<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1997
REGISTRATION NO. 333-18071
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
APOLLO INTERNATIONAL OF DELAWARE, INC.
(Name of Small Business Issuer in Its Charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3625 59-3285046
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
6542 U.S. HIGHWAY 41
SUITE 215
APOLLO BEACH, FLORIDA 33572
(813) 645-7677
(Address and Telephone Number of Principal Executive Offices and Principal Place
of Business)
------------------------------
DAVID W. CLARKE
PRESIDENT
APOLLO INTERNATIONAL OF DELAWARE, INC.
6542 U.S. HIGHWAY 41
APOLLO BEACH, FLORIDA 33572
(813) 645-7677
(Name, Address and Telephone Number of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
RANDOLPH H. FIELDS, ESQ. JAY M. KAPLOWITZ, ESQ.
Greenberg Traurig Hoffman Gertsten, Savage,
Lipoff Rosen & Quentel, P.A. Kaplowitz, Fredericks & Curtin, LLP
111 North Orange Avenue, Suite 2050 101 E. 52nd Street, 9th Floor
Orlando, Florida 32801 New York, New York 10022
Telephone: (407) 420-1000 Telephone: (212) 752-9700
Telecopier: (407) 420-5909 Telecopier: (212) 980-5192
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Exhibit Index required by Item 601 of Regulation S-B is located at page
of the sequential numbering system appearing in the manually signed copy of
this Registration Statement, totaling pages, filed with the Securities and
Exchange Commission.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER UNIT AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) (2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.......... 862,500(3) $5.00 $ 4,312,500 $ 1,307
Redeemable Common Stock Purchase
Warrants............................ 862,500(4) $.25 $ 215,625 $ 65
Common Stock, $.01 par value(5)....... 862,500(6) $5.50 $ 4,743,750 $ 1,438
Underwriters' Warrant(7).............. 1 $.0001 $ 10 $ 1
Common Stock, $.01 par value(8)....... 75,000 $6.00 $ 450,000 $ 137
Redeemable Common Stock Purchase
Warrants(9)......................... 75,000 $.30 $ 22,500 $ 7
Common Stock, $.01 par value(10)...... 75,000 $5.50 $ 412,500 $ 125
Common Stock, $.01 par value(11)...... 650,000 $5.50 $ 3,575,000 $ 1,084
Total............................. $ 13,286,385 $ 4,164
</TABLE>
<TABLE>
<S> <C>
Previously Paid........ $ 5,002
Amount Due............. $ 0
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933, this Registration
Statement also covers such indeterminable additional shares of Common Stock
as may become issuable as a result of any future anti-dilution adjustment in
accordance with the terms of the Warrants.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
(3) Includes 112,500 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(4) Includes 112,500 Warrants which the Underwriters have the option to purchase
to cover over-allotments, if any.
(5) Issuable upon exercise of Warrants.
(6) Includes 112,500 shares of Common Stock issuable upon exercise of Warrants
subject to the Underwriters' over-allotment option.
(7) Issuable to Underwriters.
(8) Issuable upon exercise of Underwriters' Common Stock Purchase Warrant.
(9) Issuable upon exercise of Underwriters' Warrant.
(10) Issuable upon exercise of Underwriters' redeemable common stock purchase
warrants ("Underwriters' Warrants").
(11) Represents 400,000 shares of Common Stock issuable upon exercise of
Warrants issued pursuant to a consulting agreement and 250,000 shares of
Common Stock issuable upon exercise of Warrants held by private placement
investors.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION. DATED MARCH 6, 1997
PROSPECTUS
APOLLO INTERNATIONAL OF DELAWARE, INC.
750,000 SHARES OF COMMON STOCK AND
750,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Apollo International of Delaware, Inc., a Delaware corporation (the
"Company"), hereby offers (the "Offering") 750,000 shares of common stock, $.01
par value (the "Common Stock"), of the Company and 750,000 Redeemable Common
Stock Purchase Warrants (the "Public Warrants"). The Common Stock and the Public
Warrants offered hereby (sometimes hereinafter collectively referred to as the
"Securities") will be separately tradeable immediately upon issuance and may be
purchased separately. Investors will not be required to purchase shares of
Common Stock and Public Warrants together or in any particular ratio. Each
Public Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $5.50 (the "Exercise Price"), subject to adjustment,
commencing two years after the date of this Prospectus (the "Effective Date")
until the close of business on the sixth year after the Effective Date. The
Public Warrants are each redeemable by the Company for $.25 per Public Warrant
at any time after one year from the Effective Date, upon thirty days' prior
written notice to the Public Warrant holders, provided (i) the closing bid price
of the Common Stock exceeds $7.50 per share for a period of 20 consecutive
trading days ending on the fifteenth day prior to the date of the Company's
redemption notice, and (ii) if such redemption occurs during the first two years
following the Effective Date, the representative of the Underwriters (the
"Representative") has consented in writing to the redemption. See "Description
of Securities".
Prior to this Offering, there has been no public market for the Company's
Common Stock or Public Warrants, and there can be no assurance that such a
public market will develop or be sustained after the completion of the Offering.
The Company has applied for the listing of the Common Stock and Public Warrants
on the NASDAQ SmallCap Market ("NASDAQ") under the symbols AIOD and AIODW,
respectively, and the Boston Stock Exchange ("BSE") under the symbols [NOVA] and
[APIOD], respectively. For discussion of the factors considered in determining
the offering prices of the Common Stock and Public Warrants, see "Underwriting."
------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE AND
SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED
UNDER THE CAPTION "RISK FACTORS" WHICH APPEAR BEGINNING ON PAGE 7 OF THIS
PROSPECTUS. SEE ALSO "DILUTION."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS(1)
<S> <C> <C>
Per Share of Common Stock.............................. $5.00 $.50
Per Warrant............................................ $.25 $.025
Total(3)............................................... $3,937,500 $393,750
<CAPTION>
PROCEEDS TO COMPANY(2)
<S> <C>
Per Share of Common Stock.............................. $4.50
Per Warrant............................................ $.225
Total(3)............................................... $3,543,750
</TABLE>
(1) In addition, the Company has agreed to pay the Representative in the form
of: (i) a non-accountable expense allowance equal to 3% of the gross
proceeds of this Offering, of which $25,000 has been prepaid by the Company
and the balance of which shall be paid upon closing of the Offering and (ii)
an underwriters' warrant ("Underwriters' Warrant") for 75,000 shares of
Common Stock and/or 75,000 Public Warrants, which Underwriters' Warrant is
exercisable for a period of five years, commencing one year after the
Effective Date at an exercise price of $8.25 per share or $.4125 per
warrant, subject to adjustment. The Company and the Underwriters have agreed
to indemnify each other against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses, estimated at $471,000, payable by the Company,
including the Underwriters' non-accountable expense allowance
(3) The Company has granted the Underwriters an option, exercisable within 45
days form the date of this Prospectus, to purchase up to 112,500 additional
shares of Common Stock and/or 112,500 Public Warrants on the same terms and
conditions as set forth above, solely for the purpose of covering
over-allotments. If such option is exercised in full, the Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be a
total of $4,528,125, $452,812, and $4,075,313, respectively.
The Securities offered by this Prospectus are being offered by the
Underwriters on a "firm commitment" basis subject to prior sale, when, as and if
accepted by the Underwriters, approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer without notice and reject any
order in whole or in part. It is expected that delivery of the certificates
representing the Securities will be made in New York, New York on or about
, 1997.
(CONTINUED ON NEXT PAGE)
---------------------
MAY DAVIS GROUP, INC.
---------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(CONTINUED FROM COVER PAGE)
In addition to the 750,00 shares of Common Stock and 750,000 Public Warrants
to be sold under this Prospectus, the Company has concurrently registered
750,000 shares of Common Stock issuable upon exercise of the Public Warrants;
75,000 shares of Common Stock and 75,000 Public Warrants issuable upon exercise
of the Underwriters' Warrant; 75,000 shares of Common Stock issuable upon
exercise of the Underwriters' Public Warrants; and 650,000 shares of Common
Stock issuable upon exercise of currently outstanding warrants that, upon the
Effective Date, will have the same exercise price and terms as the Public
Warrants (the "Additional Registered Securities").
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE BOSTON STOCK EXCHANGE, THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION (INCLUDING FINANCIAL
STATEMENTS AND NOTES THERETO) CONTAINED IN THIS PROSPECTUS AND IS QUALIFIED IN
ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE HEREIN. UNLESS
OTHERWISE SPECIFIED, ALL REFERENCES HEREIN REFLECT THE 10.6828 FOR 1 SPLIT OF
THE COMPANY'S COMMON STOCK EFFECTED FOR SHAREHOLDERS OF RECORD ON MAY 10, 1996.
ALTHOUGH FRACTIONAL SHARES RESULTED FROM THE STOCK SPLIT, THERE ARE NO
REFERENCES TO FRACTIONAL SHARES HEREIN. FURTHER, UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION IS NOT EXERCISED. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
Apollo International of Delaware, Inc. (the "Company") was formed in
Delaware in November, 1994. The Company designs and sells to industry and
electric utilities electric power protection and control products utilizing new
computer and fiber optics technologies. The Company is developing concurrently
two product lines, the first of which (designated as "CMPR" products) is
designed to monitor motors used by industrial users, and the second of which
(designated as "SOLARIS" or "NOVA" products), is designed to monitor electric
power transmission for industrial users and electric utilities. The target
market for the motor protection and control product line is industrial end users
such as steel mills, mining operations, pulp and paper mills, and petrochemical
companies. The NOVA product line is designed for the utility substation
marketplace which includes public and investor owned utilities, cogeneration
facilities, and large industrial users who operate their own electric power
substations.
The Company maintains its principal executive offices at 6542 Highway 41,
Suite 215, Apollo Beach, Florida 33572; telephone (813) 645-7677.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................... 750,000 shares of Common Stock, $.01 par
value.
750,000 Public Warrants. Each Public Warrant
entitles the holder, for $5.50, to purchase
one share of Common Stock for a period of
four years commencing two years after the
date of this Prospectus (the "Effective
Date"). The Public Warrants are each
redeemable by the Company for $.25 per Public
Warrant at any time after one year from the
Effective Date, upon thirty days' prior
written notice to the Public Warrant holders,
provided (i) the closing bid price of the
Common Stock exceeds $7.50 per share for a
period of 20 consecutive trading days ending
on the fifteenth day prior to the date of the
Company's redemption notice, and (ii) if such
redemption occurs during the first two years
following the Effective Date, the
Representative has consented in writing to
the redemption. See "Description of
Securities-- Warrants."
Securities Outstanding Prior to the
Offering................................... 2,811,434 shares of Common Stock(1)
Securities Outstanding Subsequent to the
Offering(2)................................ 3,561,434 shares of Common Stock(1)
1,400,000 Public Warrants(3)
Estimated Net Proceeds(4).................... $3,072,750
Use of Proceeds by Company................... The Company intends to use the net proceeds
of this Offering for product development and
engineering in the continuing design and
testing of its products; equipment
expenditures; marketing and selling costs
associated with expansion of its domestic and
international sales network; the design and
development of marketing materials, the
hiring of additional personnel; payment of
consulting fees to a director and principal
shareholder of the Company in the approximate
aggregate amount of $23,000; and working
capital and general corporate purposes. See
"Use of Proceeds."
Risk Factors................................. Investment in the securities offered hereby
are speculative and involve a high degree of
risk and immediate substantial dilution. See
"Risk Factors" and "Dilution."
Proposed NASDAQ Small Cap Market
Symbols(5)................................. Common Stock--AIOD
Public Warrants--AIODW
Proposed BSE Symbols(5)...................... Common Stock--[NOVA]
Public Warrants--[APIOD]
</TABLE>
4
<PAGE>
- ------------------------
(1) Does not include (i) 148,500 shares of Common Stock reserved for future
issuance under the Company's 1996 Stock Option Plan; (ii) 351,500 shares of
Common Stock reserved for issuance upon exercise of stock options granted
under the 1996 Stock Option Plan; (iii) 1,350,000 shares of Common Stock
reserved for issuance upon exercise of outstanding warrants to purchase
Common Stock; (iv) 75,000 shares of Common Stock reserved for issuance upon
exercise of the Underwriters' Warrant; (v) 75,000 shares of Common Stock
reserved for issuance upon exercise of Public Warrants issuable upon
exercise of the Underwriters' Warrant; (vi) 750,000 shares of Common Stock
reserved for issuance upon exercise of the Public Warrants; and (vii) up to
41,666 shares of Common Stock issuable under a license agreement.
(2) Does not include 112,500 additional shares of Common Stock or 112,500 Public
Warrants issuable upon exercise of the Underwriters' over-allotment option.
See "Underwriting."
(3) Includes 400,000 common stock purchase warrants issued pursuant to a
consulting agreement and 250,000 common stock purchase warrants issued
pursuant to a private placement of the Company's securities, all of which
warrants shall have the same exercise price and other terms and provisions
of the Public Warrants upon the closing of the Offering. Does not include
(i) 550,000 common stock purchase warrants issued to consultants; or (ii)
150,000 common stock purchase warrants issued to employees.
(4) After deducting expenses of this Offering payable by the Company estimated
at $864,750 (inclusive of commissions and underwriting discounts and
assuming no exercise of the Underwriters' over-allotment option).
(5) Although the Company has applied for listing the Securities for quotation on
the NASDAQ SmallCap Market and the Boston Stock Exchange ("BSE"), there can
be no assurance that the Company's securities will be accepted for listing
or that if listed it will be able to continue to meet the requirements for
continued quotation, or that a public trading market will develop or that if
such market develops, it will be sustained. See "Risk Factors--Lack of Prior
Market for Securities,
"--Possible Delisting of Securities from Nasdaq System; Risks Related to
Low-Priced Stocks."
SUMMARY FINANCIAL INFORMATION
The following table presents summary historical data of the Company for the
years ended December 31, 1995 and 1996, which have been derived from the
Company's audited financial statements, included elsewhere in this Prospectus.
The Company was formed in November 1994 and did not begin to generate
5
<PAGE>
revenues until October 1996. The information should be read in conjunction with
"Management's Plan of Operation" and the Financial Statements and the related
notes thereto.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995
----------
1996
---------------------------
AS
ACTUAL ADJUSTED(1)
------------ -------------
<S> <C> <C> <C>
SUMMARY BALANCE SHEET DATA
Working capital (deficit).................................................... $ (33,590) $ (541,359) $ 2,605,252
Total assets................................................................. $ 356,738 $ 1,214,001 $ 4,286,962
Total liabilities............................................................ $ 363,949 $ 1,035,342 $ 1,035,342
Shareholders' equity (deficit)............................................... $ (7,211) $ 178,659 $ 3,251,620
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996
------------ -------------
<S> <C> <C>
SUMMARY INCOME STATEMENT DATA
Sales............................................................................. $ 294,734
Cost of sales..................................................................... (197,803)
-------------
Gross profit...................................................................... 96,931
Research and development.......................................................... $ (233,073) (334,750)
General and administrative ....................................................... (294,089) (1,253,031)
------------ -------------
Loss from operations ............................................................. (527,162) (1,490,850)
Interest expenses................................................................. (189,882)
Deferred income taxes............................................................. (40,000) 40,000
Extraordinary income from forgiveness of indebtedness............................. 75,028
------------ -------------
Net loss.......................................................................... $ (567,162) $ (1,565,704)
------------ -------------
------------ -------------
Average number of common shares outstanding ...................................... 1,385,243 2,622,393
Net loss per common share ........................................................ $ (.41) $ (.60)
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale of 750,000 shares of Common Stock and
750,000 Public Warrants of the Company in the Offering at $5 per share, and
$.25 per warrant, and anticipated expenses of $864,750. Does not include (a)
up to 112,500 shares and 112,500 Public Warrants subject to issuance under
the over-allotment option; (b) 75,000 shares and 75,000 Public Warrants
subject to the Underwriters' Warrant; (c) up to 41,666 shares issuable under
a license agreement; or (d) other outstanding options or warrants.
6
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SUBSTANTIAL DILUTION AND SHOULD ONLY BE PURCHASED BY INVESTORS WHO CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING
AN INVESTMENT, SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND SPECULATIVE
FACTORS, AS WELL AS OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS,
ASSOCIATED WITH THIS OFFERING, INCLUDING THE INFORMATION CONTAINED IN THE
FINANCIAL STATEMENTS HEREIN.
LIMITED REVENUES; DEFICIT; GOING CONCERN. The Company was formed in
November 1994 and had a deficit of $2,153,025 as of December 31, 1996. The
Company does not expect this deficit to substantially increase in the
foreseeable future. Potential investors should be aware that unanticipated
problems, many of which may be beyond the Company's control, are commonly
encountered by companies seeking to commercialize new products. These include,
but are not limited to, unexpected product development, marketing and customer
support problems, increased competition, lack of credibility with customers and
suppliers, and technical obsolescence. Further, the Company had no significant
revenues prior to October 1996, has had limited revenues of $294,734 for the
fiscal year ended December 31, 1996, and for the fiscal years ended December 31,
1994, 1995 and 1996, had net losses of $20,159, $567,162 and $1,565,704,
respectively. There is no assurance that the Company will ever generate
sufficient revenues to meet expenses or be profitable. The Company's independent
auditors have emphasized the going concern in their audit report. See
"Management's Discussion of Plan of Operations", "Business" and the Financial
Statements hereto.
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON OFFERING PROCEEDS; POSSIBLE
NEED FOR ADDITIONAL FINANCING. The Company has had significant working capital
deficits of $33,590 and $541,359 at December 31, 1995 and December 31, 1996,
respectively. The Company's capital requirements in connection with the design,
development and commercialization of its products have been and will continue to
be significant. To date, the Company has been substantially dependent upon loans
from its principal stockholders, as well as private placements of its debt and
equity securities, to finance its working capital requirements. The Company is
dependent on the proceeds of this Offering to commence full-scale marketing
activities in connection with its products, to complete the development of
additional product and software applications, and to fund the Company's working
capital requirements. The Company anticipates, based on currently proposed plans
and assumptions relating to its operations, that the proceeds of this Offering
will be sufficient to satisfy its contemplated cash requirements for at least
twelve months following the consummation of this Offering. In the event that the
Company's plans change or prove to be inaccurate or if the proceeds of this
Offering prove to be insufficient to fund operations, the Company could be
required to seek additional financing sooner than currently anticipated or could
be required to curtail its activities. The Company has no current arrangements
with respect to, or sources of, additional financing, and there can be no
assurance that existing stockholders will provide any portion of the Company's
future financing requirements. There can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all.
Additional equity financing may involve substantial dilution to the interests of
the Company's then existing stockholders. See "Use of Proceeds" and "Certain
Transactions."
BROAD DISCRETION IN APPLICATION OF PROCEEDS. Approximately $1,284,750
(41.8%) of the Offering proceeds have been allocated to working capital. In
addition, management of the Company may adjust the application and allocation of
the net proceeds of this Offering, including funds received upon exercise of the
Underwriters' over-allotment option or the exercise of any Public Warrants, if
such adjustment is determined to be in the best interests of the Company in
order to address changed circumstances and opportunities. Furthermore, to the
extent that the Company's expenditures are less than projected, the resulting
balance will be retained and used for general working capital purposes. As a
result of the foregoing, the success of the Company will be substantially
dependent upon the judgment of the management of the Company with respect to the
application and allocation of the net proceeds hereof. Pending use of such
proceeds, the net proceeds of this Offering may be invested by the Company in
7
<PAGE>
interest-bearing accounts, or invested in government obligations, certificates
of deposit or similar short-term, low-risk investments. See "Use of Proceeds."
BENEFITS TO RELATED PARTY. Frank J. Mancini, a director and a shareholder,
will be paid approximately $23,000 for consulting services. In addition, the
Company may use a portion of the proceeds of this Offering to pay salaries of
its executive officers and fees to consultants and directors to the extent that
cash flow from operations is insufficient for such purposes. See
"Management--Employment Agreements," "-- Consulting Agreements," "Use of
Proceeds," and "Certain Transactions."
TECHNOLOGICAL FACTORS; UNCERTAINTY OF PRODUCT DEVELOPMENT AND
COMMERCIALIZATION. Although the Company has completed the development of the
technological aspects of certain of its products, which it believes perform the
principal functions for which they have been designed, the Company has only
commenced limited commercialization of its products for a limited number of
users. Accordingly, there can be no assurance that, upon widespread commercial
use, if any, these products or other products currently being developed by the
Company will satisfactorily perform the functions for which they have been
designed or that they will operate satisfactorily. The Company intends to use a
portion of the proceeds of this Offering in connection with product refinement
and enhancement of existing products and the development of additional products.
Product development, commercialization, and continued system refinement and
enhancement efforts remain subject to all of the risks inherent in development
of new products based on innovative technologies, including unanticipated
delays, expenses, technical problems, or difficulties, as well as the possible
insufficiency of funds to implement development efforts, which could result in
abandonment or substantial change in product commercialization. The Company's
success will be largely dependent upon its products meeting targeted cost and
performance objectives of full production and the timely introduction of its
products into the marketplace, among other things. There can be no assurance
that the Company's products will satisfy current price or performance
objectives, that unanticipated technical or other problems which would result in
increased costs or material delays in introduction and commercialization will
not occur, or that the Company's products will prove to be sufficiently reliable
or durable under actual operating conditions or otherwise be commercially
viable. Software and other technologies as complex as those incorporated into
the Company's systems may contain errors which become apparent subsequent to
widespread commercial use. Remedying such errors may delay the Company's plans
and cause it to incur additional costs, or otherwise have a material adverse
impact on the Company. See "Business--Products", "--Sales and Marketing" and
"--Patents and Copyrights."
CHANGES IN TECHNOLOGICAL CLIMATE. The high technology business in which the
Company participates is characterized by rapidly changing technology and
frequent new product introductions. The Company's success is dependent upon its
ability to develop and market its products on a timely basis. There can be no
assurance that the Company will be successful in developing or marketing such
products to take advantage of the perceived demand for such products within the
motor protection and electric utility industry. In addition, there can be no
assurance that products or technologies developed by others will not render the
Company's products or technologies non-competitive or obsolete. See
"Business--Competition" and "--Sales and Marketing."
UNCERTAINTY OF MARKET ACCEPTANCE. As is typical in the case of emerging and
evolving markets, demand and market acceptance for newly introduced products and
services is subject to a high level of uncertainty. The Company has not yet
commenced significant marketing activities relating to product commercialization
and currently has limited marketing experience and limited financial, personnel
and other resources to undertake extensive marketing activities. Acceptance of
the Company's products that are geared to the electric utility industry will
involve retrofitting electric utility substations, which potential customers may
be reluctant to do. Consequently, potential customers may elect to utilize other
products with which they are familiar or which they believe to have more
advantages over the Company's products, or may otherwise be reluctant to
purchase the Company's products. Achieving market acceptance for the Company's
products will require substantial marketing efforts and expenditure of
significant funds to create awareness and demand by potential customers as to
the perceived benefits and distinctive characteristics of the Company's
products. There can be no assurance that the Company will have available funds
or
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other resources necessary to achieve such acceptance. See "Business--Sales and
Marketing" and "--Competition."
LIMITED MARKETING CAPABILITIES AND EXPERIENCE; DEPENDENCE UPON THIRD-PARTY
RESELLERS. The Company has limited marketing experience and has conducted only
limited marketing activities. The Company expects to continue to market directly
to certain accounts and to market through a network of independent
manufacturers' representatives and distributors. The Company's present
manufacturers' representatives and distributors are not subject to minimum
purchase requirements and can discontinue marketing the Company's products with
minimum notice. There can be no assurance that the Company will be able to
retain any of its present manufacturers' representatives or distributors, or
expand its existing distribution network. Loss of any such persons or the
inability to expand the existing distribution network could have a detrimental
effect on the Company's ability to carry out its intended plan of operations.
The Company, directly and through its independent sales network, also
intends to establish a network of resellers, consisting primarily of value-added
resellers ("VARS") and original equipment manufacturers ("OEMS") with
established distribution channels to market the Company's products and to
educate potential resellers to install and service its systems. The Company's
prospects will be significantly affected by its ability to successfully develop
relationships with VARS and OEMS and the marketing efforts of such resellers.
While the Company believes that independent resellers with which it enters into
such arrangements will have an economic motivation to market the Company's
products, the time and resources devoted to these activities generally will be
controlled by such entities and not by the Company. The Company will also be
dependent upon such resellers to provide installation and support services. A
decline in the financial prospects of particular resellers or of any of their
customers, or inadequate installation and support services by resellers, could
have an adverse effect on the Company. In addition, such resellers will likely
market various product lines, including, in some cases, products directly
competitive with the Company's products. There can be no assurance that the
Company will be able, for financial or other reasons, to finalize any
third-party distribution or marketing arrangements or that such arrangements, if
finalized will result in commercialization of any of the Company's products. See
"Business--Sales and Marketing."
