants to purchase
initially, at any time from the date hereof until 5:30 p.m. New York time on
March 16, 2005 ("Expiration Date"), up to 15,823 Units of NUWAVE TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), each Unit consisting of 31,646
shares of fully-paid and non-assessable shares of common stock, par value $.01
per share ("Common Stock") of the Company, and 15,823 Redeemable Warrants of the
Company, at the initial exercise price, subject to adjustment in certain events
(the "Exercise Price"), of $100,000 per Unit upon surrender of this Warrant
Certificate and either (i) payment of the Exercise Price; or (ii) accompanied by
a Notice of Exchange at an office or agency of the Company, but subject to the
conditions set forth herein and in the Placement Agent's Unit Purchase Warrant
Agreement dated as of March 16, 2000 between the Company and JANSSEN/MEYERS
ASSOCIATES, L.P., (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 Placement Agent's 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 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.
1
<PAGE>
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and/or number of the Company's securities issuable
thereupon may, 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 a like number
of Warrants 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 exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
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.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of March 14, 2000
[SEAL] NUWAVE TECHNOLOGIES, INC.
Attest:
By
---------------------------
Name:
Title:
- -------------------
Secretary
2
Exhibit 23.1
Consent of Richard A. Eisner & Co., LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 (No. 333-84961) and Registration Statement on Form S-8 (No. 333-89789)
of our report dated March 1, 2000, with respect to Note 10, March 17, 2000 on
the financial statements of NUWAVE Technologies, Inc. included in the Annual
Report on Form 10-KSB of NUWAVE Technologies, Inc. for the year ended December
31, 1999.
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
March 29, 2000
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