DEPENDENCE UPON THIRD-PARTY MANUFACTURERS. The Company engages small
contract manufacturers to supply its products, pursuant to purchase orders. As
order volume increases, the Company has the flexibility of engaging larger
manufacturers with greater production capabilities. There can be no assurance
that its products can be manufactured reliably on a large-scale basis on
commercially reasonable terms, or at all. The Company is substantially dependent
on the ability of its third-party manufacturers to, among other things, meet the
Company's design, performance and quality specifications.
Failure by the Company's third-party manufacturers to comply with these and
other requirements could have a material adverse effect on the Company. There
can be no assurance that the Company's third-party manufacturers will dedicate
sufficient production capacity to meet the Company's scheduled delivery
requirements or that the Company's manufacturers will have sufficient production
capacity to satisfy the Company's requirements during any period of sustained
demand. Moreover, the electronics industry from time to time experiences short
supplies of certain high demand components, which may adversely affect the
Company's ability to meet its production schedules. Failure of manufacturers to
meet production demands of the Company, or allocations in the supply of certain
high demand components could adversely affect the Company's operations and
ability to meet its own delivery schedules on a timely and competitive basis.
There can be no assurance that if such problems develop at a time when the
Company is just beginning to deliver its products to the commercial marketplace,
the Company will be able to rectify such problems to avoid a material adverse
effect on its intended plan of operations or financial results. See
"Business--Manufacturing."
NO PATENTS OR INTELLECTUAL PROPERTY REGISTRATION; POSSIBLE NON-EXCLUSIVITY
OF TECHNOLOGY; POTENTIAL LEGAL ACTION. The Company has not yet applied for
patents or copyrights on its products, nor has it applied for
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trademark registration for any of its products' names. Although the Company
intends to initiate patent and intellectual property applications for
registration, there can be no assurance as to the breadth or degree of
protection which patents or copyrights, if any, may afford the Company; that any
patent and intellectual property applications will result in issued patents or
registered copyrights or trademarks; that the Company's patents, copyrights or
trademarks will be upheld if challenged; or that competitors will not develop
similar or superior methods or products outside the protection of any patent or
copyright issued to the Company. Although the Company is not aware of the
infringement of its technologies by third-parties, and does not believe (nor has
any party asserted) that the Company's products infringe on the proprietary
rights of others, it is possible that any future patent or intellectual property
rights of the Company's may not be valid, or if valid, that infringement of such
proprietary rights may occur. In the event the Company's products infringe
patents, intellectual property rights or proprietary rights of others, the
Company may be required to modify the design of its products, change the name of
its products or obtain a license for certain technology. There can be no
assurance that the Company will be able to do so in a timely manner, upon
acceptable terms and conditions, or at all. Failure to do any of the foregoing
could have a material adverse effect upon the Company. In addition, there can be
no assurance that the Company will have the financial or other resources
necessary to enforce or defend a patent infringement or proprietary rights
violation action. Moreover, if the Company's products infringe patents,
trademarks or proprietary rights of others, the Company could, under certain
circumstances, become liable for damages, which also could have a material
adverse effect on the Company.
The Company also relies on confidentiality agreements with its directors,
employees, consultants, and manufacturers and employs various methods to protect
the source codes, concepts, ideas, proprietary know-how, and documentation of
its proprietary technology. However, such methods may not afford complete
protection, and there can be no assurance that others will not independently
develop similar know-how or obtain access to the Company's know-how or software
codes, concepts, ideas and documentation. See "Business--Patents and
Copyrights."
COMPETITION. The Company is introducing new high technology products into
markets that are dominated by competitors which have a significant share of the
market for microprocessor control relay products in electrical substations in
the United States. Current competitors such as General Electric, Siemens A.G.,
GEC Alsthom, Inc. and ABB Industrie A.G. have substantially greater financial,
marketing and technical resources, more established manufacturing capability and
distribution channels, stronger customer support organizations and greater name
recognition than the Company. Such current or future competitors may develop
competing technologies similar or more advanced than the Company's. There can be
no assurance that the Company will be able to compete successfully in current or
future markets. See "Business--Competition."
DEPENDENCE ON KEY EXECUTIVES. The success of the Company is dependent on
the services and efforts of its existing key management personnel. Ms. Clewes
and Messrs. Clarke, Smith, Swatland and Louw each have an employment agreement
with the Company; however, the loss of the services of one or more of its
existing management personnel would have a material adverse effect on the
Company's business. The Company currently maintains key-man life insurance
policies on the lives of David W. Clarke, Christine Clewes and Steven D. Smith,
officers of the Company, and W. Haines Knox, an employee, but does not maintain
life insurance policies covering any other officer or employee. The Company's
success and plans for future growth will also depend on its ability to attract
and retain additional qualified personnel. There is no assurance that the
Company will be able to hire or retain such personnel in the future. See
"Management."
EXECUTIVE OFFICERS' LIMITED TIME WITH COMPANY. The Company's Executive Vice
President of Operations, Vice President of International Sales and Vice
President of Sales have recently joined the Company. Therefore there can be no
assurance that they will be able to function effectively as a group. The failure
of the management team to work together effectively could have a material
adverse effect on the Company's operations.
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NO INDEPENDENT DIRECTORS. While following this Offering the Company intends
to elect two independent directors (including one designated by the
Representative), presently all of the directors of the Company are employed by,
or consultants to, the Company and receive compensation from the Company.
IMMEDIATE AND SUBSTANTIAL DILUTION. Upon completion of this Offering, the
net tangible book value per share of the Common Stock, would be $.89,
representing an immediate dilution of $4.11 of net tangible book value per
share, or 82.2%, to the public investors and an increase of $.85 per share or
95.5% to existing shareholders. The exercise of the Public Warrants included in
the Securities offered hereby will result in further dilution to the public
investors. See "Dilution."
CONTROL BY MANAGEMENT. Upon consummation of this Offering, David W. Clarke,
President, Chief Executive Officer and Chairman of the Board, and his wife,
Christine Clewes, Vice President, Marketing and a director, will beneficially
own 35.33% and 19.81%, respectively, of the shares of Common Stock outstanding.
Together, they will be in a position generally to control the affairs of the
Company. For example, these two stockholders, individually and as a group, or
together with others, including directors and executive officers of the Company
and other principal stockholders, may be able to control the outcome of
stockholder votes, including votes concerning the election of directors, the
adoption of amendments to the Company's certificate of incorporation or by-laws
and the approval of certain mergers and other significant corporate
transactions, including a sale of substantially all of the Company's assets.
Such control by existing stockholders could also have the effect of delaying,
deferring or preventing a change in control of the Company. See "Beneficial
Ownership of Principal Stockholders and Management" and "Description of Common
Stock."
POTENTIAL LIABILITY AND INSURANCE. The Company's products are designed for
electric power protection and control purposes. Should any of its products fail
in operation, the Company could have potential liability to its customers in
amounts which cannot be estimated. The Company maintains product liability
insurance with a $1,000,000 limit of coverage which it believes is adequate for
its potential liability. There can be no assurance that any insurance maintained
by the Company will cover, as to scope or amount, any claims made against the
Company or that appropriate insurance will be available in the future at
acceptable cost or at all.
NO DIVIDENDS ANTICIPATED. The Company does not intend to pay dividends in
the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. See
"Dividend Policy."
NO PRIOR PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICES; POSSIBLE
VOLATILITY OF SECURITIES. Prior to this Offering, there has been no public
market for the Company's Securities. Accordingly, there can be no assurance that
an active trading market will develop or, if developed, that it will be
sustained upon the completion of this Offering or that the market prices of the
Securities will not decline below the initial public offering prices. The
initial public offering prices of the Securities and the terms of the Public
Warrants have been arbitrarily determined by negotiations between the Company
and the Underwriters and do not necessarily bear any relationship to the
Company's assets, book value, net earnings, net sales or other established
criteria of value, and should not be considered indicative of the actual value
of the Securities. See "Underwriting." The stock market has, from time to time,
experienced extreme price and volume fluctuations, which often have been
unrelated to the operating performance of particular companies. Regulatory
developments and economic and other external factors, as well as
period-to-period fluctuations in financial results of the Company, may have a
significant impact on market prices of the Securities.
LIMITED EXPERIENCE OF THE REPRESENTATIVE. The Company has entered into an
Underwriting Agreement with May Davis Group, Inc. under which that company is
the managing underwriter or representative (the "Representative"). The
Representative was organized in August 1993, was registered as a broker in June
1995, and became a member firm of the National Association of Securities
Dealers, Inc. (the
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"NASD") in June 1995. The Representative is principally engaged in retail
brokerage and market making activities and various corporate finance projects.
The Representative has acted as a placement agent in private offerings and has
participated as a member of the underwriting syndicate or as a selected dealer
in one public offering and it has acted solely one time as the lead manager in
only one public offering of securities. While certain of the officers of the
Representative have significant experience in corporate finance and the
underwriting of securities, no assurance can be given that the Representative's
lack of experience as a lead managing underwriter of public offerings will not
adversely affect this Offering and the subsequent development of a liquid public
market in the Company's securities. See "Underwriting."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF PUBLIC WARRANTS. The Public
Warrants are subject to redemption by the Company. Redemption of the Public
Warrants could force the holders to exercise the Public Warrants and pay the
exercise price at a time when it may be disadvantageous for the holders to do
so, to sell the Public Warrants at the current market price when they might
otherwise wish to hold the Public Warrants, or to accept the redemption price,
which may be substantially less than the market value of the Public Warrants at
the time of redemption. The holders of the Public Warrants will automatically
forfeit their rights to purchase the shares of Common Stock issuable upon
exercise of such Public Warrants unless the Public Warrants are exercised before
they are redeemed. The holders of Public Warrants will not possess any rights as
stockholders of the Company unless and until the Public Warrants are exercised.
See "Description of Securities--Warrants."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN CONNECTION WITH
EXERCISE OF PUBLIC WARRANTS. The Company will be able to issue shares of its
Common Stock upon exercise of the Public Warrants only if there is a then
current prospectus relating to the Common Stock issuable upon the exercise of
the Public Warrants under an effective registration statement filed with the
Commission and only if such Common Stock is then qualified for sale or exempt
from qualification under applicable state securities laws of the jurisdictions
in which the various holders of Public Warrants reside. Although the Company
will use its best efforts to meet such requirements, there can be no assurance
that the Company will be able to do so. The failure of the Company to meet such
requirements may deprive the Public Warrants of any value and cause the resale
or other disposition of Common Stock issued upon the exercise of the Public
Warrants to become unlawful. See "Description of Securities."
POSSIBLE ADVERSE IMPACT ON MARKET OF WARRANT EXERCISE. In the event of the
exercise of a substantial number of Public Warrants within a reasonably short
period of time after the right to exercise commences, the resulting increase in
the amount of Common Stock of the Company in the trading market could
substantially affect the market price of the Common Stock. See "Description of
Securities--Warrants."
POSSIBLE ADVERSE IMPACT OF UNDERWRITERS' WARRANT. In connection with the
Offering, the Company will sell to the Underwriters, for nominal consideration
of $10, an Underwriters' Warrant exercisable for 75,000 shares of Common Stock
at $8.25 per share and/or 75,000 Public Warrants at $.4125 per warrant. The
Underwriters' Warrant will be exercisable for a period of five years, commencing
one year after the date of this Prospectus. The Underwriters' Warrant will not
be redeemable by the Company. The holders of the Underwriters' Warrant will have
the opportunity to profit from a rise in the market price of the Securities, if
any, without assuming the risk of ownership. The Company may find it more
difficult to raise additional equity capital if it should be needed for the
business of the Company while the Underwriters' Warrant is outstanding. At any
time when the holders thereof might be expected to exercise them, the Company
would probably be able to obtain additional capital on terms more favorable than
those provided by the Underwriters' Warrant.
The Underwriters have "piggy back" and demand registration rights with
respect to the Common Stock issuable upon exercise of the Underwriters' Warrant
(and the Public Warrants issuable thereunder). Any future exercise of these
registration rights may cause the Company to incur substantial expense and could
impair the Company's ability to raise capital through the public sale of its
securities. See "Dilution," "Shares Eligible for Future Sale" and
"Underwriting."
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UNDERWRITERS' SIGNIFICANT INFLUENCE ON THE COMPANY. The Company has entered
into an Underwriting Agreement with May Davis Group, Inc., the Representative
and managing underwriter, pursuant to which, among other things, the Company has
granted the Underwriters a three-year preferential right with respect to future
financing relating to the offering of the Company's securities. The Underwriting
Agreement also gives the Underwriters the right, for a period of three years
from the Effective Date, to appoint a designee of the Underwriters as an advisor
to the Company's Board of Directors or, in the alternative, to designate one
person for election as a director of the Company. The Representative has
indicated to the Company that it intends to appoint a director, although such
person has not been identified. In addition, the Company has agreed to enter
into a management and financial consulting agreement to retain the
Representative as a financial consultant for a period of three years at a
monthly fee of approximately $2,187.50, payable in full, in advance, at the
closing of this Offering; the consulting agreement will not require the
consultant to devote a specific amount of time to the performance of its duties
thereunder.
LIMITATION ON DIRECTOR LIABILITY UNDER DELAWARE LAW. Pursuant to the
Company's Certificate of Incorporation and under Delaware law, directors of the
Company are not liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty, except for liability in connection with a breach
of the duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for dividend payments or
stock repurchases illegal under Delaware law or for any transaction in which a
director has derived an improper personal benefit. However, insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing, the Company has been
informed that in the opinion of the Securities and Exchange Commission ("SEC"),
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable.
DEPENDENCE ON MAJOR CUSTOMERS. Substantially all of the Company's sales for
the fiscal year ended 1996 were derived from Jeanelac, US Steel and
Phasetronics. The Company anticipates that these companies will continue as
major customers in the foreseeable future. Therefore, the loss of any of these
customers could have a material adverse effect on the business of the Company.
See "Business--Sales and Marketing."
POSSIBLE DILUTIVE EFFECT OF OPTIONS AND WARRANTS AND ADVERSE EFFECT ON
MARKET PRICE. No assurance can be given as to the effect, if any, that future
sales of Common Stock, or the availability of shares of Common Stock for future
sales, will have on the market price of the Common Stock from time to time.
Sales of substantial amounts of Common Stock (including shares issued upon the
exercise of warrants or stock options), or the possibility that such sales could
occur, could adversely affect the market price of the Common Stock and could
also impair the Company's ability to raise capital through an offering of its
equity securities in the future. As of the date of this Prospectus, the Company
granted options for 351,500 shares of Common Stock to various employees of the
Company, 127,000 of which options are first exercisable commencing one year from
their respective dates of grant (approximately July 1, 1997 to November 21,
1997), 45,000 of which are first exercisable one year from the date of this
Prospectus, and the balance of which are exercisable incrementally over six
months thereafter, all at an exercise price of $4.00 per share. Further, the
Company issued a total of 150,000 common stock purchase warrants to three
employees, which are exercisable at $5.50 per share commencing one year from the
date of this Prospectus until September 26, 2001 as to two warrants and November
1, 2001 as to the third warrant. The Company also issued common stock purchase
warrants to consultants for an aggregate of 950,000 shares, 400,000 of which
shall have the same terms as the Public Warrants offered hereby; 250,000 of
which are exercisable at $4.00 per share commencing June 1, 1998 until June 1,
2002; 250,000 of which are exercisable at $5.50 per share commencing June 1,
1998 until June 1, 2002, and 50,000 of which are exercisable at $5.50 per share
commencing June 30, 1998 until June 30, 2002. In addition, the Company issued
250,000 common stock purchase warrants to private placement investors which
shall have the same exercise price and terms as the Public Warrants offered
hereby. Further, in connection with this Offering, the Company will issue to the
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Underwriters an Underwriters' Warrant entitling the Underwriters, for four years
commencing one year from the date of this Prospectus to purchase, for $8.25 per
share, 75,000 shares of the Company's Common Stock and/or 75,000 Public Warrants
at a purchase price of $.4125 per warrant. The issuance of any additional shares
by the Company in the future may result in a reduction of the book value or
market price of the then outstanding Common Stock. For the life of the
Underwriters' Warrants, the Public Warrants, non-public warrants and options,
the holders thereof are given the opportunity to profit from a rise in the
market price of the Common Stock. Any rise in the market price of the Common
Stock may encourage the holders to exercise such warrants or options, which may
result in a dilution of the interests of other stockholders. As a result, the
Company may find it more difficult to raise additional equity capital if it
should be needed for the business of the Company while such warrants and options
are outstanding. See "Description of Securities."
SHARES ELIGIBLE FOR FUTURE SALE. Upon the closing of this Offering, there
will be issued and outstanding 3,561,434 shares of Common Stock, of which
750,000 shares will be freely tradable. The remaining 2,811,434 shares of Common
Stock are "restricted securities", as that term is defined under Rule 144
promulgated under the Securities Act. Under recent amendments to Rule 144 by the
SEC, which are anticipated to be in effect approximately in April or May 1997, a
person who has satisfied a one-year holding period may, under certain
circumstances, sell within any three month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then outstanding shares of
Common Stock or the average weekly trading volume in such shares during the four
calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity or other limitaiton by a
person who is not an affiliate of the Company and who has satisfied a two-year
holding period. Certain shareholders holding 1,432,989 shares of restricted
Common Stock, will be eligible to sell such shares under Rule 144 as of the date
of this Prospectus as to 433,989 shares; May 1997 as to 499,000 shares; and,
August through November 1997 as to 500,000 shares. However, those shareholders
have agreed not to sell those shares for periods ranging from 13 months to 24
months from the Effective Date, without the prior consent of the Representative.
Future sales of substantial amounts of Common Stock, or the potential for such
sales, could adversely affect prevailing market prices of the Company's
securities.
Each of the Company's directors and officers, holding a total of 1,053,905
shares of Common Stock and warrants, options and rights to acquire another
641,666 shares of Common Stock, have agreed not to publicly offer, sell or
otherwise dispose of any Common Stock for a period of 24 months after the date
of
this Prospectus without the prior written consent of the Underwriters. Of such
shares, 673,646 would, but for the lock-up, be available for sale as of the date
of this Prospectus, subject to certain volume limitations and other requirements
of Rule 144, and of which another 53,414 shares would be eligible for sale under
Rule 144 within six months of the date of this Prospectus. Future sales of
substantial amounts of Common Stock, or the potential for such sales, could
adversely affect prevailing market prices. See "Shares Eligible For Future
Sale."
POSSIBLE RESTRICTIONS ON MARKET MAKING ACTIVITIES IN THE
SECURITIES. Although they have no legal obligation to do so, the Underwriters
from time to time may act as market makers and otherwise effect transactions in
the Securities. Unless granted an exemption by the Commission from Regulation M
under the Securities Exchange Act of 1934 (the "Exchange Act"), the Underwriters
will be prohibited from engaging in any market making activities or solicited
brokerage activities with respect to the Securities for the period from five
business days prior to any solicitation by the Underwriters of the exercise of
any Public Warrant until the completion of such solicitation activity. However,
the foregoing 5-day restriction period is reduced to one day where the security
has an average daily trading volume of $100,000 and the public float for the
issuer's equity securities is at least $25 million; and, there is no restrictive
period where the average daily trading volume of the security is $1 million and
the public float for the issuer's equity securities is at least $150 million. As
a result, the Underwriters may be unable to continue to provide a market for the
Securities during certain periods while the Public Warrants are exercisable. The
prices and
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liquidity of the Securities may be adversely affected by the cessation of the
Underwriters' market making activities.
POSSIBLE DELISTING OF SECURITIES; NASDAQ SMALL CAP MARKET, BOSTON STOCK
EXCHANGE. Prior to this Offering, there has been no established trading market
for the Company's Securities and there is no assurance that a trading market for
such Securities will develop after the completion of this Offering. If a trading
market does in fact develop for the Securities offered hereby, there can be no
assurance that it will be sustained. Trading in such Securities is subject to
official notice of issuance that the Common Stock and the Public Warrants have
been approved for trading on the NASDAQ SmallCap Market and the BSE. If the
listings are approved, the continued trading of the Common Stock and the Public
Warrants on the NASDAQ SmallCap Market and the BSE is conditioned upon the
Company meeting certain criteria. The NASD, which administers NASDAQ, currently
requires that, in order for a company's securities to be listed on the NASDAQ
SmallCap Market, the Company must have $4,000,000 in total assets, a $1,000,000
market value of the public float and $2,000,000 in total capital and surplus.
Further, initial listing requires two market makers and a minimum bid price of
$3.00 per share. Continued inclusion on the NASDAQ SmallCap Market currently
requires two market makers and a minimum bid price of $1.00 per share; provided,
however, if the Company falls below the minimum bid price, it will remain
eligible for continued inclusion if the market value of the public float is at
least $1,000,000 and the Company has $2,000,000 in capital and surplus. NASDAQ
has approved rules increasing listing and maintenance criteria for the NASDAQ
SmallCap Market. If the new rules are enacted, it will be more difficult for the
Company to maintain its listing on the NASDAQ SmallCap Market. If the Company
fails to meet any of these criteria, the Common Stock and/or the Public Warrants
could be delisted from trading on the NASDAQ SmallCap Market or the BSE, which
delisting could materially adversely affect the trading market for the Common
Stock and/or the Public Warrants. In such event, trading in the Securities would
be conducted in the over-the-counter market known as the NASD OTC Electronic
Bulletin Board, or more commonly referred to as "pink sheets." As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's Common Stock. There can be
no assurance that the Securities will not be delisted. See "Underwriting."
PENNY STOCK REGULATION. In the event the Common Stock is delisted from
trading on NASDAQ SmallCap Market and the trading price of the Common Stock is
less than $5.00 per share, trading in the Common Stock would also be subject to
the requirements of Rule 15g-9 promulgated under the Exchange Act. Under such
rule, broker/dealers who recommend such low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements, including a requirement that they make an individualized
written suitability determination for the purchaser and receive the purchaser's
written consent prior to the transaction. The Securities Enforcement Remedies
and Penny Stock Reform Act of 1990 also require additional disclosure in
connection with any trades involving a stock defined as a "penny stock"
(generally, according to recent regulations adopted by the Securities and
Exchange Commission (the "Commission"), any non-NASDAQ equity security that has
a market price of less than $5.00 per share, subject to certain exceptions),
including the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
Such requirements could severely limit the market liquidity of the Common Stock
and the ability of purchasers in this Offering to sell their securities in the
secondary market. There can be no assurance that the Common Stock will not be
treated as a penny stock.
ANTI-TAKEOVER CONSIDERATIONS INCLUDING POSSIBILITY OF FUTURE ISSUANCE OF
PREFERRED STOCK. The Company's certificate of incorporation authorizes the
Board of Directors to issue up to 5,000,000 shares of preferred stock in one or
more series, having terms fixed by the Board of Directors without shareholder
vote, including voting, dividend or liquidation rights that could be greater
than or senior to the rights of holders of Common Stock. The rights of holders
of Common Stock will be subject to, and may be materially adversely affected by
the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock could have the effect of making it more
difficult for a third party to
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acquire a majority of the outstanding voting stock of the Company. The Company's
certificate of incorporation also specifically adopts the governance of Section
203 of the Delaware Corporation Law. Generally, Section 203 prohibits a publicly
held Delaware corporation from engaging, under certain circumstances, in a
"business combination" ("Business Transaction") with an "interested stockholder"
for a period of three years after the date of the transaction in which the
person becomes an interested stockholder (i.e., a person who, together with
affiliates and associates, owns 15% or more of the corporation's voting stock).
The Board's authority to issue preferred stock and the provisions of Section 203
could impede any merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of the Company, and any such
impediment could serve to entrench management and may not be in the best
interests of the Company's shareholders. The Company has no current intentions
or plans to issue any such preferred stock. See "Description of
Securities--Anti-Takeover Provisions of Delaware Law; Certain Provisions in
Certificate of Incorporation."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 750,000 shares of
Common Stock and 750,000 Public Warrants offered hereby (after deducting
underwriting discounts and commissions and other expenses of the Offering
approximating $864,750) are estimated to be $3,072,750 ($3,586,594 if the
Underwriters' over-allotment option is exercised in full). See "Underwriting."
The Company expects such funds to be utilized over the next twelve months
approximately as follows:
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE
APPROXIMATE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------------------ -------------- ------------
<S> <C> <C>
Product Development and Engineering(1).............................................. $ 750,000 24.4%
Advertising, Marketing and Promotion(2)............................................. 540,000 17.6%
Capital Expenditures(3)............................................................. 475,000 15.5%
Payment of Consulting Fee(4)........................................................ 23,000 .7%
Working Capital..................................................................... 1,284,750 41.8%
-------------- ------------
TOTAL......................................................................... $ 3,072,750 100.0%
-------------- ------------
-------------- ------------
</TABLE>
- ------------------------------
(1) Includes anticipated costs for software in the amount of $300,000 for new
product lines currently in development (i.e., the CMPR1 (motor protection
relay), and FPR2 and FPR3 (feeder protection relays); engineering costs
associated with product tooling in the approximate amount of $150,000; and
engineering salaries in the approximate amount of $300,000.
(2) Represents anticipated costs associated with advertising and promotion,
including trade shows and trade publications.
(3) Represents anticipated costs associated with purchasing equipment, including
computer hardware, engineering and testing equipment.
(4) Represents payment of consulting fees of approximately $23,000 to Frank J.
Mancini, a director and shareholder of the Company. See "Certain
Transactions."
The foregoing represents the Company's current estimate of the allocation of
the net proceeds of the Offering based upon certain assumptions relating to the
costs associated with the implementation of the Company's proposed business
operations. Future events, including problems, delays, expenses and
complications frequently encountered by companies which seek to develop new
technologies or establish new services or introduce services to a new market, as
well as changes in economic conditions, regulatory or competitive conditions,
and the success of the Company's marketing activities, may make shifts in the
allocation of funds necessary or desirable. There can be no assurance that the
Company's estimates will prove to be accurate or that unforeseen expenses will
not be incurred.
The Company believes that the net proceeds of this Offering will satisfy the
Company's capital requirements for at least twelve months. During those twelve
months, the Company's efforts will be directed at developing and implementing
its proposed business operations.
16
<PAGE>
Prior to expenditures, the net proceeds of this Offering will be invested
principally in high grade short-term interest-bearing investments. Any proceeds
received upon exercise of the over-allotment option or any of the Company's
Warrants will be used for working capital.
DILUTION
The net tangible book value of the Company at December 31, 1996 was $108,197
or $.04, per share of Common Stock. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of shares of Common Stock
outstanding. After giving effect to the receipt of net proceeds from the sale of
the shares offered hereby, the net tangible book value of the Company at
December 31, 1996, would have been $3,181,158 or $.89 per share of Common Stock,
representing an immediate dilution of $4.11 (or approximately 82.2%) per share
to the public investors. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share....................................... $ 5.00
Net tangible book value per share before Offering............................. $ .04
Increase in net tangible book value per share attributable to public
investors................................................................... .85
Net tangible book value per share after Offering(1)(2)........................ .89
---------
Dilution per share to public investors........................................ $ 4.11
---------
---------
</TABLE>
The following table sets forth, as of the date of this Prospectus, the
number of shares of Common Stock purchased, the percentage of total shares
purchased, the total consideration paid, the percentage of total consideration
paid and the average price per share paid by the existing stockholders of the
Company and the investors in this Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders....................... 2,811,432 78.9% $ 2,646,653 41.4% $ .94
Public Investors(2)(3)...................... 750,000 21.1% 3,750,000 58.6% $ 5.00
---------- ----------- ------------ -----------
Total....................................... 3,561,432 100.0% $ 6,396,653 100.0%
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
</TABLE>
- ------------------------
(1) Does not include: (a) up to 112,500 shares and 112,500 Public Warrants
subject to issuance under the over-allotment option; (b) 75,000 shares and
75,000 Public Warrants subject to the Underwriters' Warrant; (c) up to
41,666 shares issuable under license agreement; or (d) other outstanding
options or warrants. To the extent that any warrants or options are
exercised, there may be further dilution to the public investors.
(2) In the event that the Underwriters exercise their over-allotment option in
full, the net tangible book value after this Offering would be $1.01 per
share which would result in an immediate dilution of $3.99 to the public
investors.
(3) Allocates no value to the Public Warrants offered hereby.
17
<PAGE>
CAPITALIZATION
The following table sets forth the debt and capitalization of the Company at
December 31, 1996, and as adjusted to give effect to the sale of 750,000 shares
of Common Stock and 750,000 Public Warrants by the Company in the Offering at $5
per share and $.25 per Public Warrant and the application of the net proceeds
therefrom. This information should be read in conjunction with the financial
statements and the notes thereto, as well as "Summary Financial Information,"
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
AS
ACTUAL ADJUSTED(1)
------------- -------------
<S> <C> <C>
Loans payable--stockholders........................................................ $ 213,384 $ 213,384
------------- -------------
Stockholders' Equity
Preferred Stock, $.01 par value; authorized: 5,000,000 shares; issued and
outstanding: none
Common Stock, $.01 par value; authorized: 15,000,000 shares; issued and
outstanding: 2,811,432 actual and 3,561,432 pro forma.......................... 21,280 28,780
Additional paid-in capital....................................................... 2,325,404 5,390,865
Deficit.......................................................................... (2,153,025) (2,153,025)
Less prepaid rent................................................................ (15,000) (15,000)
------------- -------------
Total Stockholders' Equity................................................... 178,659 3,251,620
------------- -------------
Total Capitalization......................................................... $ 392,043 $ 3,465,004
------------- -------------
------------- -------------
</TABLE>
- ------------------------
(1) Does not include: (a) up to 112,500 shares and 112,500 Public Warrants
subject to issuance under the overallotment option; (b) 75,000 shares and
75,000 Public Warrants subject to the Underwriters' Warrant; (c) up to
41,666 shares issuable under license agreement; or (d) other outstanding
options or warrants.
18
<PAGE>
DIVIDEND POLICY
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. Future
dividend policy will depend upon the Company's earnings, capital requirements,
financial condition and other factors considered relevant by the Company's Board
of Directors. See "Description of Securities."
MANAGEMENT'S DISCUSSION OF PLAN OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE COMPANY'S PLAN OF OPERATIONS SHOULD BE READ
IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO
INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE BUT ARE NOT
LIMITED TO THOSE DISCUSSED IN "RISK FACTORS."
OVERVIEW
The Company was incorporated in 1994 for the purpose of engaging in the
development, production and marketing of protection relays for heavy industry
and electric utilities worldwide. The Company's initial products are a motor
protection relay developed to protect medium to large motors, and a feeder
protection relay designed to protect industrial equipment and utility
substations.
From inception to September 1996, the Company's operating activities were
related primarily to recruiting personnel, raising capital, purchasing operating
assets and performing research and development.
The Company's strategy is to develop products for heavy industry that are
price competitive and have performance and other features not found in
competitors' products. As part of product development, the Company first tests a
product at its facility and then "beta" tests the product. Beta testing is the
testing of the unit on a customer's site under the customer's normal operating
conditions with the understanding that there could be undetected "bugs" or
additional features which have not yet been implemented. Feedback from the
customer at the beta testing stage regarding the operation and features of the
unit are analyzed by the Company for possible modification of the unit prior to
final commercial release.The Company plans on beta testing two new motor
protection relay products in March and April 1997. Currently in development and
scheduled for beta testing in May 1997 is a new feeder protection relay. The
Company expects to have an overvoltage/undervoltage relay ready for beta testing
in June 1997. With these additional products, the Company will have a complete
range of relay products for heavy industry and power utilities. Each new relay
is more unique and has a wider potential customer base than its predecessor. The
final product in the Solaris protection relay family, NOVA, is expected to
outperform existing products and provide a range of substation protection
features that have never previously been available in the electric power utility
industry. The Company is in the process of applying for a patent on NOVA;
however, there is no assurance that a patent will be awarded, or if awarded,
there can be no assurance as to the breadth or degree of protection which a
patent, if any, may afford the Company; that any patent will be upheld if
challenged; or that competitors will not develop similar or superior methods or
products outside the protection of any patent issued to the Company.
RESULTS OF OPERATIONS
REVENUES. Prior to the year ending December 31, 1996, the Company had no
sales. For the year ended December 31, 1996 the Company had sales of $294,734
which generated a gross profit of $96,931.
OPERATING EXPENSES: The Company's operating expenses are about $129,000 per
month as of December 1996. The increase resulted from the hiring of additional
engineering personnel and development costs
19
<PAGE>
incurred in connection with outside engineering consultants. The Company
believes that continued expansion of operations is essential to achieving and
maintaining market leadership.
In order to meet its cash requirements until the consummation of this
Offering, the Company arranged for factoring and financing of its accounts
receivable. Under a factoring agreement between the Company and Queensbury,
Inc., a Florida corporation, some of whose shareholders are also shareholders of
the Company (none of whom is an officer, director or principal shareholder of
the Company), the Company sold accounts receivable at a 6% discount, plus pays a
fee on the outstanding balance at the rate of 1% per month. The Company is
obligated to repurchase accounts which are delinquent for six consecutive
months. This agreement was terminated effective December 31, 1996, at which time
accounts receivable sold under the agreement were $160,350. At March 1, 1997,
$150,010 of such amount remained uncollected.
The factoring agreement was converted to a revolving line of credit
agreement between the Company and the same lender, effective January 1, 1997.
Under that agreement, the Company may borrow 94.5% of the face amount of
accounts receivable which are collateral for the loans. Interest accrues at 1%
per month and is payable monthly on the outstanding principal balance of each
such loan. The loans are repaid at 100% of the face amount of the collateralized
accounts as the Company receives payments from the customers. The maturity date
for amounts owed under the loan agreement is December 31, 1998. The maximum
amount available under the agreement is $500,000 and at March 1, 1997, there was
an outstanding obligation of $66,900 under this agreement.
Additionally, the Company entered into a cash advance and security agreement
with Framan Company, a business entity owned by Frank J. Mancini, a shareholder
and a director of the Company. Under the agreement, Framan Company advances
funds to the Company for the purchase of parts inventory and receives a security
interest in the parts. The advances accrue interest at 2% above the prime rate
and are payable interest only commencing on the first business day of the month
following the closing of the Offering and continuing on the first business day
of each month thereafter until the outstanding principal and all accrued
interest is repaid. Principal is due and payable one-half on the earlier of June
1, 1998, or the last day of the first fiscal quarter that the Company's gross
revenue exceeds $500,000, subject to cash flow; and one-half, or more, of the
then outstanding principal balance is due and payable on the last day of each
subsequent fiscal quarter that the Company's gross revenue exceeds $500,000,
subject to cash flow. Outstanding principal and interest is to be paid in full
on or before December 31, 1998. As of March 1, 1997, the Company had been
advanced $398,045 under this agreement.
The Company believes that the foregoing arrangements will allow the Company
to have cash available to meet its operating expenses, including inventory
requirements, until the closing of this Offering.
RESEARCH AND DEVELOPMENT: Research and development expenses consist
primarily of salaries and consulting fees to support technological product
development. Costs of software to be sold, incurred after technological
feasibility has been established and until it is available for general release,
are capitalized. Salaries and other material costs are expensed. The Company
believes that continuous development will occur for new products and has added
four new engineers to replace consultants which the Company believes will be
more cost efficient.
During fiscal 1996, the Company spent approximately $334,750 on research and
development. Expected research and development costs for the fiscal year ended
December 31, 1997 are estimated to be $300,000 in salaries for software
engineers (4 persons); $300,000 in salaries for hardware engineers (5 persons);
$150,000 for engineering equipment; and $150,000 for product tooling.
SALES AND MARKETING: Sales and marketing expenses, which currently
represent less than 10% of expenses, will grow as more products are developed.
The Company currently develops its own marketing materials in-house to save
costs; however, since the Company is planning to penetrate a global market
place, the Company expects these costs to increase at a faster rate than other
costs.
20
<PAGE>
EXECUTIVE OFFICER SALARIES. Salaries for the Company's five executive
officers for fiscal year ended December 31, 1997 are expected to aggregate
$530,000. See "Management--Employment Agreements."
INCOME TAXES
As of December 31, 1996, the Company had federal net operating loss carry
forwards of approximately $2,095,000. This net operating loss can be carried
forward for fifteen years to offset future taxable income.
FACTORS AFFECTING OPERATING RESULTS
As a result of the Company's limited operating history, the Company does not
have historical financial data for a significant number of periods on which to
base planned operating expenses. Additionally, the Company has not yet generated
enough revenue to become profitable on a month-to-month basis. Accordingly, the
Company's expense levels are based entirely on its expectations as to future
revenues and to a large extent are variable. The Company in the past used
outside independent contractors to support its limited number of development
personnel. However, the Company found that development schedules were difficult
to control and the Company experienced unanticipated development cost overruns.
The Company plans to hire additional personnel and to fund internal research and
development at a level sufficient to meet the Company's planned introduction of
new products. Additionally, the Company plans to increase its sales and
marketing expenses to increase potential customer awareness of its products. The
Company currently has 22 employees and anticipates hiring approximately another
14 employees within twelve months from the date of this Prospectus.
The Company distributes its products to customers directly and through
independent manufactures' representatives and distributors. The Company
anticipates that its largest customer base will be OEMS; however, the Company is
just beginning to exploit the OEM market and it is uncertain whether the Company
can timely supply products in the quantities that OEMS may require.
The Company is dependent on and intends to use the proceeds of this Offering
to implement its proposed expansion. The Company anticipates, based on currently
proposed plans and assumptions relating to its operations (including the costs
associated with, and the timetable for, its proposed expansion), that the
proceeds of this Offering, together with projected cash flow from operations,
will be sufficient to satisfy its contemplated cash requirements for at least
twelve months following the successful consummation of this Offering.
The Company expects to experience significant fluctuations to future
quarterly operating results that may be caused by many factors, including demand
for the Company's products, introduction of new technological developments, the
introduction, enhancement and market acceptance of new and existing products,
the introductions of competing products, and general economic conditions.
Further, the Company's products have long sales cycles. Occasionally, a product
may be evaluated by customers for a period of time, after which the Company may
be required to modify the product to meet the customer's needs, after which the
product is evaluated again prior to a purchase order being issued. Payment for
foreign sales is normally net 60 days and net 30 days for domestic sales. The
Company anticipates that a significant portion of its business will come from
foreign sales. As a result, the Company believes that period-to-period
comparisons of its results of operations will not necessarily be meaningful and
should not be relied upon as any indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has primarily financed its operations through private
sales of equity and debt securities as well as loans and capital contributions
by stockholders including the factoring and accounts receivable financing and
cash advance agreements.
21
<PAGE>
From December 1994 to December 1995, the Company raised in the aggregate
$580,000 through the sale of Common Stock. On June 3, 1995 certain stockholders
advanced $122,154 to the Company which has been partially repaid leaving a
balance at October 31, 1996 of $85,121. During January to April of 1996 a
stockholder advanced the Company $60,840 which was subsequently converted to
64,994 shares of Common Stock. During January to April of 1996, the Company
borrowed an aggregate of $178,087, which principal amount plus interest totaling
$190,703 was converted to 203,726 shares of Common Stock. During March to May
the Company sold convertible debentures for net proceeds of $54,980. These were
converted to 25,331 shares of Common Stock effective July 1, 1996. On May 15,
1996 the Company completed a bridge financing of $250,000 which was repaid from
proceeds of a subsequent private placement. Starting in June 1996 through
November 15, 1996, the Company conducted a private placement in which the
Company sold 50 units resulting in net proceeds of $1,305,000 after payments to
the placement agent. See "Certain Transactions."
The Company began generating sales in October 1996 and for the year ended
December 31, 1996 had sales of $294,734. The Company presently has orders for
approximately 1200 FPR1 units and approximately 180 CMPR2 units for shipment
through June 1997 to customers in North America, Taiwan, Brazil and South
Africa. Additionally, the Company has orders subject to satisfactory completion
of development and beta testing for certain of its other products. The Company
believes that the revenue to be generated from these sales together with the
proceeds from this Offering will be sufficient to meet its anticipated needs for
working capital, capital expenditures, new research and development, and
increased engineering staff for at least the next 12 months. Thereafter, sales
from products that have been developed in 1996 is expected provide sufficient
cash or provide the basis for conventional bank financing for growth of accounts
receivable and inventory. Prior to the closing of this Offering, the Company
expects to utilize its line of credit under the revolving line of credit and
cash advance agreements in order to generate cash.
PROPOSED ACCOUNTING STANDARDS
On June 14, 1996, the American Institute of Certified Public Accountants
issued an exposure draft of a Statement of Position on Software Revenue
Recognition which may require the Company to change their method of recognizing
revenue effective for the year ending December 31, 1997. The Company has not
analyzed or determined the effect, if any, which may result, but management of
the Company does not believe there will be a material effect of such change and
any change would be charged to operations.
22
<PAGE>
BUSINESS
GENERAL
Apollo International of Delaware, Inc. (the "Company") was formed in
Delaware in November, 1994 with its principal place of business located in
Apollo Beach, Florida. The Company designs and sells to industry and electric
utilities electric power protection and control products utilizing new computer
and fiber optics technologies. The Company is developing concurrently two
product lines, the first of which (designated as "CMPR" products) is designed to
monitor motors used by industrial users, and the second of which (designated as
"SOLARIS" or "NOVA" products), is designed to monitor electric power
transmission for industrial users and electric utilities. The target market for
the motor protection and control product line is industrial end users such as
steel mills, mining operations, pulp and paper mills, and petrochemical
companies. The NOVA product line is designed for the utility substation
marketplace which includes, public and investor owned utilities, cogeneration
facilities, and large industrial users who operate their own electric power
substations. The following discussion contains forward looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in "Risk Factors."
PRODUCTS
THE CONTROL AND MOTOR PROTECTION RELAYS (CMPR).
The CMPR products are motor protection relays designed for the medium to
heavy industrial electric motor market. The CMPR is a hardware and software
package designed to provide a high level of protection to expensive electric
motors used throughout heavy industries such as mining operations, chemical and
petrochemical, steel mills, and paper manufacturing facilities. The CMPR, which
is attached to a motor directly or indirectly through a circuit breaker, is a
digital protection device (relay) similar to a circuit breaker that monitors the
motor and either shuts down the motor or sets off an alarm upon detection of
irregularities such as shorts to ground, loss of a phase of power, overheating,
failing gears, or an unbalanced rotor. The CMPR offers an advantage over other
types of motor protection devices because it contains its own "intelligence" and
as such is not required to communicate with any other "off-site" device for
instructions before making the decision to shut down a motor, sound an alarm, or
do nothing.
The Company is currently marketing the CMPR2 relay which is designed to
protect motors with a minimum of 5000 horsepower. The motor protection and
control products share a common technology and the Company anticipates
developing and marketing variations of the CMPR2 offering varying degrees of
motor protection (i.e., monitoring voltage, ground current, motor temperature)
and/or control (i.e., starting up and shutting down the motors), depending on
the types of motors and needs of potential customers. Under current development
and scheduled for beta testing in March 1997 is the CMPR1 relay product which is
designed for small to medium motors with horsepower ranging from 100 HP to 5,000
HP. The CMPR1 products are versions of the CMPR2 in a streamlined package with
fewer features selling at a lower price. Management believes that the market is
substantially larger for the CMPR1 than for the CMPR2 due to the larger number
of lower horsepower motors used in industry. The Company expects to release the
first of such products in the second quarter of 1997. The Company also has in
development another variation of the CMPR2 which is designed for motors which
require more control features than motor protection features (the MCR1-motor
control relay). The Company anticipates that this product will be ready for beta
testing by the third quarter of 1997. Also in development is the SMPR1
(synchronious motor protection relay) which the Company expects to have ready
for beta testing approximately in the third quarter of 1997. The price range for
a CMPR2 motor protection relay is $2,195 to $3,734 per unit, depending on the
number of added features the customer requests. The CMPR1 price range is
expected to be $1,095 to $1,570 per unit. The Company expects to price the SMPR1
synchronious motor protection relay at $1,595 per unit.
23
<PAGE>
THE NOVA PRODUCT FAMILY
The NOVA product line is a family of feeder breaker relays that are designed
to provide protection and control for both electric power utility substations
and heavy industrial facilities operating their own substations. The Company
believes NOVA's unique design will perform more rapidly than existing products
and provide a range of substation protection features that previously have not
been available in the Company's target markets. Ultimately, the NOVA products
will be self-contained, stand alone devices (i.e., act independently with their
own intelligence without having to communicate with a remote or off-site device
for instruction) that monitor and send communications regarding irregularities
in power transmission (i.e., loss of electric power from a transformer, an
imbalance in power, shorts to ground, etc.). The NOVA feeder breaker relays will
be installed in electric power substations (which contain transformers and
breakers). A transformer is a device that transforms variations of electric
current into variations of voltage and current and sends power to different
locations over several feeder lines, which, in turn, pass through other, smaller
down-stream substations, where power is eventually disseminated to final
destinations such as hospitals, office buildings, industrial plants and
residential areas. On each such feeder line is a feeder breaker to which relays
are attached. The relays tell the breaker to open or shut in response to
irregularities in power transmission. The relays currently used by electric
power utilities (and industries that have their own electric power substations)
do not have their own "intelligence" and therefore must first communicate with a
remote terminal unit ("RTU") or a programmable logic controller ("PLC") before
reacting. The RTU/PLC contains the information necessary to analyze the problem,
make a decision and transmit that decision to the relay, which then reacts by
either shutting off or opening up the breaker. On the other hand, NOVA relays
are designed to contain their own intelligence and therefore can respond more
quickly to a problem.
The Company is initially developing three models of its NOVA line. The first
model "Solaris" (FPR1), is designed primarily for use by heavy industry. Solaris
is a solid state digital tripping device for large industrial breakers. It can
be programmed to trip the breaker under certain conditions or to send an alarm
under other circumstances. The Company anticipates that the Solaris will benefit
major industrial operations where there is a multitude of motor-operated
equipment (i.e., conveyor belts, paint stations, robotics, machinery), which may
be synchronized and where precise monitoring of motor functions is critical. The
price for the Solaris FPR1 is $1,095 per unit.
In development is a more sophisticated version of Solaris (FPR3) which is
expected to be beta tested during May 1997 and, subject to successful testing,
commercially marketed by the third quarter of 1997. The FPR3 model is designed
for the electric power utility industry and has automatic reclosure capability
when tripped. It will contain more information than current feeder breaker
relays, but will still communicate with the RTU or PLC. However, it will provide
more information to the RTU/PLC, thereby shortening processing and response time
by the RTU/PLC. The projected price for the FPR3 unit is $1,695. An FPR2 model
will be a scaled-down version of the FPR3 for which the Company has not yet
determined a price. It is anticipated that the FPR2 model will be readly for
beta testing during June 1997.
The Company also has in development a feeder protection relay with automatic
closure capability and under/over voltage protection and a feeder protection
relay with automatic closure and direction determination capability. The Company
has not established beta test dates or prices for these products.
The Company's flagship product will be the most sophisticated version of
feeder breaker relays in the NOVA family and its development is scheduled to
commence during the first quarter of 1997. This NOVA design is expected to
perform more rapidly than existing products and provide a range of substation
control features that have never previously been available in the electric power
utility industry. Each feeder breaker relay will be self contained, having its
own intelligence and ability to react independently of an RTU/PLC, thus
rendering the RTU/PLC obsolete. Each NOVA unit is designed to communicate with
other NOVA units and the customer via a high speed data network. By combining
self contained intelligence and communications via fiber optics and
sophisticated software, the response time to an
24
<PAGE>
electrical irregularity is expected to be reduced to milliseconds from several
seconds. In addition to a faster response time, the Company anticipates that
electric utilities will save the cost of an expensive RTU/PLC plus the cost of
wiring. The Company estimates that wiring requirements will be reduced by
two-thirds with the NOVA flagship system. The commercial availability of the
product will depend on beta testing results and any refinements that may be
required. At this time the Company expects to commence beta testing the product
in the third quarter of 1997. As with the CMPR product line, the NOVA product
line will share a common technology with variations for emphasizing different
purposes.
MANUFACTURING AND MATERIALS
The Company develops and designs its products, the associated test
procedures and produces assembly and operations manuals for customers' use. The
Company contracts with third party manufacturers for the manufacture of product
components which the Company assembles at its facilities. The Company believes
that such relationships will afford the most competitive pricing and the Company
will not be dependent on one source for production. However, the Company has
limited control over the manufacturing process from the perspective of quality
control and production of a sufficient number of products to meet demand.
The Company purchases raw materials for its products from approximately
eight suppliers. Since industry standard components are typically used to
produce the Company's products, there are many sources for raw materials and the
Company is not dependent on any one supplier of materials. Suppliers for custom
components, such as printed circuit boards, can be quickly tooled in the event
of an interruption in supply by the Company's current vendors.
RESEARCH AND DEVELOPMENT
During fiscal 1996 the Company spent approximately $334,750 on research and
development. The Company plans to further expand its engineering department to
focus on research and development of additional products, including the
completion of the NOVA line of products utilizing the proceeds of this Offering.
These "design teams" will work closely with the Company's field engineers, sales
and marketing staff to evaluate additional customer needs and to further advance
the state of its substation control and motor protection product development.
PATENTS AND COPYRIGHTS
The Company is in the process of having patent applications prepared for
certain individual modules of its products. The Company has not previously
applied for patent or copyright protection for its products nor has it conducted
a patent search (other than through university library resources and the
Internet) due to a lack of sufficient working capital. Although the Company has
not determined whether various products are patentable as a whole, or even
whether it can obtain patents and copyrights on certain components, the Company
plans to obtain copyrights and patents on the various modules of the overall
system, which the Company anticipates will provide an effective barrier to
infringement by third parties. Although the Company anticipates obtaining
patents for the NOVA system and/or its various modules, the patent process is
long and complex, and there is no assurance that the Company will be successful
in obtaining patents on any or all of its products. There may be other, similar
products currently being developed or subject to superior patents or copyrights,
thereby subjecting the Company to potential liability claims based on patent or
copyright infringement.
SALES AND MARKETING
The Company has been establishing relationships with a network of
independent manufacturer's representative organizations strategically located
throughout the United States and selected international
25
<PAGE>
markets for the marketing of its Solaris and NOVA products. As of the date of
this Prospectus, the Company has entered into agreements with 13 domestic and 6
international representatives. The Company also expects to enter into agreements
with domestic and international OEMS, VARS and systems integrators. The Company
also plans to sell directly to certain customers. The Company's marketing
strategy utilizes public relations, trade media advertising, product sales
materials and other direct distributor and customer relations support.
The Company plans to first concentrate its internal marketing efforts on
forging contractual relationships with OEMS and permit the OEM to put its own
label on certain CMPR products. In January, 1996 the Company entered into its
first OEM agreement with Phasetronics, Inc., a manufacturer and distributor of
solid state power and motor control products, some of which are distributed
under the "Motortronics" label. Under the agreement, the Company supplies its
CMPR motor protection relays to the Phasetronics, on a non-exclusive basis, who
in turn distributes the relays worldwide under its own Motortronics label. The
agreement has a term of two years and to date, the Company has sold 10 relays
under this agreement and has received a purchase order for another 100 relays,
initially 15 for delivery in each of December 1996 and January 1997. Delivery of
the remaining 70 units is yet to be scheduled.
The Company expects to enter into similar arrangements with other OEMS. The
Company believes that this marketing effort will give the Company exposure to
some of the largest users of electric motor power in the United States.
The Company entered into a second agreement with Phasetronics pursuant to
which the Company agreed to design, develop, manufacture and supply that company
with a solid state digital starter module (inclusive of communications control
software) according to specifications supplied by the OEM. The OEM expects to
use the module in the development and marketing of a digital soft start device
for motors. The module has been completed and is being tested by the customer.
The Company anticipates receiving $40,000 in February 1997, subject to
satisfactory results from the customer's testing of the product. Although the
Company does not have any current plans to enter into similar product
development arrangements with other companies, preferring instead to sell
completed products to the OEM market, in the future the Company may enter into
agreements with third parties to develop specific products for them.
As the Company diversifies its customer base, it will have less dependence
on any one customer. The majority of the Company's 1996 sales were allocated
between Jeanelac (37%), US Steel (30%), and Phasetronics (28%). The loss of any
one of these customers during the Company's initial growth could have a material
adverse effect on the Company. However, the Company has begun selling products
to Hawker Siddeley and Iscor Steel and contracts have been signed with
distributors in Brazil, Taiwan and Namibia who have placed initial inventory
orders. The Company is currently conducting negotiations with distributors
and/or end users in China, Columbia and the United Kingdom which the Company
believes will be completed by the beginning of the second quarter, 1997. See
"Risk Factors -- Dependence on Major Customers."
COMPETITION
The Company faces competition from manufacturers of the existing technology
products currently used by the electric power protection and control market.
Companies such as General Electric, Siemens A.G., GEC Alsthom, Inc., and ABB
Industrie A.G., are established companies which control a substantial share of
the domestic and international market for motor control and relay products and
have greater name recognition and financial resources than the Company. Although
the Company believes it has no current competitor manufacturing high technology
products similar to the CMPR or NOVA, there is no assurance that such
competitors will not emerge and further they may have more resources than the
Company for development, manufacturing and marketing their products.
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<PAGE>
EMPLOYEES
As of December 31, 1996, the Company had 18 employees, comprised of 8
engineers, 5 marketing and sales personnel and 5 administrative personnel, all
of which are full-time employees. The employees are not represented by a union
and no work stoppages have occurred since the Company's inception.
GOVERNMENT REGULATION
To the Company's knowledge, the Company's products are not subject to
governmental regulation in the United States. To the Company's knowledge, there
are no specific foreign governmental regulations covering its products in the
countries in which it presently contemplates selling its products. However, in
such foreign jurisdictions, the products are regulated by generally applicable
import and currency control regulations.
INSURANCE
The Company maintains $1 million in product liability insurance coverage in
addition to $1 million general liability insurance coverage. The Company does
not have errors and omissions insurance at this time.
PROPERTY
The Company's facilities are located at 6542 North U.S. Highway 41, Apollo
Beach, Florida 33572 where it leases its office and plant space comprising
approximately 7,230 square feet. The lease expires as to 5,630 square feet on
March 31, 1999 and expires as to approximately 1,600 square feet on October 31,
1998. The lease provides for a monthly rental of $6,873.26. However, in April
1996, the landlord gave the Company a $20,000 credit toward the rent in exchange
for 21,366 shares of the Company's Common Stock, which credit is being off-set
against the rent at $555.56 per month. The landlord is not affiliated with the
Company or any of its directors or officers. The Company believes that the
facilities are adequate for its purposes for the foreseeable future.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Company or any of its
property is subject, and to the knowledge of the Company, there are no such
proceedings threatened. There can be no assurance that any future legal
proceedings will not have a material adverse effect on the Company's business,
reputation or financial condition.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follow:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE
- --------------------------------------- --- --------------------------------------------------
<S> <C> <C>
David W. Clarke........................ 48 President, Chief Executive Officer; Chairman
Christine Clewes....................... 46 Vice President, Marketing; Director
Steven D. Smith........................ 42 Vice President, Operations; Director
Gregory C. Hamilton.................... 46 Director
Matthias E. Lukens, Jr................. 46 Director (Vice Chairman)
Frank J. Mancini....................... 74 Director
Robert K. Swatland..................... 56 Vice President, Sales
Donald P. Louw......................... 40 Vice President, International Sales
</TABLE>
David W. Clarke, one of the Company's founders, has served as its President
and Chief Executive Officer since its inception in November 1994 and was elected
Chairman in September 1996. Prior to founding the Company, Mr. Clarke was a
sales representative for GF Electro, a power utility industry representative,
from April 1994 to November 1994. From April 1992 to April 1994, Mr. Clarke
co-founded and was employed by WHR Corporation, a high technology firm
specializing in data communications for multimedia firms. Mr. Clarke served as
Vice President until WHR was dissolved in April 1994. In April 1991, Mr. Clarke
co-founded and was director and Executive Vice President of Sales and Marketing
for Watch Hill Research, a high technology manufacturing firm specializing in
high speed data links and located in Providence, Rhode Island. That company's
domestic operations were sold in 1992. In November 1984, Mr. Clarke co-founded
Sequel Data Communications, a high tech data switching manufacturer based in
Raleigh, North Carolina. He served as Executive Vice President and Director
until the company was sold in August 1990. Mr. Clarke is married to Christine
Clewes, a founder, director and officer of the Company.
Christine Clewes, one of the Company's founders, has been its Vice President
of Marketing and a Director since the Company's inception in November 1994.
Prior to founding the Company, Ms. Clewes was the director of Sales and
Marketing for WHR Corporation since 1992, where she had responsibility for large
direct commercial accounts and all US Government accounts. From 1991 through
1992, Ms. Clewes managed her own firm, C2 Communications, a sole proprietorship,
located in Reston, Virginia which focused on government contracts and large
national accounts. Ms. Clewes is married to David W. Clarke, a founder, director
and officer of the Company.
Steven D. Smith joined the Company in February, 1996 as Vice President of
Operations and was elected as a Director in September 1996. Prior to joining the
Company, from 1994 to 1996, he was employed as President and CEO by Innovative
Concepts & Manufacturing Company, Boca Raton, Florida, a provider of
manufacturing and operational consulting services to various industries. Prior
to founding Innovative Concepts, from 1993 to 1994, he was employed as a
consultant to Reynolds International, Inc., a provider of environmental
consulting services. In 1978 Mr. Smith founded Manutek, Inc., an electronics
manufacturing firm where he functioned as it's President and CEO through 1993.
Gregory C. Hamilton, has been a director since September 1996. Mr. Hamilton
is an independent public accountant who has conducted a public accounting
practice in Bradenton, Florida since 1983. He has been the Company's business
accountant since November 1994. Mr. Hamilton has an accounting degree from the
University of South Florida in Tampa, Florida and is a Certified Public
Accountant. While operating his practice, Mr. Hamilton also served as an adjunct
professor in accounting and tax at the University of Tampa.
Frank J. Mancini has been a director of the Company since September, 1996.
He is a shareholder, director and since March 1995 the President and Chief
Executive Officer of The Mancini Packing
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Company, Zolfo Springs, Florida, prior to which he had been Vice President of
that company since 1946. Mr. Mancini receives consulting fees from the Company
and has advanced the Company funding for acquisition of parts pursuant to a cash
advance agreement. Mr. Mancini will receive $23,000 in consulting fees from
Offering proceeds. See "Management--Consulting Agreements" and "Certain
Transactions."
Mathias E. Lukens, Jr., has been a director of the Company and its Vice
Chairman since September, 1996. Mr. Lukens has been a Vice President, director
and shareholder of Access Solutions International, Inc., North Kingston, Rhode
Island, a computer software developer since January 1996. From April 1994 to
January 1996 he was President and CEO of that company. Mr. Lukens was President
of WHR Corporation from May 1992 to April 1994. From June 1990 to March 1992 he
was President of Watch Hill Research, Providence, Rhode Island. Mr. Lukens
receives certain consulting fees and was issued 250,000 common stock purchase
warrants pursuant to a consulting agreement. Mr. Lukens has licensed certain
software to the Company pursuant to an agreement and under the terms of the
agreement will receive up to $125,000 in cash and 41,666 shares of Common Stock
of the Company. See "Management--Consulting Agreements" and "Certain
Transactions."
Robert K. Swatland has been Vice President of Sales since October, 1996.
From March 1995 to October, 1996, Mr. Swatland was national sales manager for HT
Communications, Inc., Simi Valley, California, a manufacturer of wide area
communication devices. From April 1994 to March 1995, Mr. Swatland sold wide
area communications equipment as a sales representative for his own company, RKS
Enterprises, Wheaton, Illinois. Mr. Swatland served as Vice President of Sales
for Watch Hill Research from March 1992 to March 1994, Providence, Rhode Island,
a high technology manufacturing firm that specialized in high speed data links.
From April 1987 to March 1992, Mr. Swatland was employed as a regional manager
by Sequel Data Communications, Raleigh, North Carolina, a high technology data
switching manufacturer.
Donald P. Louw has been Vice President of International Sales since March
1996 and is currently working for the Company in South Africa. Prior to joining
the Company, Mr. Louw was employed by Siemens LTD South Africa in its motor
protection department from 1990 to March 1996, where he was Senior Project
Engineer. Prior to Siemens, he was employed by G E C Alstrom South Africa in its
motor protection department, where he also held the position of Senior Project
Engineer.
EXECUTIVE COMPENSATION
The following table sets forth cash compensation paid by the Company to, as
well as any other compensation paid to or earned by, the President and Chief
Executive Officer of the Company and those executive officers compensated at or
greater than $100,000 for services rendered to the Company in all capacities
during the fiscal year ended December 31, 1996. For information regarding
current compensation paid to the Company's executive officers, see "Employment
Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
- ----------------------------------------------------------------------------------------------
FISCAL YEAR OTHER ANNUAL
NAME AND POSITION ENDED 12/31 SALARY(1) BONUS COMPENSATION
- ------------------------------------------ ------------- --------- --------- -------------
<S> <C> <C> <C> <C>
David W. Clarke........................... 1996 $ 60,000 -- --
President, CEO 1995 $ 57,692(2) -- --
</TABLE>
- ------------------------
(1) Reflects annual compensation earned for the fiscal years ended December 31,
1996 and 1995 in the form of salary, bonus or other annual compensation. No
executive officer received any long-term compensation (e.g., restricted
stock awards, securities underlying options/stock appreciation rights,
long-term incentive plan payouts or other long-term compensation). No
executive officer received over $100,000 in compensation.
(2) Reflects $60,000 salary, of which $57,692.25 was paid and $2,307.69 accrued
in fiscal 1995.
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<PAGE>
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive compensation for
serving as directors. The Company anticipates compensating its independent
directors for their services in the form of fees and/ or stock options, yet to
be determined. All directors will be reimbursed for their reasonable
out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors and for other expenses incurred in their capacity as
directors of the Company.
EMPLOYMENT AGREEMENTS
The Company entered into a five year employment agreement with David W.
Clarke as the Company's President and Chief Executive Officer, commencing June
1, 1996. The term of the agreement may be automatically extended for successive
one (1) year terms, unless notice of termination is given ninety (90) days prior
to the expiration of the term or any extension period thereafter. The agreement
provides for an initial annual base salary of $150,000, subject to increases, in
addition to annual cost of living increases, based on the Company's annual gross
sales, as follows: For each $1,000,000 in annual gross sales, as calculated in
accordance with Generally Accepted Accounting Principles, in excess of
$10,000,000 but less than $30,000,001, Mr. Clarke shall receive an additional
$5,000 in annual base salary, commencing in the next fiscal year; PROVIDED,
HOWEVER, that during the applicable fiscal year, the Company's earnings before
interest and taxes are at least 10% of the annual gross sales. The agreement
also provides that an independent committee of Board members may award Mr.
Clarke discretionary bonuses.
Mr. Clarke's employment agreement provides for certain severance payments to
be made to him or his estate as follows: (i) in the event of death, any accrued
and unpaid salary, vacation and bonus, and one year's annual base salary then in
effect, payable in 12 equal monthly installments; (ii) in the event of permanent
disability, three years of annual base salary then in effect, and any unpaid
bonus, payable in 36 equal monthly installments (inclusive of any disability
payments paid to him from any Company-sponsored disability plan or disability
insurance), plus continued coverage, at the Company's expense, under the
Company's major medical, dental and disability plans, or the monetary
equivalent, for a period of 36 months; (iii) in the event of termination without
cause, the full compensation to which he would otherwise be entitled under the
employment agreement, payable in one lump sum upon termination, plus continued
coverage under the Company's major medical, dental and disability plans, or the
monetary equivalent, for a period of 24 months; and, (iv) in the event of
non-renewal of the employment agreement by the Company, one year's annual base
salary then in effect, payable in 12 equal monthly installments. In the event
that the Company terminates Mr. Clarke within nine months of a change in control
of the Company, Mr. Clarke will be entitled to receive in one lump sum payment,
three times his annual base salary for the remainder of the term of his
employment agreement, provided that such payment shall be based upon a minimum
period of three years.
Under the terms of his employment agreement, Mr. Clarke is subject to a
covenant not to compete with the business of the Company anywhere in the world
during the term of his employment with the Company and for a term of five years
following the expiration or termination of his employment agreement.
The Company also entered into employment agreements with Christine Clewes
(Vice President of Marketing), Steven D. Smith (Vice President of Operations),
Robert K.. Swatland (Vice President of Sales) and Donald P. Louw (Vice President
of International Sales). These employment agreements are substantially similar
and were entered into on July 1, 1996 as to Ms. Clewes and Mr. Smith, and March
22, 1996 and November 1, 1996 as to Messrs. Louw and Swatland, respectively. Mr.
Swatland's agreement is for a term of two years. The other agreements have an
initial period of four (4) years and all the agreements and are automatically
renewable for successive two (2) year terms, unless notice of termination is
given prior to the renewal period. The agreements provide for the following
annual base salaries, subject to increases for annual cost of living
adjustments: Ms. Clewes ($100,000); Mr. Smith ($120,000); Mr. Swatland
($80,000); and Mr. Louw ($80,000). Except for Ms. Clewes' employment agreement,
the
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<PAGE>
agreements provide that the executives will be entitled to stock options under
the Company's stock option plan, as determined by the Board of Directors. The
number and exercise prices of the options shall be determined in accordance with
such plan. See "--Employee Stock Option Plan."
Ms. Clewes is entitled to receive additional compensation pursuant to the
terms of her employment agreement in the amount of one and one-half percent of
the net sales of the Company's products within the United States. For purposes
of the agreement, net sales is defined as the gross sales price of the Company's
products, less (a) any commissions paid to the third parties by the Company with
respect to such products, (b) sales tax, if any, and shipping and handling
charges.
Mr. Louw is entitled to receive, under his employment agreement, additional
compensation equal to three percent of the net sales of the Company's products
outside of North America.
The agreements provide for severance payments in the event that the Company
terminates the executives without cause, or for permanent disability or death in
an amount equal to six (6) months of the executive's annual base salary. They
also be entitled to any major medical, dental and disability plans available to
employees generally for the six month period, or the monetary equivalent in the
event of termination without cause or permanent disability. The employment
agreements contain covenants not to compete with the business of the Company
during the term of employment and for a period of two years following the
expiration or termination of the employment agreements.
Although all of the employment agreements discussed above contain
non-compete restrictions during and after termination of employment (five years
in the case of Mr. Clarke, and two years in the case of other executive
officers), a state court reviewing the enforceability of any such covenant not
to compete may decline to enforce, or may enforce in part, such a covenant based
on various factors. There is no assurance that if a former employee challenges
the covenant not to compete, that a court would declare any portion or all of
the covenant enforceable.
The Company may enter into other employment agreements with current and
future employees on terms as deemed appropriate by the Company's Board of
Directors. The Company anticipates hiring a Chief Financial Officer after the
closing of the Offering.
CONSULTING AGREEMENTS
The Company entered into consulting arrangements with four separate
consultants for business advice on non-operational aspects of the Company's
business. Under one such agreement, the Company issued 299,000 shares of the
Company's Common Stock and 400,000 Common Stock purchase warrants to Perryman
Corp. N.V. ("Perryman") for consulting services rendered through May 10, 1996,
the agreement's termination date. Perryman is an international business
consulting firm which assisted the Company in connection with assessing the
market potential of various foreign countries and in identifying and contacting
potential customers in certain of those countries. Upon effectiveness of this
Offering, the consultant's warrants will be modified to be identical to the
Public Warrants. The consultant has certain piggy-back registration rights for
the shares and shares underlying the warrants. See "Description of
Securities--Warrants" and "--Registration Rights." Under the terms of the
consulting agreement, David W. Clarke, President of the Company, holds a voting
proxy for the 299,000 shares of Common Stock and any shares issued in respect of
exercise of the 400,000 warrants until the earlier of: (i) May 10, 2001, and
(ii) the date of this Prospectus. The shares and warrants are subject to a 13
month lock-up from the date of this Prospectus, unless released earlier by the
Underwriters. See "Description of Securities--Lock-Up Agreements."
The Company is also party to a five year consulting agreement with Imagine
Holdings for business advice services, commencing June 1, 1996. The consultant's
services include strategic planning and advice in respect of foreign market
negotiations. In respect of such services, the Company agreed to pay the
consultant 250,000 Common Stock purchase warrants, exercisable at $4.00 per
share commencing June 1, 1998 (unless the Company agrees to an earlier exercise)
until June 1, 2002 and reimbursement of the
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<PAGE>
consultant's reasonable expenses incurred in connection with the agreement. The
consulting agreement provides for certain piggy-back registration rights for the
shares underlying the warrants. The consultant has given David W. Clarke,
President of the Company, a voting proxy for the shares issued in respect of the
exercise of the warrants, until the earlier of: (i) June 1, 2002, and (ii) the
date that the shares issuable upon exercise of the warrants are included in a
registration statement for a secondary public offering of the Company's Common
Stock. Any unexercised warrants may be terminated by the Company upon the
occurrence of certain events including a breach of the agreement by the
consultant. The agreement requires the consultant to not disclose the Company's
confidential information and also contains a restriction on competition with the
Company during the term of the agreement and for three years after termination
of the agreement. In consideration of making a short term loan in the amount of
$50,000 to the Company, which loan has been repaid, the consultant was also
issued a warrant for 50,000 shares of Common Stock on the same terms and
conditions as the other warrant, except it is exercisable at $5.50 per share.
See "Description of Securities--Warrants," and "--Registration Rights."
In addition, in November 1996, the Company entered into a five year
consulting agreement with Mathias E. Lukens, Jr., a director (and Vice Chairman)
of the Company, for consulting services in connection with administrative,
business development and product development matters. Specific services include
engineering and re-engineering of software and advice on market identification
and expansion. Pursuant to the agreement, Mr. Lukens was issued 250,000 common
stock purchase warrants, exercisable at $5.50 per share commencing June 1, 1998
(unless the Company agrees to an earlier exercise) until June 1, 2002. The
warrant contains "piggy-back" registration provisions for the shares issuable
upon exercise of the warrants. Mr. Lukens gave David W. Clarke, President of the
Company, a voting proxy for the shares issued in respect of the exercise of the
warrants, until the earlier of (i) June 1, 2002, and (ii) the date that the
shares are included in a registration statement for a secondary offering of the
Company's Common Stock. Mr. Lukens is also reimbursed for expenses reasonably
incurred in performance of his duties under the agreement. The consulting
agreement may be terminated under certain circumstances, including breach of the
agreement and upon such termination, the consultant would be entitled to
exercise only a PRO RATA portion of the unexercised warrants based on the number
of months service provided under the consulting agreement. The agreement
requires the consultant to not disclose the Company's confidential information
and also contains a restriction on competition with the Company during the term
of the agreement and for three years after termination of the agreement.
In December 1996, the Company formalized a consulting relationship with
Frank J. Mancini, a principal shareholder and director of the Company, pursuant
to which Mr. Mancini provides the Company with business and day-to-day
operations advice. Pursuant to the agreement, Mr. Mancini will be paid $4,000
per month commencing the first day of the calendar month following the closing
of the Company's initial public offering, and to and including September 1,
1997. The agreement expires September 30, 1997. The agreement also contains
non-disclosure and non-compete restrictions applicable during and after
termination of the consulting relationship. The Company plans to pay Mr. Mancini
$23,000 from Offering proceeds for consulting advice in connection with various
operational matters, which fees are independent from the fees to be paid under
the consulting agreement.
Although the consulting agreements discussed above contain non-compete
restrictions during and after termination of the consulting relationship, a
state court reviewing the enforceability of any such covenant not to compete may
decline to enforce, or may enforce in part, such a covenant based on various
factors. There is no assurance that if a former consultant challenges the
covenant not to compete, that a court would declare any portion or all of the
covenant enforceable, except as would otherwise be enforceable based on
fiduciary obligations imposed on officers and directors.
EMPLOYEE STOCK OPTION PLAN
In June 1996, the Company's Board of Directors adopted and its shareholders
approved the Company's 1996 Employee Stock Option Plan (the "Plan") under which
500,000 shares of Common Stock are
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<PAGE>
currently reserved for issuance to employees upon exercise of stock options. The
purpose of the Plan is to attract and retain key personnel, to encourage stock
ownership by officers, directors and key management of the Company, and to
provide an incentive for such persons to expand and improve the performance of
the Company. The Plan provides for the grant of both incentive stock options
("ISOs") intended to qualify as such under Section 422 of the Internal Revenue
Code (the "Code") and nonqualified stock options to key employees (including
directors and officers who are employees), as determined in the discretion of a
committee designated by the Board.
The Plan is administered by a committee, comprised of David W. Clarke,
Christine Clewes, Mathias E. Lukens and Frank Mancini. The selection of
participants, allotment of shares, and whether a grant will consist of incentive
stock options or nonqualified stock options or a combination thereof is
discretionary with the committee. ISO's granted under the Plan may not be
granted at a price less than the fair market value of the Common Stock on the
date of grant (or 100)% of fair market value in the case of persons holding 10%
or more of the voting stock of the Company). The aggregate fair market value of
shares for which ISO's granted to any employee are exercisable for the first
time by such employee during any calendar year (under all stock option plans of
the Company) may not exceed $100,000. The exercise price of non-qualified stock
options shall be determined by the option committee, in its discretion. Options
granted under the Plan will expire not more than ten years from the date of
grant (five years in the case of ISO's granted to persons holding 10% or more of
the voting stock of the Company). All options granted under the Plan are not
transferable during an optionee's lifetime but may be transferred by will or by
the laws of descent and distribution.
The Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to options
which expire without being exercised or which are canceled as a result of
cessation of employment are available for further grants.
As of March 1, 1997, there were 351,500 ISO's granted under the Plan, all
exercisable at $4.00 per share. The options, which have five or ten year terms
and were granted between July 1996 and February 1997, are first exercisable one
year from their respective dates of grant as to one-half of the option shares,
and quarterly thereafter as to each remaining 25%. However, the optionees have
agreed not to sell the shares issuable upon exercise of their options for a
period of 24 months after the date of this Prospectus, unless released earlier
by the Underwriters.
The Company plans to grant independent directors of the Company
non-qualified stock options outside of the Plan, although at a later date the
Company may implement a stock option plan specifically for non-employee
directors.
INDEMNIFICATION, DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify all directors and officers of the Company to the full
extent permitted by the Delaware General Corporation Law. Under such provisions,
any director or officer, who in his capacity as such, is made or threatened to
be made, a party to any suit or proceeding, may be indemnified if the Board of
Directors determines such director or officer acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interest of the Company. The Certificate of Incorporation, Bylaws and the
Delaware General Corporation Law further provide that such indemnification is
not exclusive of any other rights to which such individual may be entitled under
the Certificate of Incorporation, the Bylaws, any agreement, vote of
shareholders or disinterested directors or otherwise.
The Company's Board of Directors and executive officers entered into
indemnification agreements with the Company. The agreements follow the
indemnification and expense advancement provisions of Delaware's General
Corporation Law. In addition, the indemnitee under the agreements is entitled to
indemnification against all expenses actually and reasonably incurred by him or
on his behalf in connection with serving as a witness in any proceeding (as
defined in the agreement) by virtue of his or her status with the Company. The
agreements also provide a procedural mechanism under which the indemnitee can
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<PAGE>
claim and obtain indemnification, including a procedure for the Board or
independent counsel to determine entitlement to indemnification under specific
situations. In the event the indemnitee does not receive the indemnification to
which he would otherwise be entitled under the terms of the agreement, the
indemnitee is entitled to seek a judicial determination. In the event the
indemnitee seeks a judicial adjudication to enforce his or her rights under, or
to recover damages for breach of, the agreement, the indemnitee is entitled to
recover from the Company his or her reasonable legal fees and other expenses in
connection with the legal proceeding, subject to proration in the event the
amount of the aware is less than the amount of indemnification sought.
The Company and the Underwriters have agreed to indemnify each other
(including officers and directors) against certain liabilities arising under the
Securities Act. See "Underwriting."
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted for directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
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BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially five percent
or more of the outstanding shares of Common Stock, each Director and all
officers and Directors as a group as of the date of this Propectus, and as
adjusted to reflect the sale of the 750,000 shares of Common Stock included in
the Securities offered hereby.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING STOCK(1)
AMOUNT AND NATURE OF ------------------------
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL BEFORE AFTER
OWNER OR IDENTITY OF GROUP(2) OWNERSHIP(1) OFFERING OFFERING
- ------------------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C>
David W. Clarke.............................................. 1,258,242(3) 44.75% 35.33%
Christine Clewes............................................. 705,691(4) 25.10% 19.81%
Steven D. Smith.............................................. -0-(5) -0- -0-
Gregory C. Hamilton.......................................... -0- -0- -0-
Matthias E. Lukens, Jr....................................... 21,365(6) * *
Frank J. Mancini............................................. 326,577(7) 11.62% 9.17%
c/o The Mancini Packing Company
700 Magnolia Street
Zolfo Springs, FL 32890
Robert C. Swatland........................................... -0-(8) -0- -0-
Donald P. Louw............................................... -0-(9) -0- -0-
James Kendall................................................ 347,191 12.35% 9.75%
676 Reef Road
Vero Beach, FL 32963
All Directors and officers as a group
(eight persons)............................................ 1,606,184(3)-(9) 57.13% 45.10%
</TABLE>
- ------------------------
* Less than 1% of the issued and outstanding Common Stock.
(1) As used herein, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Securities Exchange Act of 1934 as
consisting of sole or shared voting power (including the power to vote or
direct the vote) and/or sole or shared investment power (including the power
to dispose or direct the disposition of) with respect to the security
through any contract, arrangement, understanding, relationship or otherwise,
including a right to acquire such power(s) during the next 60 days. Unless
otherwise noted, beneficial ownership consists of sole ownership, voting and
investment rights.
(2) Unless otherwise noted, addresses are c/o Apollo International of Delaware,
Inc., 6542 North U.S. Highway 41, Suite 215, Apollo Beach, Florida 33572
(3) Includes 705,962 shares owned jointly by Mr. Clarke and Ms. Clewes and
552,551 shares for which David W. Clarke has sole voting power pursuant to
irrevocable proxies granted to him by various shareholders; but excludes
900,000 shares issuable upon exercise of warrants for which Mr. Clarke also
holds a proxy, but which warrants are not exercisable within the next 60
days. Of the 552,551 shares of outstanding Common Stock for which Mr. Clarke
holds a proxy, the proxy as to 299,000 of these shares terminates as of the
date of this Prospectus.
(4) Represents 705,962 shares owned jointly by Ms. Clewes and Mr. Clarke.
(5) Excludes 50,000 shares issuable upon exercise of a common stock purchase
warrant and 100,000 shares issuable upon exercise of a stock option, neither
of which is exercisable within the next 60 days.
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<PAGE>
(6) Represents 21,365 shares held by Mr. Lukens as custodian for his children.
Excludes (a) 250,000 shares issuable upon exercise of a warrant that is not
exercisable within the next 60 days and (b) up to 41,666 shares issuable in
connection with a software license agreement. See "Certain Transactions."
(7) Represents 138,034 shares held individually and 188,543 shares owned
beneficially by an entity of which Mr. Mancini is sole owner.
(8) Excludes 50,000 shares issuable upon exercise of a common stock purchase
warrant and 50,000 shares issuable upon exercise of a stock option, neither
of which is exercisable within the next 60 days.
(9) Excludes 50,000 shares of Common Stock issuable upon exercise of a common
stock purchase warrant and 50,000 shares issuable upon exercise of a stock
option, neither of which is within the next 60 days.
CERTAIN TRANSACTIONS
In December 1994, a total of 694,382 shares of Common Stock were issued to
David W. Clarke, Christine Clewes, Mathias E. Lukens, Jr. and W. Haines Knox,
the Company's founders, for a total consideration of $110. Mr. David W. Clarke
and Ms. Christine Clewes, officers and directors of the Company, own 640,968 of
such shares.
The Company is indebted to its President and Chief Executive Officer and its
Vice President, Marketing in the total amount of approximately $85,000
represented by a promissory note dated December 15, 1995. The note bears
interest at 10.5% per annum and provides for payments of principal and interest
equal to $1,600 per month from January 15, 1996 through June 15, 1998, at which
time the entire remaining unpaid principal balance becomes due and payable along
with any accrued and unpaid interest.
In early 1996, Mr. Clarke and Ms. Clewes advanced the Company an additional
$60,840, which obligation was converted into approximately 64,994 shares of
Common Stock in June, 1996.
Pursuant to a consulting agreement with Mathias E. Lukens, Jr., a director
(Vice Chairman) of the Company, he was issued 250,000 Common Stock purchase
warrants exercisable at $5.50 per share commencing June 1, 1998 and expiring
June 1, 2002. See "Management--Consulting Agreements." In December 1996, the
Company and Mr. Lukens also entered into a non-exclusive license agreement,
pursuant to which Mr. Lukens licensed to the Company certain software and its
source code for the Company's use in its products. Under the agreement, Mr.
Lukens is to be paid a one-time license fee of $250,000, payable: (a) $125,000
in the following cash installments: $62,500 on the earlier of September 1, 1998
or the last day of the first fiscal quarter that the Company's gross revenue
exceeds $500,000, subject to cash flow, and $62,500, or more, of the then
outstanding balance on the last day of each subsequent fiscal quarter that the
Company's gross revenues exceed $500,000, subject to cash flow, until paid. The
balance of the $125,000 license fee is to be paid in 41,666 shares of the
Company's Common Stock (valued at $3.00 per share in December 1996), one-half of
which shall be paid on the date the licensed software is successfully run on any
of the Company's products, and one-half of which shall be paid when the first
successful beta testing is concluded prior to the first full commercial shipment
incorporating the software.
During 1995 and 1996, Frank J. Mancini, a director, and an affiliate, loaned
the Company an aggregate of $178,087.25. In June, 1996, pursuant to an agreement
between him and the Company, he converted the entire principal balance, plus
accrued interest of $12,617.39 into a total of 203,726 shares of the Company's
Common Stock. Mr. Mancini will be paid approximately $23,000 from the proceeds
of this Offering for consulting services previously rendered to the Company.
The Company entered into a cash advance and security agreement with Framan
Company, a business entity owned by Frank J. Mancini, pursuant to which Framan
advances funds to the Company for the purchase of parts inventory and takes a
security interest in the parts. The advances accrue interest at 2% above the
prime rate and are payable monthly interest only commencing after the close of
the Offering.
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<PAGE>
Principal is due and payable one-half on the earlier of June 1, 1998, or the
last day of the first fiscal quarter that the Company's gross revenues exceed
$500,000, subject to cash flow; and one-half, or more, of the remaining
principal balance on the last day of each subsequent fiscal quarter that
revenues exceed $500,000, subject to cash flow. The maturity date for any
outstanding principal balance and accrued and unpaid interest is December 31,
1998. As of March 1, 1997, the Company had been advanced $398,045 under this
agreement.
In October 1996, The Company entered into a factoring agreement with
Queensbury, Inc., some of whose shareholders are also shareholders of the
Company (none of whom is an officer, director or principal shareholder of the
Company) in order to obtain additional working capital. Under the agreement, the
Company sold receivables at a 6% discount, plus pays interest at the rate of 1%
per month on the outstanding balance. The Company is obligated to repurchase
accounts which are delinquent for six consecutive months. This agreement was
terminated effective December 31, 1996, at which time accounts receivable sold
under the agreement were $160,350. At March 1, 1997, $156,010 of such amount
remained uncollected.
As of January 1, 1997, the Company converted the above-referenced factoring
agreement to a revolving line of credit agreement with the same lender. Under
that agreement, the Company may borrow 94.5% of the face amount of accounts
receivable which are collageral for the loans. Interest accrues at 1% per month
and is payable monthly on the outstanding principal balance of each such loan.
The loans are repaid at 100% of the face amount of the collateralized accounts
as the Company receives payments from customers. Outstanding principal and
interest on all such loans is due and payable on December 31, 1998. The maximum
outstanding principal balance under the loan agreement at any time is limited to
$500,000 and at March 1, 1997, the outstanding principal balance under this loan
agreement was $66,900.
From August 5, 1996 through November 14, 1996, the Company issued an
aggregate of 500,000 shares of Common Stock and 250,000 Common Stock purchase
warrants for gross proceeds of $1,500,000 pursuant to a private placement to
accredited investors that commenced June 25, 1996. Upon the Effective Date, the
warrants will be automatically converted to the Public Warrants and are being
registered under the Registration Statement of which this Prospectus is a part.
See "Concurrent Registration for Secondary Offering." The private placement was
conducted by the Representative, as placement agent, which was paid a commission
of 10% and a non-accountable expense allowance of 3% of the gross proceeds.
Gregory C. Hamilton, a director, receives compensation from the Company for
providing accounting services to the Company. During the fiscal year ended
December 31, 1996, Mr. Hamilton was paid $34,015 for accounting and tax
reporting services.
The Company believes that all transactions with officers, directors and/or
5% shareholders were made on terms no less favorable to the Company than those
available from unaffiliated parties. All future transactions between the Company
and its officers, directors and 5% shareholders will be on terms no less
favorable than could be obtained by independent third parties and will be
approved by a majority of the disinterested directors of the Company.
37
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is currently authorized to issue 15,000,000 shares of Common
Stock, $.01 par value per share, 2,811,434 of which are issued and outstanding
to a total of 58 shareholders as of the date of this Prospectus. Holders of
Common Stock have one vote for each share held of record on all matters to be
voted upon by stockholders, including the election of directors. Holders of
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor and, upon liquidation
of the Company, and to share ratably in the net assets available for
distribution. Shares of Common Stock are not redeemable and have no preemptive,
conversion or similar rights.
PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation authorizes
the issuance of 5,000,000 shares of "blank check" preferred stock, $.01 par
value, with such designation, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the board of directors is
empowered, without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights superior to those of the holders
of Common Stock. Shares of preferred stock, if and when issued, could have
voting or other rights that adversely affect the voting power of the holders of
Common Stock. Further, the issuance of preferred stock could have the effect of
delaying or preventing a change of control of the Company, which could limit
stockholders' ability to dispose of their Common Stock in such transactions. The
Company currently has not issued any shares of preferred stock.
WARRANTS
REDEEMABLE COMMON STOCK PURCHASE WARRANTS. Each redeemable common stock
purchase warrant offered hereby (the "Public Warrants") entitled the holder
thereof to purchase one share of Common Stock at a price of $5.50 per share (the
"Exercise Price"), subject to adjustment, commencing two years after the date of
this Prospectus (the "Effective Date") until the close of business on the sixth
year after the Effective Date. Each Public Warrant is redeemable, in whole or in
part, by the Company at a price of $.25 per Public Warrant, commencing one year
after the Effective Date and prior to their expiration, provided that (a) prior
written notice of not less than thirty days is given to the Public Warrant
holders, (b) the closing bid price (as defined) of the Company's Common Stock
for the twenty consecutive trading days ending on the fifteenth day prior to the
date on which the notice of redemption is given, shall have exceeded $7.50 per
share, (c) Public Warrant holders shall have exercise rights until the close of
business the day preceding the date fixed for redemption if the Public Warrants
are then exercisable, and (d) if such redemption occurs during the first two
years following the Effective Date, the Company has received the prior written
consent of the Underwriters for such redemption. In the Warrant Agreement, the
"closing bid price" is defined as (i) the last bid price regular way as reported
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or (ii) if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last bid price
regular way for the Common stock as reported by the NASDAQ National Market
System or SmallCap Market of the NASDAQ Stock Market, Inc. ("NASDAQ"), or (iii)
if the Common Stock is not listed or admitted for trading on any national
securities exchange, and is not reported by NASDAQ, the last bid price in the
over-the-counter market as furnished by the National Quotation Bureau, Inc. or
if no such quotation is available, the fair market value of the Common Stock as
determined in good faith by the Board of Directors of the Company. Pursuant to
applicable federal and state securities laws, in the event a current prospectus
is not available, the Public Warrants may not be exercised by the holders
thereof and the Company will be precluded from redeeming the Public Warrants.
There can be no assurance that the Company will not be prevented by financial or
other considerations from maintaining a current prospectus. Any Public Warrant
holder who does not exercise prior to the redemption date, as set forth in the
38
<PAGE>
Company's notice of redemption, will forfeit the right to purchase the Common
Stock underlying the Public Warrants, and after the redemption date or upon
conclusion of the exercise period any outstanding Public Warrants will become
void and be of no further force or effect, unless extended by the Board of
Directors of the Company.
The number of shares of Common Stock that may be purchased is subject to
adjustment upon the occurrence of certain events including a dividend
distribution to the Company's shareholders, or a subdivision, combination or
reclassification of the outstanding Common Stock. Further, the Public Warrant
exercise price is subject to adjustment in the event the Company issues
additional stock or rights to acquire stock at a price per share that is less
than the current market price per share of Common Stock on the record date
established for the issuance of additional stock or rights to acquire stock. The
term "current market price" is defined as the average of the daily closing
prices for the five consecutive trading days ending three days prior to the
record date. However, the Warrant exercise price will not be adjusted in the
case of the issuance or exercise of options pursuant to the Company's stock
option plans, the issuance of the Underwriters' Warrant or any other options or
warrants outstanding as of the date of this Offering. The Public Warrant
exercise price is also subject to adjustment in the event of a consolidation or
merger where a distribution by the Company is made to its stockholders of the
Company's assets or evidences of indebtedness (other than cash or stock
dividends) or pursuant to certain subscription rights or other rights to acquire
Common Stock. The Warrants are also subject to price adjustment upon the
occurrence of certain events including subdivisions or combinations of the
Common Stock.
The Company may at any time, and from time to time, extend the exercise
period of the Public Warrants, provided that written notice of such extension is
given to the Public Warrant holders prior to the expiration date then in effect.
Also, the Company may reduce the exercise price of the Public Warrants for
limited periods or through the end of the exercise period if deemed appropriate
by the Board of Directors or the Company, in addition to the adjustments to the
exercise price arising from certain events as discussed above. Any extension of
the terms and/or reduction of the exercise price of the Public Warrants will be
subject to compliance with Rule 13e-4 under the Exchange Act including the
filing of a Schedule 13E-4. Notice of any extension of the exercise period
and/or reduction of the exercise price will be given to the Public Warrant
holders. The Company does not presently contemplate any extension of the
exercise period not does it contemplate any reduction in the exercise price of
the Public Warrants.
The Public Warrants are to be issued pursuant to the terms and conditions of
a Public Warrant Agreement between the Company and American Stock Transfer &
Trust Company.
In addition, the Company has outstanding warrants exercisable for a total of
650,000 shares of Common Stock, which warrants have the same terms and
conditions as the Public Warrants, but which are not registered under the
Securities Act.
NONREDEEMABLE COMMON STOCK PURCHASE WARRANTS. The Company issued to a
consultant a non-redeemable warrant to purchase 250,000 shares of Common Stock.
It has a six year term commencing June 1, 1996. The warrants may be exercised
for four years commencing June 1, 1998 at an exercise price of $4.00 per share,
unless the Company agrees to an earlier exercise. The warrant is subject to
termination by the Company under certain circumstances. The warrant contains
certain anti-dilution provisions with respect to stock dividends or
distributions to shareholders; and combinations, subdivisions and
reclassification of shares. The warrant contains certain piggy-back registration
rights (for shares issuable upon exercise of such warrants) with respect to a
secondary public offering of the Company's securities. In consideration of
making a short term loan to the Company, the consultant was also issued a
warrant for 50,000 shares of Common Stock on the same terms and conditions as
its other warrant, except it is exercisable at $5.50 per share. See
"Management--Consulting Agreements," and "Description of
Securities--Registration Rights."
39
<PAGE>
Mathias E. Lukens, Jr., a director of the Company as well as a consultant,
was issued, pursuant to a consulting agreement, a non-redeemable warrant to
purchase 250,000 shares of Common Stock exercisable at $5.50 per share from June
1, 1998 until June 1, 2002 until unless the Company agrees to an earlier
exercise. Unexercised warrants are subject to termination by the Company under
certain circumstances. The warrants contain certain anti-dilution provisions
respecting stock dividends or distributions to shareholders; and combinations,
subdivisions and reclassification of shares. The warrants also contain "piggy-
back" registration rights (for shares issuable upon exercise of the warrants)
with respect to a secondary public offering of the Company's securities. See
"Management--Consulting Agreements," "Descriptions of Securities--Registration
Rights," and "Certain Transactions."
The Company issued to three of its officers, Steven D. Smith, Donald Louw
and Robert J. Swatland, non-redeemable common stock purchase warrants, each
exercisable for 50,000 shares of Common Stock at an exercise price of $5.50 per
share. Mr. Smith's and Mr. Louw's warrants are first exercisable one year from
the date of this Prospectus until September 26, 2001 and Mr. Swatland's warrant
is exercisable one year from the date of this Prospectus until November 1, 2001.
However, Messrs. Smith, Louw and Swatland have agreed with the Company that the
shares underlying the warrants will not be sold for a period of 24 months from
the date of this Prospectus, unless released earlier by the Underwriters. The
warrants contain certain anti-dilution provisions with respect to stock
dividends or distributions to shareholders, and combinations, subdivisions and
reclassification of shares. The warrants do not provide registration rights.
REGISTRATION RIGHTS
The Underwriters have demand and piggy-back registration rights with respect
to the 75,000 shares of Common Stock underlying the Underwriters' Warrant, the
75,000 Public Warrants issuable upon exercise thereof and the 75,000 shares of
Common Stock underlying the warrants. The Underwriters' demand and piggy-back
registration rights will expire no later than five years and seven years,
respectively, from the Effective Date. In addition, certain securityholders
holding 1,432,989 shares of Common Stock and warrants to purchase an aggregate
of 650,000 shares of the Company's Common Stock have piggy-back registration
rights for such shares and Common Stock underlying the warrants with respect to
a secondary offering of the Company's securities. However, the holders of such
shares and warrants are subject to lock-up agreements for periods of 13 to 24
months from the date of this Prospectus and such shares may not be sold or
otherwise disposed of until expiration of the applicable lock-up period, which
may be shortened at the discretion of the Underwriters. Additionally,
consultants holding warrants to purchase a total of 550,000 shares of Common
Stock have "piggy-back" registration rights commencing June 1, 1998 in
connection with a secondary offering of the Company's securities. Any exercise
of such registration rights may result in dilution of the interest of the
Company's stockholders, hinder efforts by the Company to arrange future
financings and/or have an adverse effect on the market prices of the Securities.
In the event such registration rights are exercised, the Company will be
obligated to pay all expenses in connection with such registration, including
but not limited to legal and accounting fees, printing and certain other costs;
however, any selling securityholder will be responsible for payment of any
transfer taxes and broker/dealer commissions.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW; CERTAIN PROVISIONS IN THE CERTIFICATE
OF INCORPORATION
Unless otherwise provided in a corporation's certificate of incorporation,
Delaware law generally requires the affirmative vote of holders of a majority of
the outstanding voting stock for approval of mergers, consolidations, and
certain other transactions. The Company's Certificate of Incorporation expressly
adopts the provisions of Section 203 of the Delaware General Corporation Law
("DGCL"). In general, this statute prohibits a publicly held Delaware
corporation from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" for a period of three years after
the
40
<PAGE>
date of the transaction in which the person becomes an interested stockholder,
unless (i) prior to the date at which the stockholder became an interested
stockholder, the board of directors approved either the business combination or
the transaction in which the person becomes an interested stockholder; (ii) the
stockholder acquires more than 85% of the outstanding voting stock of the
corporation (excluding shares held by directors who are officers or held in
certain employee stock plans) upon consummation of the transaction in which the
stockholder becomes an interested stockholder; or (iii) the business combination
is approved by the board of directors and at least 66 2/3% of the outstanding
voting stock of the corporation (excluding shares held by the interested
stockholder) at a meeting of stockholders, (and not written consent) held on or
subsequent to the date such stockholder became an interested stockholder.
However, the Company's Certificate of Incorporation provides for the affirmative
vote of 60% of the outstanding voting stock (excluding shares held by the
interested stockholder) rather than the 66 2/3% provided in the statute. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time within the prior three years did own) 15% or
more of the corporation's voting stock. Section 203 defines a "business
combination" to include, without limitation, mergers, consolidations, stock
sales and asset based transactions and other transactions resulting in a
financial benefit to the interested stockholder.
The overall effect of such anti-takeover provisions is to render more
difficult the accomplishment of mergers or the assumption of control by a
principal shareholder, and thus to make difficult the removal of management.
However, the Company believes that the advantages to the Company and its
shareholders of anti-takeover provisions would outweigh any disadvantages and
afford the Board of Directors greater flexibility in the management of the
Company.
The Certificate imposes a super-majority voting requirement (75% of the
outstanding voting shares) for certain amendments to the Company's Bylaws. The
Certificate also provides for indemnification of the Company's directors,
officers and, in the discretion of the Board of Directors, any and all other
persons whom it shall have power to indemnify under Delaware law from and
against certain liabilities. For a summary of such provisions, see
"Management--Limitation on Director's Liability." The Certificate does not
provide shareholders with any preemptive rights or cumulative voting rights.
TRANSFER AND WARRANT AGENT AND REGISTRAR
The transfer agent and registrar for the Securities and the warrant agent
for the Public Warrants is American Stock Transfer & Trust Company, 40 Wall
Street, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this Offering, the Company will have 3,561,434 shares
of Common Stock outstanding (3,673,934 shares, if the Underwriters'
over-allotment option is exercised in full), of which 750,000 shares offered
hereby (862,500 shares, if the Underwriters' over-allotment option is exercised
in full) will be freely tradable without restriction or further registration
under the Securities Act. The remaining 2,811,434 shares are deemed to be
"restricted securities," as that term is defined under Rule 144, in that such
shares were issued and sold by the Company in private transactions not involving
a public offering and, as such, may only be sold pursuant to an effective
registration under the Securities Act, in compliance with the exemption
provisions of Rule 144 or pursuant to another exemption under the Securities
Act. Certain shareholders holding 1,432,989 shares of restricted Common Stock,
will be eligible to sell such shares under Rule 144 as of the date of this
Prospectus as to 433,989 shares; May 1997 as to 499,000 shares; and, August
through November 1997 as to 500,000 shares. However, those shareholders have
agreed not to sell those shares for periods ranging from 13 months to 24 months
from the Effective Date, without the prior consent of the Representative. Of the
remaining 1,378,445 restricted securities, 673,646 shares are eligible for sale
under Rule 144 as the date of this Prospectus (subject to certain recurring
three-month volume limitations prescribed by Rule 144 and the lock-up
arrangements with the
41
<PAGE>
Underwriters described below), 53,414 shares will be eligible for resale under
Rule 144 within six months of the date of this Prospectus, and the balance will
become so eligible at various times commencing thereafter. Sales of such shares
in the public market, or the availability of such shares for sale, could
adversely affect the market price for the Common Stock.
The officers and directors of the Company (holding an aggregate of 1,053,905
shares of Common Stock, and warrants, options and rights to purchase an
aggregate of 641,666 shares of Common Stock), have agreed not to publicly offer,
sell or otherwise dispose of any of those shares of Common Stock for 24 months
after the date of this Prospectus without the written consent of the
Underwriters. The Underwriters may, in their sole discretion and at any time
without notice, release all or any portion of the securities subject to the
lock-up agreements.
In general, under Rule 144 (as recently amended by the SEC and anticipated
to be effective in April or May, 1997), subject to the satisfaction of certain
other conditions, a person, including an affiliate of the Company (or person
whose shares are aggregated with an affiliate), who has owned restricted shares
of Common Stock beneficially for at least one year is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the then outstanding shares of Common Stock (approximately 35,000 shares
based on the number of shares expected to be outstanding after this Offering)
or, if the Common Stock is quoted on NASDAQ, the average weekly trading volume
during the four calendar weeks preceding the sale. Sales under Rule 144 are also
subject to certain requirements as to the manner and notice of sale and the
availability of public information concerning the Company. A person who has not
been an affiliate of the Company for at least three months immediately preceding
the sale and who has beneficially owned shares of Common Stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
No prediction can be made as to the effect, if any, that public sales of
shares of Common Stock or Warrants or the availability of such securities for
sale will have on the market prices of such securities prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock and
Warrants may be sold in the public market may adversely affect prevailing market
prices for the these securities and could impair the Company's ability in the
future to raise additional capital through the sale of its equity securities.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Company has agreed to sell to the Underwriters,
severally and not jointly, and the Underwriters have severally and not jointly
agreed to purchase from the Company, on a "firm commitment" basis, if any are
purchased, the number of Securities (exclusive of Securities issuable upon
exercise of the Underwriters' over-allotment option) set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SECURITIES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
May Davis Group, Inc..............................................................
Total.........................................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Securities offered hereby are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all shares
of Securities offered hereby (other than those covered by the over-allotment
option described below) if any such shares are purchased.
The Underwriters, for whom May Davis Group, Inc. is acting as Representative
(the "Representative"), propose to offer the Securities directly to the public
at the public offering price set forth on the cover page of this Prospectus and
may allow certain dealers who are National Association of Securities Dealers,
Inc. ("NASD") members to offer a part of the Securities at a price which
represents a concession not in excess of $ per share and $ per
Public Warrant. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share and $ per Public Warrant
to certain other dealers. Commencement of the initial public offering, the
offering price and other selling terms may be changed by the Representative.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company has granted to the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to an aggregate of 112,500
additional shares of Common Stock and/or up to 112,500 additional Public
Warrants at the public offering price set forth on the cover page of this
Prospectus, less the underwriting discounts and commissions. The Representative
may exercise such option solely for the purpose of covering over-allotments, if
any, in connection with the sale of the Securities offered hereby. To the extent
such option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite such Underwriter's name in the
preceding table bearing the total number of shares in such table.
The Company has agreed to sell to the Representative or its designees, for
$10, a common stock purchase warrant (the "Underwriters' Warrant") exercisable
for 75,000 shares of Common Stock at $8.25 per share and/or 75,000 Public
Warrants at $.4125 per warrant. The Underwriters' Warrant may not be sold,
transferred, assigned or hypothecated, except to officers and directors of the
Underwriters, and is exercisable for four years commencing one year from the
Effective Date (or until the close of business five years after the Effective
Date) (the "Exercise Term"). During the Exercise Term, the holders of the
Underwriters' Warrant are given, at nominal cost, the opportunity to profit from
a rise in the market price of the Company's Common Stock. To the extent that the
Underwriters' Warrant is exercised, dilution of the interests of the Company's
stockholders will occur. Further, the terms on which the Company will be able to
obtain additional equity capital may be adversely affected since the holders of
the Underwriters'
43
<PAGE>
Warrants can be expected to exercise it any time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the Underwriters' Warrant. Any profit realized by
the Underwriters on the sale of the shares of Common Stock underlying the
Underwriters' Warrant may be deemed additional underwriting compensation. The
Company has also agreed to pay the Representative a non-accountable expense
allowance equal to 3% of the gross proceeds from the sale of the Securities
offered hereby of which $25,000 has been paid.
Certain shareholders who beneficially hold an aggregate of 2,259,574 shares
of Common Stock, have agreed that, for periods ranging from 13 to 24 months
following the date of this Prospectus, they will not, without the prior written
consent of the Representative offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock of the Company or any securities
convertible into, or exercisable or exchangeable for Common Stock of the
Company. The Representative has advised the Company that it has no present
intention to waive or shorten the lock-ups.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to officers, directors or persons controlling the Company, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and is therefore
unenforceable.
The Company has agreed with the Representative that the Company will pay to
the Underwriters a warrant solicitation fee (the "Warrant Solicitation Fee")
equal to 5% of the exercise price of the Public Warrants which are exercised
pursuant to a solicitation of exercise of the warrants or in connection with a
redemption and to the extent not inconsistent with the guidelines of the NASD
and the rules and regulations of the Commission (including NASD Notice to
Members 81-38). Such Warrant Solicitation Fee will be paid to the Underwriters
if (a) the market price of the Common Stock on the date that any Public Warrant
is exercised is greater than the exercise price of the Public Warrant; (b) the
exercise of such Public Warrant was solicited by the Underwriters; (c) prior
specific written approval for exercise is received from the customer if the
Public Warrant is held in a discretionary account; (d) disclosure of this
compensation agreement is made prior to or upon the exercise of such Public
Warrant; (e) solicitation of the exercise is not in violation of Regulation M of
the Exchange Act; (f) the Underwriters provided bona fide services in exchange
for the Public Warrant Solicitation Fee; and (g) the Underwriters have been
specifically designated in writing by the holders of the Public Warrants as the
broker. Unless granted an exemption by the Commission from Regulation M under
the Exchange Act, the Underwriters will be prohibited from engaging in any
market making activities or solicited brokerage activities with respect to the
Securities for the period from five business days prior to any solicitation by
the Underwriters of the exercise of any Public Warrant until the termination of
such solicitation activity by the Underwriters. The foregoing 5-day restriction
period is reduced to one day where the security has an average daily trading
volume of $100,000 and the public float for the issuer's equity securities is at
least $25 million; and, there is no restrictive period where the average daily
trading volume of the security is $1 million and the public float for the
issuer's equity securities is at least $150 million. As a result, the
Underwriters may be unable to continue to provide a market for the Securities
during certain periods while the Public Warrants are exercisable.
The Underwriters have been given certain "piggyback" and demand registration
rights with respect to the Common Stock underlying the Underwriters' Warrants
for a period of four years commencing one year from the date of this Prospectus
(or until the close of business five years after the Effective Date). The
exercise of any of such registration rights by the Underwriters may result in
dilution to the interest of the Company's shareholders, hinder efforts by the
Company to arrange future financing of the Company and/ or have an adverse
effect on the market price of the Securities.
The Company has agreed that for a period of 24 months commencing on the
Effective Date, it will not issue any shares of its Common Stock or any
warrants, options or other rights to purchase Common Stock
44
<PAGE>
and Public Warrants, without the consent of the Underwriters, which consent
shall not be unreasonably withheld, except for issuances pursuant to (i) the
public offering of the Company's securities as described herein, (ii) the
exercise of the Underwriters' Warrant and the shares issuable thereunder, (iii)
outstanding options, warrants, convertible securities or contractual obligations
disclosed in this Prospectus and (iv) the grant of options and the issuance of
shares issued upon exercise of options granted or in the future granted under
the Company's Stock Option Plan. The Company has granted the Underwriters a
three-year preferential right with respect to future financing relating to the
offering of the Company's securities.
The Underwriting Agreement gives the Underwriters the right, for a period of
three years from the Effective Date, to appoint a designee of the Underwriters
as an advisor to the Company's Board of Directors who shall be reimbursed
expenses incurred in connection with attendance at Board meetings and who shall
receive the same compensation as paid to non-employee directors. Alternatively,
the Underwriters may designate one person for election as a director of the
Company. The Representative has indicated to the Company that it intends to
appoint a director, although such person has not been identified.
In addition, the Company has agreed to enter into a management and financial
consulting agreement to retain the Representative as a financial consultant for
a period of three years at a monthly fee of $2,187.50, payable in full, in
advance, at the closing of this Offering. Further, the Representative will be
entitled to receive certain payments in the event of a merger, sale of
substantially all of the Company's assets or similar transaction that is
originated by the Representative. The Representative will provide investment
banking services under the agreement. The consulting agreement will not require
the consultant to devote a specific amount of time to the performance of its
duties thereunder.
Further, the Underwriting Agreement provides the Underwriters with a right
of first refusal for a period of three years from the date of this Prospectus
for any public or private offering of securities to raise capital and sale of
securities to be made by the Company, its affiliates or any of its present or
future subsidiaries.
The foregoing includes a summary of certain provisions of the Underwriting
Agreement which has been filed as an exhibit to the Registration Statement.
Prior to this Offering, there has been no public market for the Securities.
The initial public offering price for the Securities and the exercise price of
the Warrants have been determined by negotiations between the Company and the
Underwriters. Among the factors considered in the negotiations were an analysis
of the areas of activity in which the Company is engaged, the present state of
the Company's business, the Company's financial condition, the Company's
prospects, an assessment of management, the general condition of the securities
markets at the time of this Offering and the demand for similar securities of
comparable companies. The public offering price of the Securities and the
exercise price of the Warrants do not necessarily bear any relationship to
assets, earnings, book value or other criteria of value applicable to the
Company.
The Representative was organized in August 1993, was registered as a broker
in June 1995, and became a member firm of the NASD in June 1995. The
Representative is principally engaged in retail brokerage and market making
activities and various corporate finance projects. The Representative has acted
as a placement agent in private offerings and has participated as a member of
the underwriting syndicate or as a selected dealer in one public offering and it
has acted solely one time as the lead manager in only one public offering of
securities. While certain of the officers of the Representative have significant
experience in corporate finance and the underwriting of securities, no assurance
can be given that the Representative's lack of experience as a lead managing
underwriter of public offerings will not adversely affect this Offering and the
subsequent development of a liquid public market in the Company's securities.
45
<PAGE>
LEGAL MATTERS
The validity of the Securities being offered hereby will be passed upon for
the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Orlando,
Florida. Certain matters are being passed upon for the Underwriters by Gersten,
Savage, Kaplowitz, Fredericks & Curtin, LLP, New York, New York.
EXPERTS
The financial statements as of December 31, 1995 and December 31, 1996
included in this Prospectus have been so included in reliance on the report of
Most Horowitz & Company, LLP, independent certified public accountants, given on
the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is not presently a reporting company and does not file reports
or other information with the Securities and Exchange Commission (the "SEC" or
"Commission"). Upon effectiveness of the Registration Statement filed with the
SEC in connection with this Offering, the Company will become a reporting
company. Further, the Company will register its securities under the Securities
Exchange Act of 1934 ("Exchange Act"). Accordingly, upon effectiveness of its
Exchange Act registration, the Company will be subject to the additional
reporting requirements of the Exchange Act and in accordance therewith will file
reports, proxy statements and other information with the Commission. In
addition, after the effective date of this Offering, the Company intends to
furnish its shareholders with annual reports containing audited financial
statements and interim reports, in each case as it may determine to furnish or
as may be required by law. The fiscal year of the Company ends on December 31 of
each year.
The Company has filed with the Washington, DC Office of the Commission a
Registration Statement on Form SB-2 (with all amendments, exhibits and schedules
thereto, the "Registration Statement") under the Securities Act of which this
Prospectus forms a part. This Prospectus does not contain all of the information
set forth in the Registration Statement, as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Securities offered hereby, reference is hereby made to such
Registration Statement. Statements contained in this Prospectus concerning the
provisions or contents of any contract or other document referred to herein are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
Copies of the Registration Statement may be inspected without charge at the
Commission's principal office at 450 Fifth Street, N.W, Room 1024, Washington,
D.C. 20549; and at the following Regional Offices of the Commission, except that
copies of the exhibits may not be available at certain of the Regional Offices:
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of all or any part of such material may be obtained from
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 upon
payment of certain fees prescribed by the Commission. The Commission maintains a
worldwide web site on the Internet at http://www.sec.gov that contains reports
and other information concerning the Company filed electronically with the
Commission.
46
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
FINANCIAL STATEMENTS
INDEX
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT......................................................... F-2
BALANCE SHEET
December 31, 1995 and 1996......................................................... F-3
STATEMENT OF OPERATIONS
Years ended December 31, 1995 and 1996............................................. F-4
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1995 and 1996............................................. F-5
STATEMENT OF CASH FLOWS
Years ended December 31, 1995 and 1996............................................. F-6
NOTES TO FINANCIAL STATEMENTS........................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Apollo International of Delaware, Inc.
Apollo Beach, Florida
We have audited the accompanying balance sheet of Apollo International of
Delaware, Inc., as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Apollo International of
Delaware, Inc., as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, although, as discussed in Note 13,
certain conditions indicate that the Company may be unable to continue as a
going concern. The accompanying financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.
New York, New York
February 6, 1997, February 10, 1997
as to Note 9
MOST HOROWITZ & COMPANY, LLP
F-2
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- -------------
<S> <C> <C>
ASSETS (NOTE 9)
CURRENT ASSETS
Cash (Note 12)....................................................................... $ 5,840 $ 34,099
Accounts receivable (Note 4)......................................................... 7,734
Unbilled account receivable (Note 10)................................................ 20,000
Inventory (Note 5)................................................................... 108,921 228,157
Other current assets................................................................. 4,553 8,077
---------- -------------
TOTAL CURRENT ASSETS............................................................... 119,314 298,067
DEFERRED SOFTWARE COSTS (Note 6)....................................................... 214,941 658,820
FIXED ASSETS (Note 7).................................................................. 18,940 111,102
DEFERRED COSTS OF PROPOSED PUBLIC OFFERING (Note 15)................................... 73,650
DEFERRED FINANCING COSTS (Note 4)...................................................... 69,230
OTHER ASSETS........................................................................... 3,543 3,132
---------- -------------
TOTAL ASSETS....................................................................... $ 356,738 $ 1,214,001
---------- -------------
---------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Trade notes and accounts payables and accrued expenses (Note 8)...................... $ 134,984 $ 575,034
Payroll taxes payable................................................................ 10,146 101,924
Loans payable--stockholders (Note 9)................................................. 7,774 142,468
Deferred income (Note 10)............................................................ 20,000
---------- -------------
TOTAL CURRENT LIABILITIES.......................................................... 152,904 839,426
ACCOUNTS PAYABLE--NONCURRENT (Notes 3 and 6)........................................... 66,505 125,000
NONCURRENT LOANS PAYABLE--STOCKHOLDERS (Note 9)........................................ 104,540 70,916
DEFERRED INCOME TAXES PAYABLE (Note 11)................................................ 40,000
---------- -------------
TOTAL LIABILITIES.................................................................. 363,949 1,035,342
---------- -------------
COMMITMENTS (Notes 4, 10 and 15)
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 3 and 15)
Preferred stock, $.01 par value; authorized: 5,000,000 shares; issued and
outstanding: none
Common stock, $.01 par value; authorized: 15,000,000 shares; issued and outstanding:
1,451,526 as of December 31, 1995 and 2,811,434 as of December 31, 1996............ 7,682 21,280
Additional paid-in capital........................................................... 572,428 2,325,404
Deficit.............................................................................. (587,321) (2,153,025)
Less prepaid rent.................................................................... (15,000)
---------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)............................................... (7,211) 178,659
---------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)............................... $ 356,738 $ 1,214,001
---------- -------------
---------- -------------
</TABLE>
See notes to financial statements
F-3
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
1995 1996
--------- ----------
<S> <C> <C>
SALES (NOTE 10)........................................................................ $ 294,734
COST OF SALES.......................................................................... (197,803)
----------
GROSS PROFIT....................................................................... 96,931
----------
EXPENSES
Research and development............................................................. $(233,073) (334,750)
General and administrative........................................................... (294,089) (1,253,031)
--------- ----------
TOTAL EXPENSES..................................................................... (527,162) (1,587,781)
--------- ----------
LOSS FROM OPERATIONS............................................................... (527,162) (1,490,850)
INTEREST EXPENSE AND AMORTIZATION AND WRITE-OFF OF DISCOUNT AND DEFERRED FINANCING
COSTS (Notes 3, 4 and 14)............................................................ (189,882)
--------- ----------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY INCOME.................................. (527,162) (1,680,732)
DEFERRED INCOME TAXES (Note 11)........................................................ (40,000) 40,000
--------- ----------
LOSS BEFORE EXTRAORDINARY INCOME................................................... (567,162) (1,640,732)
EXTRAORDINARY INCOME FROM FORGIVENESS OF INDEBTEDNESS (Note 3)......................... 75,028
--------- ----------
NET LOSS........................................................................... $(567,162) $(1,565,704)
--------- ----------
--------- ----------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (Note 3)................................... 1,385,243 2,622,393
--------- ----------
--------- ----------
LOSS PER COMMON SHARE
Loss before extraordinary income..................................................... $ (.41) $ (.63)
Extraordinary income................................................................. .03
--------- ----------
NET LOSS........................................................................... $ (.41) $ (.60)
--------- ----------
--------- ----------
</TABLE>
See notes to financial statements
F-4
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
(NOTE 3) ADDITIONAL PREPAID
-------------------- PAID-IN RENT
SHARES AMOUNT CAPITAL DEFICIT (NOTE 10) TOTAL
--------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance--January 1, 1995................... 961,452 $ 2,781 $ 247,329 $ (20,159) $ 229,951
1995, issuances of shares to investors
($.75 to $.94, per share)................ 384,580 3,846 326,154 330,000
1995, issuance of anti-dilutive shares..... 105,494 1,055 (1,055)
Net loss for the year ended December 31,
1995..................................... (567,162) (567,162)
--------- --------- ----------- ----------- -----------
Balance--December 31, 1995............... 1,451,526 7,682 572,428 (587,321) (7,211)
1996, issuance of shares to investors
($.94, per share)........................ 5,343 53 4,947 5,000
April 5, 1996, issuance of shares to
landlord ($.94, per share)............... 21,366 214 19,786 $ (20,000)
May 1996, issuance of shares under bridge
financing ($.47, per share), net of
expenses of $12,220...................... 200,000 2,000 79,780 81,780
June 1996, issuance of shares to consultant
($.10, per share)........................ 299,000 2,990 27,010 30,000
June 1996, issuance of shares to consultant
($.94, per share)........................ 25,000 250 23,250 23,500
June 13, 1996, conversion of loan
payable--stockholder ($.94, per share)... 64,994 650 60,190 60,840
June 20, 1996, conversion of loan
payable--other ($.94, per share)......... 203,726 2,037 188,666 190,703
July 1, 1996, conversion of debentures
($2.25, per share)....................... 25,333 253 56,747 57,000
August to November 1996, issuance of shares
under private placement ($3.00, per
share), net of expenses of $287,749...... 500,000 5,000 1,207,251 1,212,251
September 1996, issuance of shares to
vendor ($3.00, per share)................ 3,500 35 10,465 10,500
October 1996, issuance of shares to
consultant ($3.00, per share)............ 25,000 250 74,750 75,000
December 1996, adjustment to
anti-dilutive shares..................... (13,354) (134) 134
Amortization of prepaid rent............... 5,000 5,000
Net loss for the year ended December 31,
1996..................................... (1,565,704) (1,565,704)
--------- --------- ----------- ----------- --------- -----------
Balance--December 31, 1996............... 2,811,434 $ 21,280 $ 2,325,404 $(2,153,025) $ (15,000) $ 178,659
--------- --------- ----------- ----------- --------- -----------
--------- --------- ----------- ----------- --------- -----------
</TABLE>
See notes to financial statements
F-5
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1996
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................................. $ (567,162) $(1,565,704)
Adjustments to reconcile net loss to net cash used in operating activities
Write-off and amortization of discount and deferred financing costs.............. 122,070
Amortization of deferred software costs.......................................... 72,586
Deferred income.................................................................. 20,000
Depreciation and amortization.................................................... 4,105 15,568
Loss on sales of accounts receivable............................................. 9,621
Amortization of prepaid rent..................................................... 5,000
Capitalization of software costs................................................. (214,941) (266,465)
Forgiveness of indebtedness...................................................... (75,028)
Deferred income taxes............................................................ 40,000 (40,000)
Increase (decrease) in cash flows from
Accounts receivable............................................................ (168,085)
Unbilled account receivable.................................................... (20,000)
Inventory...................................................................... (108,921) (119,236)
Other current assets........................................................... (4,553) (3,524)
Other assets................................................................... (3,953)
Trade notes and accounts payable and accrued expenses.......................... 189,001 400,189
Payroll taxes payable.......................................................... 10,146 91,778
------------- -----------
NET CASH USED IN OPERATING ACTIVITES (656,278) (1,521,230)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets............................................................ (17,227) (107,319)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock............................................... 355,000 1,299,031
Proceeds from loan payable--stockholder.............................................. 112,314 189,102
Proceeds from loan payable--other.................................................... 178,087
Proceeds from sales of accounts receivable........................................... 150,730
Proceeds from bridge financing....................................................... 135,720
Proceeds from convertible debentures................................................. 54,980
Payments of notes payable--bridge financing.......................................... (250,000)
Costs of proposed public offering.................................................... (73,650)
Payments of loans payable--stockholders.............................................. (27,192)
------------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................................... 467,314 1,656,808
------------- -----------
INCREASE (DECREASE) IN CASH.................................................... (206,191) 28,259
CASH--beginning........................................................................ 212,031 5,840
------------- -----------
CASH--ending........................................................................... $ 5,840 $ 34,099
------------- -----------
------------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest............................................................... NONE $ 41,813
------------- -----------
------------- -----------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITY--1996
The Company issued shares of common stock in exchange for reductions in future
rent (Note 10)
Loans payable--stockholders were converted into common stock (Note 3)
Loan payable--other was converted into common stock (Note 3)
Convertible debentures were converted into common stock (Note 3)
Accounts payable to a consultant and a vendor were converted into common stock
(Note 3)
Capitalized software costs also included $250,000 acquired for future payments
and common stock (Note 6)
The Company issued shares of common stock in exchange for a factoring fee
(Note 4).
See notes to financial statements
F-6
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Apollo International of Delaware, Inc. (Company) was incorporated in
November 1994 to develop, manufacture and distribute electric power protection
and control products, utilizing computer and fiber optics technologies, for
industry and electric utilities. The Company was in the development stage
through December 31, 1995.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORY
Inventory was stated at the lower of cost or market, using the first-in,
first-out method.
FIXED ASSETS
Equipment and furniture and computer software were stated at cost and are
being depreciated on the straight-line method over their estimated useful lives
of five and three years, respectively.
Leasehold improvements were stated at cost and are being amortized over the
life of the lease (Note 10) or lives of the asset, whichever is less.
SOFTWARE COSTS
Costs of software to be sold, which were incurred after technological
feasibility has been established and until it is available for general release,
have been capitalized and are being amortized on the straight-line method over
the estimated economic lives of the related products or three years, whichever
is less.
DEFERRED INCOME TAXES
Deferred income taxes have been provided on timing differences between
financial statement and income tax reporting resulting from computer software
costs and net operating loss carryforwards.
REVENUE RECOGNITION
Revenue from product sales has been recognized upon shipment.
DEFERRED FINANCING COSTS AND DISCOUNTS
Deferred financing costs have been capitalized and are being amortized on
the straight-line method over the term of the related financing agreement.
Discounts on the bridge financing and convertible debentures have been
amortized on the interest method over the term of the related notes payable.
F-7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
Stock based compensation of nonemployees and employees have been valued on
the fair value based method and the intrinsic value based method, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs have been charged to operations as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included in general and
administrative expenses. For the years ending December 31, 1995 and 1996,
advertising costs were $3,869 and $35,072, respectively.
LOSS PER COMMON SHARE
Loss per common share was computed based on the weighted average number of
common shares and common share equivalents outstanding during the year. All
shares and per share amounts have been retroactively restated to reflect the
stock split on May 10, 1996. The 299,000 shares issued in June 1996 (Note 3) and
the 105,494 shares issued under anti-dilution provisions, as subsequently
adjusted by 13,354 shares (Note 3), have been treated as outstanding for all
periods or from date of original issuance, respectively, in calculating loss per
common share because such shares were issued at prices below the proposed public
offering price (Note 15).
Fully-dilutive loss per common share has not been presented because it was
anti-dilutive.
3. CAPITALIZATION
PREFERRED STOCK
In June 1996, the Company authorized 5,000,000 shares of $.01, par value,
preferred stock.
COMMON STOCK
In November 1994, the Company authorized 100,000 shares of $.01, par value,
common stock.
Effective October 1995, the Company issued 105,494 shares of common stock
under anti-dilution provisions of previously issued common stock. In December
1996, the Company cancelled 13,354 of such shares.
RECAPITALIZATION AND STOCK SPLIT
Effective May 10, 1996, the Company increased its authorized common stock to
15,000,000 shares and authorized a 10.6828 for 1 stock split, without a change
in par value. As a result of the split, the Company issued 1,339,860 additional
shares of common stock and transferred $7,105 from additional paid-in capital to
common stock. All shares and per share amounts have been retroactively restated
to reflect the stock split.
LOAN PAYABLE--STOCKHOLDER
During January to April 1996, a stockholder advanced the Company $60,840. On
June 13, 1996, the advances were converted into 64,994 shares of common stock.
F-8
<PAGE>
3. CAPITALIZATION (CONTINUED)
LOANS PAYABLE--OTHER
During January to April 1996, the Company borrowed an aggregate of $178,087,
payable on demand, with interest at 18%, per annum. On June 20, 1996, the loans
and accrued interest thereon of $12,616 were converted into 203,726 shares of
common stock.
CONVERTIBLE DEBENTURES
During March/April and May 1996, the Company sold convertible debentures in
the aggregate face amount of $47,000 and $10,000, respectively, for proceeds of
$44,980 and $10,000, respectively. The debentures were due in March and April
2001, with interest at 11.625% to 12.625%, per annum, payable annually. On July
1, 1996, the debentures were converted into 25,333 shares of common stock.
CONSULTING AGREEMENTS
In May 1996, the Company entered into a business consulting agreement in
exchange for, at the Company's option: (a) $30,000 in cash or (2) 299,000 shares
of common stock and 400,000 warrants to purchase shares of common stock. Each
warrant is exercisable at $5.50, per share, commencing June 1998 through May
2001. If the Company does not close an initial public offering before June 1,
1997, the Company will be entitled to cancel the warrants and redeem the shares
for $30,000. In June 1996, the Company issued the shares of common stock and
warrants to the consultant.
In June 1996, the Company issued 25,000 shares of common stock to a
consultant, at $.94, per share, the fair value of the shares.
In June 1996, the Company entered into a business consulting agreement
through June 2001, in exchange for 250,000 warrants to purchase shares of common
stock, each exercisable to purchase one share of common stock at $4, per share,
commencing June 2000 through June 2002.
In November 1996, the Company entered into a business consulting agreement
with a stockholder in exchange for 250,000 warrants to purchase shares of common
stock, each exercisable to purchase one share, at $5.50, per share, commencing
June 2000 through June 2002.
BRIDGE FINANCING
On May 15, 1996, the Company completed a bridge financing for aggregate
proceeds of $250,000 and issued notes payable of $250,000, with interest at 12%,
per annum, and 200,000 shares of common stock. In connection with the bridge
financing, the Company paid an underwriter a discount of $25,000 and a
nonaccountable expense allowance of $7,500.
The Company allocated $.47, per share, of the proceeds of the bridge
financing to the common stock, the value of the shares at the date of issuance.
The notes payable issued with the bridge financing were repaid with proceeds
from the private placement and the unamortized discount and deferred financing
costs of $80,945 and $17,462, respectively, were written-off.
STOCK OPTION PLAN
In June 1996, the Company adopted a stock option plan under which it may
grant both qualified and nonqualified options to purchase up to 500,000 shares
of common stock to directors, officers and key employees. Options shall be
exercisable for a period of up to ten years (five years for qualified options)
F-9
<PAGE>
3. CAPITALIZATION (CONTINUED)
from the date of the grant at no less than the fair value on the date of the
grant (five years and 110% of fair market value for stockholders owning 10% or
greater).
During the year ended December 31, 1996, the Company granted qualified
options, under the plan, to purchase 261,500 shares of common stock at $4, per
share, none of which are exercisable.
FORGIVENESS OF INDEBTEDNESS
On September 17, 1996, the Company settled an accounts payable to a vendor
of $110,528 in exchange for $25,000 in cash and the issuance of 3,500 shares of
common stock (including 1,100 shares issued directly to the shareholder of the
vendor). The Company valued the shares at $3, per share, the value of the
private placement and, as such, recorded forgiveness of indebtedness income of
$75,028.
PRIVATE PLACEMENT
In November 1996, the Company completed a private placement of 500,000
shares of common stock and 250,000 warrants for an aggregate of $1,500,000. Each
warrant is exercisable to purchase one share of common stock at a price of
$5.50, per share, for a period of four years, commencing two years from the
later of (i) the closing of the private placement or (ii) the date of the
proposed public offering.
In connection with the private placement, the Company paid the underwriter a
commission of $150,000 and a nonaccountable expense allowance of $45,000, and
incurred other expenses of $92,749.
WARRANTS
In July 1996, the Company borrowed $50,000 from a consultant, which was
repaid in August 1996, without interest. As consideration for the loan, the
Company issued to such consultant a warrant to purchase 50,000 shares of common
stock, exercisable at $5.50 per share, commencing June 30, 2000 until June 30,
2002.
In September and November 1996, the Company issued warrants to three
employees, each exercisable to purchase 50,000 shares of common stock at $5.50,
per share, commencing at the earlier of (1) one year from the proposed public
offering or (2) September 26, 1998 through September 26, 2001 and November 1,
2001, respectively.
RESERVED SHARES
The values of all options and warrants have been deemed immaterial as all
were issued with exercise prices in excess of their fair values.
As of December 31, 1996, common stock was reserved as follows:
<TABLE>
<S> <C>
Warrants--consultants............................................ 950,000
Stock option plan................................................ 500,000
Warrants--private placement...................................... 250,000
Warrants--employees.............................................. 150,000
Shares to be issued in connection with license agreement (Note
6)............................................................. 41,666
---------
1,891,666
---------
---------
</TABLE>
F-10
<PAGE>
4. SALES OF ACCOUNTS RECEIVABLE
On October 31, 1996, the Company entered into an agreement to sell, without
notification, with full recourse and subject to credit approval, all existing
and future accounts receivable to a finance company owned by certain
stockholders of the Company, in exchange for 94% of the invoiced amount. Upon
becoming delinquent, as defined, the Company will repurchase the accounts
receivable for 94% of the amount invoiced. The agreement limits uncollected
accounts receivable sold to $425,000. The Company will also pay a fee equal to
1%, per month, of the uncollected accounts receivable sold in excess of 30 days
(Note 14).
As of December 31, 1996, the uncollected accounts receivable sold were
$160,350, of which 88% were from two customers. For the year ended December 31,
1996, the loss on sales of accounts receivable and fees were $9,621, which have
been charged to interest expense. In addition, the Company incurred a fee in
connection with the agreement of 25,000 shares of common stock which the Company
valued at $3, per share, the fair value of the shares.
5. INVENTORY
As of December 31, 1995 and 1996, inventory consisted of:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Raw materials......................................................... $ 164,362
Work-in-progress...................................................... $ 108,921 30,785
Finished goods........................................................ 33,010
---------- ----------
$ 108,921 $ 228,157
---------- ----------
---------- ----------
</TABLE>
6. DEFERRED SOFTWARE COSTS
For the year ended December 31, 1996, the Company capitalized software costs
of $516,465, which included a fee of $250,000 to use certain licensed software
within the Company's software products. The fee is payable to a company owned by
a stockholder, as follows: (1) $62,500, in cash, on the earlier of September 1,
1998 or the last day of the first quarter which the gross revenues of the
Company exceeds $500,000, subject to available cash flow, (2) one-half of the
balance up to $125,000, in cash, due each subsequent quarter the gross revenues
of the Company exceeds $500,000, subject to available cash flow, (3) 20,833
shares of common stock issuable upon the successful running of the licensed
software within the Company's product and (4) 20,833 shares of common stock
issuable upon a successful beta test. The shares will be valued at $3 per share,
the fair value of the shares.
7. FIXED ASSETS
As of December 31, 1995 and 1996, fixed assets consisted of:
<TABLE>
<CAPTION>
1995 1996
--------- ----------
<S> <C> <C>
Equipment and furniture................................................ $ 19,212 $ 111,187
Computer software...................................................... 3,515 15,192
Leasehold improvements................................................. 3,667
--------- ----------
22,727 130,046
Less accumulated depreciation and amortization......................... 3,787 18,944
--------- ----------
$ 18,940 $ 111,102
--------- ----------
--------- ----------
</TABLE>
F-11
<PAGE>
8. TRADE NOTES AND ACCOUNTS PAYABLE
Through December 31, 1996, the Company converted accounts payable of
$114,701 to notes payable, all of which bear interest at 18%, per annum, and are
due on June 1, 1997.
9. LOANS PAYABLE--STOCKHOLDERS
<TABLE>
<S> <C>
Loans payable--stockholders consisted of:
Notes payable for inventory purchases, bearing interest at 2% above the
prime rate (10.25%, at December 31, 1996), per annum. The note is
collateralized by all the assets of the Company(a)(b)..................... $ 92,134
Note payable in equal monthly installments of $1,600, including interest
at 10.5%, per annum, through June 15, 1998, when the balance is due....... 85,121
Account payable due from proceeds of public offering (Note 15)............ 23,000
Loan payable on demand, without interest.................................. 13,129
---------
213,384
Less noncurrent portion................................................... 70,916
---------
$ 142,468
---------
---------
</TABLE>
(a) Payable with interest in amounts equal to 50% of the outstanding balance
during any quarter which gross revenues of the Company exceeds $500,000,
subject to available cash flow, and in full by June 30, 1998
(b) Subsequent to December 31, 1996 and through February 10, 1997, the Company
borrowed an additional $305,913, under the same terms
For the year ended December 31, 1996, interest expense to stockholders was
$22,539.
10. COMMITMENTS
LEASE
The Company is committed under noncancellable leases for office and research
space requiring minimum annual rents of $51,600 and $18,648 through March 31,
1999 and October 31, 1998, respectively. In addition, the Company issued the
landlord 21,366 shares of common stock in exchange for $20,000, payable in equal
installments over 36 months, by reductions of future monthly rent.
For the years ending December 31, 1995 and 1996, rent expense was $10,736
and $55,192, respectively.
EMPLOYMENT AGREEMENT
In June 1996, the Company entered into an employment agreement with an
officer (chief executive officer and president) through June 2001, which
annually shall automatically be extended for one year beginning on the fifth
anniversary of the agreement. The agreement provides for an annual base
compensation of $150,000, with annual increases based on cost of living
increases, plus increases up to $100,000, if the Company's gross revenues are in
excess of $10,000,000 and if income before interest and income taxes are 10% of
gross revenues. Upon death, the executive or his estate shall receive an amount
equal to one year's base salary, payable over 12 months. Upon permanent
disability, the officer shall receive an amount equal to three times the base
salary, payable over 36 months, plus insurance and other benefits, etc. for
three years. Upon termination by the Company, the officer shall receive an
amount equal to the balance of the agreement, payable upon termination, plus
insurance and other benefits, etc., for two years. Upon nonrenewal of the
agreement by the Company, the officer shall receive one year's base salary
payable over 12 months. Upon a termination within nine months of a change in
control of the Company,
F-12
<PAGE>
10. COMMITMENTS (CONTINUED)
the officer shall receive an amount equal to the balance of the agreement, but
for no less than a three year period.
During 1996, the Company also entered into employment agreements with four
additional officers for terms of four years, except one with a term of two
years, and all are automatically renewable for two year terms, unless
terminated. The agreements provided for annual base salaries of $120,000,
$100,000, $80,000 and $80,000, subject to increases for annual cost of living
adjustments.
One officer is also entitled to receive additional compensation equal to
1 1/2% of the net sales proceeds, as defined, of the Company's products within
the United States. Another officer is entitled to receive additional
compensation equal to 3% of the net sales proceeds of the Company's products
outside North America. The agreements also provide for severance payments upon
death, permanent disabilities or termination by the Company of the officer equal
to six months base salary, plus insurance and other benefits for six months.
EQUIPMENT LEASE
The Company is also committed under a noncancellable lease for office
equipment requiring, future minimum annual lease payments of $5,136, through
March, 2000.
CONSULTING AGREEMENT
In December 1996, the Company entered into an agreement with a stockholder
to provide consulting services commencing with the month following the closing
of the Company's proposed public offering (Note 15) through September 1, 1997 in
exchange for $4,000, per month.
DEFERRED INCOME
For the year ended December 31, 1996, sales included $60,000 from the design
and development of certain hardware and software using the Company's underlying
products. As of December 31, 1996, the Company has completed all requirements of
the agreement, except the field operations and, as such, the Company has
deferred the final additional $20,000 of sales.
11. INCOME TAXES
Through November 30, 1995, the Company had elected as an "S" Corporation for
Federal and state purposes and, as such, was not required to pay income taxes.
For the years ended December 31, 1995 and 1996, the tax effects of timing
differences which gave rise to deferred income taxes were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
---------- -----------
<S> <C> <C>
Net operating loss carryforwards............................................... $ 40,000 $ 760,000
Computer software costs........................................................ (80,000) (170,000)
Less valuation allowance....................................................... (550,000)
---------- -----------
$ (40,000) $ 40,000
---------- -----------
---------- -----------
</TABLE>
F-13
<PAGE>
11. INCOME TAXES (CONTINUED)
As of December 31, 1995 and 1996, the tax effect of deferred income taxes
payable were as follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Net operating loss carryforwards............................................... $ 40,000 $ 800,000
Computer software costs........................................................ (80,000) (250,000)
Less valuation allowance....................................................... (550,000)
---------- -----------
$ (40,000) NONE
---------- -----------
---------- -----------
</TABLE>
As of December 31, 1996, the Company had net operating loss carryforwards
available to reduce future taxable income of approximately $2,095,000 expiring
through 2011.
12. CONCENTRATION OF CASH
The Company, from time to time, had cash in financial institutions in excess
of insured limits. In assessing its risk, the Company's policy is to maintain
funds only with reputable financial institutions.
13. GOING CONCERN
The Company has incurred net losses since inception and, as of December 31,
1996, their current liabilities exceeded their current assets by $541,359. These
factors raise doubt about the Company's ability to continue as a going concern.
Management believes the net proceeds of the proposed public offering (Note 15)
will provide the necessary cash to resolve these matters. The financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
14. SUBSEQUENT EVENTS
LINE OF CREDIT AGREEMENT
On January 1, 1997, the Company converted their agreement to sell accounts
receivable (Note 4) to a revolving line of credit agreement through December 31,
1998. Under the agreement, the Company may borrow 94.5% of individual eligible
accounts receivable, up to $500,000 of such accounts receivable. Borrowings
under the line of credit (1) bear interest at 1%, per month, payable monthly,
plus the additional 5.5% of the individual eligible accounts receivable-payable
upon repayment, and (2) are collateralized by the individual account receivable.
The borrowings are due upon collection or six months, which ever is sooner.
Subsequent to December 31, 1996 and through February 3, 1997, the Company
borrowed $62,886 under the line of credit.
STOCK OPTIONS
In February 1997, the Company granted qualified options under the stock
option plan (Note 3) to purchase 90,000 shares of common stock, at $4, per
share.
15. PROPOSED PUBLIC OFFERING
The Company has entered into an agreement with an underwriter for a proposed
public offering, anticipated to be for 750,000 shares of common stock at a price
of $5, per share, plus 750,000 warrants (Public Warrants) at a price of $.25,
per warrant, for an aggregate of $3,937,500. Each Public Warrant shall be
exercisable for one share of common stock at a price of $5.50, per share, for a
period of four years, commencing two years from the date of the public offering.
Upon certain conditions, the warrants will be
F-14
<PAGE>
15. PROPOSED PUBLIC OFFERING (CONTINUED)
redeemable by the Company at $.25, per warrant. The offering will also provide
for an overallotment option of 112,500 shares and 112,500 warrants.
The underwriter shall be entitled to a 10% discount and 3% nonaccountable
expense allowance. Upon closing of the public offering, the Company will sell to
the Underwriter, for $10, a warrant to purchase 75,000 shares of common stock at
$8.25, per share, and 75,000 Public Warrants at $.4125 per warrant, exercisable
for five years commencing one year from the public offering. In addition, upon
the closing of the public offering, the Company will enter into a three year
consulting agreement with the underwriter for $2,187.50, per month, payable at
closing.
The Company anticipates other costs of the proposed public offering of
approximately $350,000.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, OR ANY UNDERWRITER OR BROKER/DEALER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 16
Dilution....................................... 17
Capitalization................................. 18
Dividend Policy................................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 19
Business....................................... 23
Management..................................... 28
Beneficial Ownership of Principal Stockholders
and Management............................... 35
Certain Transactions........................... 36
Description of Securities...................... 38
Shares Eligible for Future Sale................ 41
Underwriting................................... 43
Legal Matters.................................. 46
Experts........................................ 46
Available Information.......................... 46
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
750,000 SHARES OF COMMON STOCK
AND
750,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
APOLLO INTERNATIONAL
OF DELAWARE, INC.
---------------------
PROSPECTUS
---------------------
MAY DAVIS GROUP, INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 11 of the Certificate of Incorporation of Apollo International of
Delaware, Inc. (the "Registrant") eliminates the personal liability of directors
to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, that such elimination of the personal
liability of a director of the Registrant does not apply to (i) any breach of
the director's duty of loyalty to the Registrant or its stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) actions prohibited under Section 174 of the
Delaware General Corporation Law (i.e., liabilities imposed upon directors who
vote for or assent to the unlawful payment of dividends, unlawful repurchases or
redemption of stock, unlawful distribution of assets of the Registrant to the
stockholders without the prior payment or discharge of the Registrant's debts or
obligations, or unlawful making or guaranteeing of loans to directors), or (iv)
any transaction from which the director derived an improper personal benefit. In
addition, Article 11 of the Registrant's Certificate of Incorporation, provides
that the Registrant shall indemnify its directors and officers to the fullest
extent permitted by the Delaware General Corporation Law, as amended from time
to time.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 145 further provides that a corporation may indemnify a person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the corporation, and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. To the extent that a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Expenses (including attorneys' fees) incurred by an
officer or
II-1
<PAGE>
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
The indemnification and advancement of expenses provided by, or granted
pursuant to, Section 145 of the Delaware General Corporation Law shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
The Company's Board of Directors and its executive officers entered into
indemnification agreements with the Company. The terms of indemnification and
advancement of expenses follow the indemnification and expense advancement
provisions of Delaware's General Corporation Law. In addition, the indemnitee
under the agreements is entitled to indemnification against all expenses
actually and reasonably incurred by him or on his behalf in connection with
serving as a witness in any proceeding (as defined in the agreement) by virtue
of his or her status with the Company. The agreements also provide a procedural
mechanism under which the indemnitee can claim and obtain indemnification,
including a procedure for the Board or independent counsel to determine
entitlement to indemnification under specific situations. In the event the
indemnitee does not receive the indemnification to which he would otherwise be
entitled under the terms of the agreement, the indemnitee is entitled to seek a
judicial determination. In the event the indemnitee seeks a judicial
adjudication to enforce his or her rights under, or to recover damages for
breach of, the agreement, the indemnitee is entitled to recover from the Company
his or her reasonable legal fees and other expenses in connection with the legal
proceeding, subject to proration in the event the amount of the aware is less
than the amount of indemnification sought.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration fee.................................................. 4,164
National Association of Securities Dealers, Inc................... 2,500*
NASDAQ listing fee................................................ 8,500*
Boston Stock Exchange Listing Fee................................. 15,000*
Printing and engraving expenses................................... 65,000
Accounting fees and expenses...................................... 75,000*
Legal fees and expenses........................................... 90,000*
Blue sky fees and expenses........................................ 65,000*
Transfer agent and registrar fees................................. 7,500*
Underwriters' non-accountable expense allowance (assuming no
exercise of over-allotment option).............................. 118,125*
Miscellaneous..................................................... 20,000*
---------
Total......................................................... $ 470,789*
</TABLE>
- ------------------------
* Estimated expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, the Company has sold the following securities
without registration
under the Securities Act of 1933, as amended, (the "Securities Act") in reliance
on exemptions from registration afforded by the Securities Act or the rules and
regulations promulgated thereunder.
II-2
<PAGE>
In December 1994, a total of 694,382 shares of Common Stock were issued to
David W. Clarke, Christine Clewes, W. Haines Knox and Mathias E. Lukens, Jr.,
the Company's founders, for a total consideration of $110.
In December 1994, a total of 240,363 shares of Common Stock were sold to two
investors for an aggregate purchase price of $225,000 in reliance upon Section
4(2) of the Securities Act, which provides exemptions for transactions not
involving a public offering. With regard to the Company's reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Section 4(2) of the Securities Act (i)
each investor made representations that he or she was an "accredited investor"
within the meaning of Regulation D of the Securities Act in relation to such
investments, and (ii) each purchaser gave written assurance of his or her
investment intent, and the certificates for the securities bear a legend
accordingly.
In December, 1994, 26,707 shares of Common Stock were sold to one investor
for a total purchase price of $25,000 in reliance upon Section 4(2) of the
Securities Act, which provides exemptions for transactions not involving a
public offering. With regard to the Company's reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act, certain inquiries
were made by the Company to establish that such sales qualified for such
exemption. In particular, the Company confirmed that with respect to the
exemption claimed under Section 4(2) of the Securities Act (i) the investor made
representations that he was an "accredited investor" within the meaning of
Regulation D of the Securities Act in relation to such investments, and (ii) the
purchaser gave written assurance of his investment intent, and the certificates
for the securities bear a legend accordingly.
From June through December 1995, a total of 224,339 shares of Common Stock
were sold to six investors (three of whom were existing shareholders) for a
total purchase price of $210,000 in reliance upon Section 4(2) of the Securities
Act, which provides exemptions for transactions not involving a public offering.
With regard to the Company's reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act, certain inquiries were made by
the Company to establish that such sales qualified for such exemption. In
particular, the Company confirmed that with respect to the exemption claimed
under Section 4(2) of the Securities Act (i) each investor made representations
that he or she was an "accredited investor" within the meaning of Regulation D
of the Securities Act in relation to such investments, and (ii) each purchaser
gave written assurance of his or her investment intent, and the certificates for
the securities bear a legend accordingly.
From September 1995 through November 1995, a total of 160,241 shares of
Common Stock were issued to two investors for a total purchase price of $120,000
in reliance upon Section 4(2) of the Securities Act, which provides exemptions
for transactions not involving a public offering. With regard to the Company's
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act, certain inquiries were made by the Company to establish that
such sales qualified for such exemption. In particular, the Company confirmed
that with respect to the exemption claimed under Section 4(2) of the Securities
Act (i) each investor made representations that he or she was an "accredited
investor" within the meaning of Regulation D of the Securities Act in relation
to such investments, and (ii) each purchaser gave written assurance of his or
her investment intent, and the certificates for the securities bear a legend
accordingly.
In October 1995, the Company issued to certain shareholders a total of
105,494 shares of Common Stock pursuant to anti-dilution provisions of certain
prior subscription agreements between those shareholders and the Company in
reliance upon Section 4(2) of the Securities Act, which provides exemptions for
transactions not involving a public offering. With regard to the Company's
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act, certain inquiries were made by the Company in the original
private placement to establish that such sales qualified for such exemption. In
particular, the Company confirmed that with respect to the exemption claimed
under Section 4(2) of the
II-3
<PAGE>
Securities Act (i) each investor made representations that he or she was an
"accredited investor" within the meaning of Regulation D of the Securities Act
in relation to such investments, and (ii) each purchaser gave written assurance
of his or her investment intent, and the certificates for the securities bear a
legend accordingly.
In January 1996, a total of 5,343 shares of Common Stock were issued to two
investors for a total purchase price of $5,000 in reliance upon Section 4(2) of
the Securities Act, which provides exemptions for transactions not involving a
public offering. With regard to the Company's reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act, certain inquiries
were made by the Company to establish that such sales qualified for such
exemption. In particular, the Company confirmed that with respect to the
exemption claimed under Section 4(2) of the Securities Act (i) each investor
made representations that he or she was sophisticated and/or an "accredited
investor" within the meaning of Regulation D of the Securities Act in relation
to such investments, and (ii) each purchaser gave written assurance of his or
her investment intent, and the certificates for the securities bear a legend
accordingly.
Effective April 1996, the Company issued 21,366 shares of Common stock to
the landlord of its principal office facilities in consideration of a rent
reduction valued at $20,000 over the life of the lease, in reliance upon Section
4(2) of the Securities Act, which provides exemptions for transactions not
involving a public offering. With regard to the Company's reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Section 4(2) of the Securities Act (i)
the investor made representations that he or she was an "accredited investor"
within the meaning of Regulation D of the Securities Act in relation to such
investments, and (ii) each purchaser gave written assurance of his or her
investment intent, and the certificates for the securities bear a legend
accordingly.
In May 1996, the Company issued 299,000 shares of Common Stock and a warrant
for 400,000 shares of Common Stock, exercisable at $5.50 per share to a
consultant for services rendered to the Company valued at $30,000 in reliance
upon Section 4(2) of the Securities Act, which provides exemptions for
transactions not involving a public offering. With regard to the Company's
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act, certain inquiries were made by the Company to establish that
such sales qualified for such exemption. In particular, the Company confirmed
that with respect to the exemption claimed under Section 4(2) of the Securities
Act (i) the investor made representations that the investor was an "accredited
investor" within the meaning of Regulation D of the Securities Act in relation
to such investments, and (ii) the purchaser gave written assurance of his or her
investment intent, and the certificates for the securities bear a legend
accordingly. The warrant, upon the Effective Date, will be modified to have the
same terms and conditions as the Public Warrants.
In May 1996, the Company issued 200,000 shares of Common Stock to certain
accredited investors pursuant to a private placement of $250,000 in promissory
notes, which notes were repaid from the Company's private placement which
commenced in June 1996. The note offering was conducted by the May Davis Group,
Inc. as placement agent, who received a commission of 10% of the gross proceeds.
The sales of these securities were made in reliance upon Regulation D, Rule 506
of the Securities Act, which provides exemptions for transactions not involving
a public offering. With regard to the Company's reliance upon the exemption from
registration provided by Regulation D, Rule 506 of the Securities Act, certain
inquiries were made by the Company to establish that such sales qualified for
such exemption. In particular, the Company confirmed that with respect to such
exemption (i) each investor made representations that he or she was an
"accredited investor" within the meaning of Regulation D of the Securities Act
in relation to such investments and (ii) each purchaser gave written assurance
of his or her investment intent, and the certificates for the securites bear a
legend accordingly.
In June 1996, a director and shareholder of the Company, and one of his
affiliated entities, converted a total of $190,703 of debt owed by the Company
to a total of 203,726 shares of Common Stock. The sale
II-4
<PAGE>
of these securities were made in reliance upon Section 4(2) of the Securities
Act, which provides exemptions for transactions not involving a public offering.
With regard to the Company's reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act, certain inquiries were made by
the Company to establish that such sales qualified for such exemption. In
particular, the Company confirmed that with respect to the exemption claimed
under Section 4(2) of the Securities Act (i) the investor made representations
that he was an "accredited investor" within the meaning of Regulation D of the
Securities Act in relation to such investments, and (ii) the purchaser gave
written assurance of his investment intent, and the certificates for the
securities bear a legend accordingly.
In June 1996, an officer, director and principal shareholder of the Company
converted $60,840 of debt owed by the Company to 64,994 shares of Common Stock.
The sale of these securities were made in reliance upon Section 4(2) of the
Securities Act, which provides exemptions for transactions not involving a
public offering. With regard to the Company's reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act, certain inquiries
were made by the Company to establish that such sales qualified for such
exemption. In particular, the Company confirmed that with respect to the
exemption claimed under Section 4(2) of the Securities Act (i) the investor made
representations that he was an "accredited investor" within the meaning of
Regulation D of the Securities Act in relation to such investments, and (ii) the
purchaser gave written assurance of his investment intent, and the certificates
for the securities bear a legend accordingly.
In June 1996, the Company issued a total of 25,000 shares of Common Stock to
three consulants for consulting services in respect of the Company's business
plan, which shares were valued at $.94 per share. The shares were issued in
reliance upon Section 4(2) of the Securities Act, which provides exemptions for
transactions not involving a public offering. With regard to the Company's
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act, certain inquiries were made by the Company to establish that
such sales qualified for such exemption. In particular, the Company confirmed
that with respect to the exemption claimed under Section 4(2) of the Securities
Act (i) each investor made respresentations that he or she was an "accredited
investor" within the meaning of Regulation D of the Securities Act in relation
to such investments, and (ii) the purchaser gave written assurance of his
investment intent, and the certificates for the securities bear a legend
accordingly.
In July 1996, certain shareholders of the Company holding in the aggregate
$54,836 in convertible debentures elected to convert the debentures to an
aggregate of 25,333 shares of Common Stock. The sales of these securities were
made in reliance upon Section 4(2) of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act, certain inquiries were made by the Company to establish
that such sales qualified for such exemption. In particular, the Company
confirmed that with respect to the exemption claimed under Section 4(2) of the
Securities Act (i) each investor made representations that he or she was an
"accredited investor" within the meaning of Regulation D of the Securities Act
in relation to such investments, and (ii) each purchaser gave written assurance
of his or her investment intent, and the certificates for the securities bear a
legend accordingly.
In September 1996, the Company issued 3,500 shares of Common Stock to
consultants of the Company for reduction of accounts payable in the amount of
$85,528 in reliance upon Section 4(2) of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act, the consultants received information about the Company
and its operations, including financial information and met with, asked
questions of and received answers from, representatives of the Company; and
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Section 4(2) of the Securities Act (i)
each investor made representations, and the Company reasonably believed them to
be true, that (a) the investor had such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the securities; (b) the investor's overall
II-5
<PAGE>
commitment to investments which were not readily marketable were not
disproportionate to the investor's net worth, and the investment in the
securities would not cause such overall commitment to become excessive; (c) the
investor was financially able to bear the economic risk of the investment,
including the ability to hold the securities indefinitely or to afford a
complete loss of the investor's investment in the securities, and, (ii) each
investor gave written assurance of his or her investment intent, and the
certificates for the securities bear a legend accordingly.
From August 5, 1996 through November 14, 1996, the Company issued an
aggregate of 500,000 shares of Common Stock and 250,000 Common Stock purchase
warrants for gross proceeds of $1,500,000 pursuant to a private placement to
accredited investors that commenced June 25, 1996. The minimum offering closed
in August 1996 and the Company had subsequent closings until the maximum
offering of $1,500,000 was met on November 14, 1996. Upon the effective date of
this Registration Statement, the warrants will have the same exercise price and
terms of the Public Warrants to be offered by the Company in its initial public
offering under this Registration Statement. The private placement was conducted
by the May Davis Group, Inc. as placement agent, which was paid a commission of
10% and a non-accountable expense allowance of 3%, each of which was calculated
on the gross proceeds. The sales of these securities were made in reliance upon
Regulation D, Rule 506 of the Securities Act, which provides exemptions for
transactions not involving a public offering. With regard to the Company's
reliance upon the exemption from registration provided by Regulation D, Rule 506
of the Securities Act, certain inquiries were made by the Company to establish
that such sales qualified for such exemption. In particular, the Company
confirmed that with respect to such exemption (i) each investor made
representations that he or she was an "accredited investor" within the meaning
of Regulation D of the Securities Act in relation to such investments and (ii)
each purchaser gave written assurance of his or her investment intent, and the
certificates for the securites bear a legend accordingly.
In June 1996, the Company issued to a consultant in respect of business
consulting services a warrant for 250,000 shares of Common Stock exercisable at
$4.00 per share commencing June 1, 1998 and terminating June 1, 2002 and a
warrant for 50,000 shares of Common Stock exercisable at $5.50 per share
commencing June 30, 1998 and terminating June 30, 2002, in reliance upon Section
4(2) of the Securities Act, which provides exemptions for transactions not
involving a public offering. With regard to the Company's reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Section 4(2) of the Securities Act (i)
the investor made representations that he was an "accredited investor" within
the meaning of Regulation D of the Securities Act in relation to such
investments, and (ii) the purchaser gave written assurance of his investment
intent, and the certificates for the securities bear a legend accordingly.
In September and November 1996, the Company issued to each of three officers
of the Company in respect of their services to the Company, a warrant, each
exercisable for 50,000 shares of Common Stock (for an aggregate of 150,000
shares), at an exercise price of $5.50 per share commencing 12 months from the
first to occur of (i) the Effective Date or (ii) September 26, 1998, until
September 26, 2001 as to two warrants and November 1, 1998 until November 1,
2001 as to the third warrant. The issuance of these securities was made in
reliance upon Section 4(2) of the Securities Act, which provides exemptions for
transactions not involving a public offering. With regard to the Company's
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act, certain inquiries were made by the Company to establish that
such sales qualified for such exemption. In particular, the Company confirmed
that with respect to the exemption claimed under Section 4(2) of the Securities
Act (i) each investor made representations that he or she was an "accredited
investor" within the meaning of Regulation D of the Securities Act in relation
to such investments, and (ii) each purchaser gave written assurance of his or
her investment intent, and the certificates for the securities bear a legend
accordingly.
In October 1996, the Company issued a total of 25,000 shares of Common Stock
to a consultant for facilitating the Company's factoring agreement, which shares
were valued at $3.00 per share. The shares
II-6
<PAGE>
were issued in reliance upon Section 4(2) of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act, certain inquiries were made by the Company to establish
that such sales qualified for such exemption. In particualr, the Company
confirmed that with respect to the exemption claimed under Section 4(2) of the
Securities Act (i) each of the investor made representations that he or she was
an "accredited investor" within the meaning of Regulation D of the Securities
Act in relation to such investments, and (ii) the purchaser gave written
assurance of his investment intent, and the certificates for the securities bear
a legend accordingly.
In December 1996, the Company issued to a director of the Company in respect
of business consulting services a warrant for 250,000 shares of Common Stock,
exercisable at $5.50 per share commencing June 1, 1998 and terminating June 1,
2002, in reliance upon Section 4(2) of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act, certain inquiries were made by the Company to establish
that such sales qualified for such exemption. In particular, the Company
confirmed that with respect to the exemption claimed under Section 4(2) of the
Securities Act (i) the investor made representations that he was an "accredited
investor" within the meaning of Regulation D of the Securities Act in relation
to such investments, and (ii) the purchaser gave written assurance of his
investment intent, and the certificates for the securities bear a legend
accordingly.
II-7
<PAGE>
ITEM 27. EXHIBITS
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Underwriters' Warrant
3.1 Amended and Restated Articles of Incorporation*
3.2 Amended and Restated ByLaws*
4.1 Specimen of Common Stock Certificate
4.2 Specimen of Warrant Certificate
4.3 Form of Warrant Agreement between the Company and American Stock Transfer & Trust Company, as Warrant
Agent
4.4 Form of Warrant issued to investors in the Company's private placement, dated August 5, 1996 through
November 14, 1996*
4.5 Warrant dated September 26, 1996 in favor of Steven D. Smith, as amended*
4.6 Warrant dated September 26, 1996 in favor of Don P. Louw, as amended*
4.7 Warrant dated October 29, 1996 in favor of Perryman Corporation N.V.*
4.8 Warrant dated October 29, 1996 in favor of Rickgrove, N.V.*
4.9 Warrant dated October 29, 1996 in favor of Cherryhills, N.V.*
4.10 Warrant dated June 25, 1996 in favor of Imagine Holdings*
4.11 Warrant dated December 15, 1996 in favor of Mathias E. Lukens, Jr.
4.12 Form of Registration Rights Agreement between the Company and certain investors dated in May 1996*
4.13 Form of Registration Rights Agreement between the Company and private placement investors dated August
5, 1996* through November 14, 1996*
4.14 Warrant dated June 30, 1996 in favor of Imagine Holdings
4.15 Warrant dated November 1, 1996 in favor of Robert Swatland
5 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, Counsel for the Company***
10.1 1996 Stock Option Plan*
10.2 Stock Purchase Agreement between the Company and Christine Clewes, dated June 13, 1996*
10.3 Stock Purchase Agreement between the Company and Frank Mancini, dated June 24, 1996*
10.4 Stock Purchase Agreement between the Company and Framan, a business entity, dated June 24, 1996*
10.5 Consulting Agreement between the Company and Perryman Corporation, N.V. dated May 10, 1996*
10.6 Amended & Restated Consulting Agreement between the Company and Imagine Holdings, dated June 1, 1996*
10.7 Lease between the Company and South Hillsborough Community Bank Office/Complex, Richard L. Phagan, dated
October 31, 1995
10.7.1 Lease between the Company and South Hillsborough Community Bank Office/Complex, dated October 24, 1996
10.8 Amended and Restated Consulting Agreement between the Company and Matthias E. Lukens, Jr. dated November
30, 1996
10.9 Consulting Agreement between the Company and Frank J. Mancini dated December 20, 1996
10.10 Agreement between the Company and Phasetronics, Inc., dated January 31, 1996
10.11 Agreement between the Company and Phasetronics, Inc. dated January 31, 1996
10.12 Sale of Accounts Receivable Agreement between the Company and Queensbury, Inc. dated October 31, 1996
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.13 Cash Advance and Security Agreement and amendment thereto between Frank J. Mancini and the Company
10.14 Form of indemnification agreement for directors and officers
10.15 Revolving Line of Credit Agreement between the Company and Queensbury, Inc.
10.16 Amended and Restated License Agreement between the Company and Mathias E. Lukens, Jr., d/b/a WHR
Partners, dated December 16, 1997
10.17 Stock Purchase Agreement between the Company and Mathias E. Lukens, Jr., d/b/a WHR Partners, dated
December 16, 1997
10.18 Executive Employment Agreement between the Company and David W. Clarke
10.19 Executive Employment Agreement between the Company and Christine Clewes
10.20 Executive Employment Agreement between the Company and Donald P. Louw
10.21 Executive Employment Agreement between the Company and Steven D. Smith
10.22 Executive Employment Agreement between the Company and Robert Swatland
10.23 Form of Financial Advisor and Investment Banking Agreement between the Company and May Davis Group, Inc.
23.1 Consent of Most Horowitz & Company, LLP
23.3 Consent of Greenberg Traurig Hoffman Lipoff, Rosen & Quentel, P.A. (included in Exhibit 5)
27 Financial Data Schedule
99.1 Form of Agreement Among Underwriters**
99.2 Form of Selected Dealer Agreement**
99.3 Form of domestic distribution agreement
99.4 Form of international distribution agreement
</TABLE>
- ------------------------
* Previously filed.
** To be filed by amendment.
*** Form of opinion included herewith. Final signed opinion to be filed by
amendment.
ITEM 28. UNDERTAKINGS.
(a) The small business issuer will:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered, (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
II-9
<PAGE>
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The small business issuer will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The small business issuer will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the small business issuer under Rule 424(b)(l) or (4) or 497(h)
under the Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
BONA FIDE offering of those securities.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement on Form SB-2 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Apollo Beach, State of Florida, on March 6, 1997.
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /s/ DAVID W. CLARKE
-----------------------------------------
David W. Clarke
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement on Form SB-2 has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DAVID W. CLARKE
- ------------------------------ President, Chief Executive March 6, 1997
David W. Clarke Officer, and Chairman
/s/ CHRISTINE CLEWES Vice President of
- ------------------------------ Marketing, Secretary and March 6, 1997
Christine Clewes Director
/s/ STEVEN D. SMITH
- ------------------------------ Vice President of March 6, 1997
Steven D. Smith Operations and Director
*
- ------------------------------ Director March 6, 1997
Mathias E. Lukens, Jr.
*
- ------------------------------ Director March 6, 1997
Frank J. Mancini
*
- ------------------------------ Director March 6, 1997
Gregory C. Hamilton
* By David W. Clarke pursuant to power of attorney
II-11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Underwriters' Warrant
3.1 Amended and Restated Articles of Incorporation*
3.2 Amended and Restated ByLaws*
4.1 Specimen of Common Stock Certificate
4.2 Specimen of Warrant Certificate
4.3 Form of Warrant Agreement between the Company and American Stock Transfer & Trust Company, as
Warrant Agent
4.4 Form of Warrant issued to investors in the Company's private placement, dated August 5, 1996
through November 14, 1996*
4.5 Warrant dated September 26, 1996 in favor of Steven D. Smith, as amended*
4.6 Warrant dated September 26, 1996 in favor of Don P. Louw, as amended*
4.7 Warrant dated October 29, 1996 in favor of Perryman Corporation N.V.*
4.8 Warrant dated October 29, 1996 in favor of Rickgrove, N.V.*
4.9 Warrant dated October 29, 1996 in favor of Cherryhills, N.V.*
4.10 Warrant dated June 25, 1996 in favor of Imagine Holdings*
4.11 Warrant dated December 15, 1996 in favor of Mathias E. Lukens, Jr.
4.12 Form of Registration Rights Agreement between the Company and certain investors dated in May
1996*
4.13 Form of Registration Rights Agreement between the Company and private placement investors dated
August 5, 1996 through November 14, 1996*
4.14 Warrant dated June 30, 1996 in favor of Imagine Holdings
4.15 Warrant dated November 1, 1996 in favor of Robert Swatland
5 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, Counsel for the Company***
10.1 1996 Stock Option Plan*
10.2 Stock Purchase Agreement between the Company and Christine Clewes, dated June 13, 1996*
10.3 Stock Purchase Agreement between the Company and Frank Mancini, dated June 24, 1996*
10.4 Stock Purchase Agreement between the Company and Framan, a business entity, dated June 24, 1996*
10.5 Consulting Agreement between the Company and Perryman Corporation, N.V. dated May 10, 1996*
10.6 Amended & Restated Consulting Agreement between the Company and Imagine Holdings, dated June 1,
1996*
10.7 Lease between the Company and South Hillsborough Community Bank Office/ Complex, Richard L.
Phagan, dated October 31, 1995
10.7.1 Lease between the Company and South Hillsborough Community Bank Office/ Complex, dated September
24, 1996
10.8 Amended and Restated Consulting Agreement between the Company and Matthias E. Lukens, Jr. dated
November 30, 1996
10.9 Consulting Agreement between the Company and Frank J. Mancini dated December 20, 1996
10.10 Agreement between the Company and Phasetronics, Inc., dated January 31, 1996
10.11 Agreement between the Company and Phasetronics, Inc. dated January 31, 1996
10.12 Sale of Accounts Receivable Agreement between the Company and Queensbury, Inc. dated October 31,
1996
10.13 Cash Advance and Security Agreement and amendment thereto between Frank J. Mancini and the
Company
10.14 Form of indemnification agreement for directors and officers
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.15 Revolving Line of Credit Agreement between the Company and Queensbury, Inc.
10.16 Amended and Restated License Agreement between the Company and Mathias E. Lukens, Jr., d/b/a WHR
Partners, dated December 16, 1997
10.17 Stock Purchase Agreement between the Company and Mathias E. Lukens, Jr., d/b/ a WHR Partners,
dated December 16, 1997
10.18 Executive Employment Agreement between the Company and David W. Clarke
10.19 Executive Employment Agreement between the Company and Christine Clewes
10.20 Executive Employment Agreement between the Company and Donald P. Louw
10.21 Executive Employment Agreement between the Company and Steven D. Smith
10.22 Executive Employment Agreement between the Company and Robert Swatland
10.23 Form of Financial Advisor and Investment Banking Agreement between the Company and May Davis
Group, Inc.
23.1 Consent of Most Horowitz & Company, LLP
23.3 Consent of Greenberg Traurig Hoffman Lipoff, Rosen & Quentel, P.A. (included in Exhibit 5)*
27 Financial Data Schedule
99.1 Form of Agreement Among Underwriters*
99.2 Form of Selected Dealer Agreement*
99.3 Form of domestic distribution agreement
99.4 Form of international distribution agreement
</TABLE>
- ------------------------
* Filed previously.
** To be filed by amendment.
*** Form of opinion included herewith. Final signed opinion to be filed by
amendment.
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE, INC.
UNDERWRITING AGREEMENT
New York, New York
_____________, 1997
May Davis Group, Inc., as Representative of
the Several Underwriters as Listed in Schedule A
20 Exchange Place
New York, New York 10005
Dear Sirs:
The undersigned, Apollo International of Delaware, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with May Davis Group,
Inc., as representative of the several underwriters listed in Schedule A ("May
Davis" or "you" or the "Underwriters") with respect to the sale by the Company
to the Underwriters, acting severally and not jointly, of the respective number
of shares ("Shares") of the common stock of the Company, par value $.01 per
share ("Common Stock") and redeemable common stock purchase warrants ("Public
Warrant") each to purchase one share of Common Stock, as set forth in Schedule A
hereto. The aggregate 750,000 Shares and 750,000 Public Warrants will be
separately tradable upon issuance and are sometimes herein referred to as the
"Firm Securities".
<PAGE>
1. Introduction. Each Public Warrant is exercisable commencing on
_________, 1999 [two years from the Effective Date, as hereafter defined] until
___________, 2003 [six years from the Effective Date], unless previously
redeemed by the Company, at an initial exercise price of $ ____ [110% of the
public offering price] per share of Common Stock. The Public Warrants may be
redeemed by the Company at a redemption price of $.25 per Public Warrant at any
time after __________, 1998 [one year from the Effective Date] on thirty (30)
days prior written notice, provided that the closing bid price of the Common
Stock equals or exceeds $____ [150% of the initial public offering price] for
any twenty (20) consecutive trading day period ending within 15 days prior to
the date of the notice of redemption, all in accordance with the terms and
conditions of the Warrant Agreement between the Company and American Stock
Transfer & Trust Company ("Warrant Agreement").
Upon your request, as provided in this Agreement, the Company shall
also issue and sell to you up to an additional 112,500 Shares and/or 112,500
Public Warrants for the purpose of covering over-allotments in the sale of the
Firm Securities (the "Over-allotment Option"). Such additional securities are
hereinafter referred to as the "Option Securities." The Firm Securities and the
Option Securities are hereinafter sometimes referred to as the "Securities." The
Company also proposes to issue and sell to you, pursuant to the terms of the
warrant agreement, dated , 1997 between you and the Company (the "Underwriters'
Warrant Agreement"), warrants (the "Underwriters' Warrants") to purchase up to
75,000 Shares and/or 75,000 Public Warrants. The Underwriters' Warrants shall be
exercisable during the four year period commencing one (1) year from the date of
the Prospectus (as defined in Section 2(a) hereof) at a price of $______ per
Share and $_____ per Public Warrant, subject to adjustment in certain events to
protect against dilution. The Securities issuable upon exercise of the
Underwriters' Warrants are hereinafter sometimes referred to as the
"Underwriters' Securities." The Securities, the Underwriters' Warrants and the
Underwriters' Securities are more fully described in the Registration Statement
and the Prospectus referred to below.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriters as of the date hereof that:
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<PAGE>
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement"), and an amendment or amendments thereto, on Form SB-2 (No.
333-18071), including any related preliminary prospectus (the "Preliminary
Prospectus"), for the registration of the Securities and the Underwriters'
Securities, under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission promulgated under the Act.
Before the registration becomes effective, the Company will not file any
amendment to such registration statement to which you shall have reasonably
objected after having been furnished with a copy thereof. Except as the context
may otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Regulations), is hereinafter called the "Registration Statement,"
and the form of prospectus, in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations (or included in the Registration Statement, if
no filing under Rule 424 is required), is hereinafter called the "Prospectus."
(b) On the date upon which the Registration Statement is declared
effective by the Commission (the "Effective Date") and at all times subsequent
thereto up to Closing Date I and Closing Date II, if any (as such terms are
defined in Section 3(d) hereof), the Registration Statement and the Prospectus
will comply in all material respects with the applicable provisions of the Act
and the Regulations; neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The representation and warranty made in
this Section 2(b) does not apply to statements made or statements omitted in
reliance upon
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<PAGE>
and in conformity with written information furnished to the Company by the
Underwriters expressly for use in the Registration Statement or Prospectus or
any amendment thereof or supplement thereto.
(c) This Agreement, the Warrant Agreement, the Underwriters'
Warrant Agreement and the Financial Advisory and Investment Banking Agreement
(as defined in Section 5(s) hereof), have been duly and validly authorized by
the Company, and this Agreement constitutes, and the Public Warrant Agreement,
the Underwriters' Warrant Agreement and the Financial Advisory and Investment
Banking Agreement, when executed and delivered pursuant to this Agreement, will
(assuming due execution by the Underwriters) each constitute a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or exculpation provision may be limited under
applicable Federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The Securities and the
Underwriters' Warrants to be issued and sold by the Company pursuant to this
Agreement, the Underwriters' Securities issuable upon exercise of the
Underwriters' Warrants and payment therefor, have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by reason
of being such holders; the Securities, the Underwriters' Warrants and the
Underwriters' Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Securities, the Underwriters'
Warrants and the Underwriters' Securities has been duly and validly taken. The
Underwriters' Warrants constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, to issue and sell, upon exercise in
accordance with the terms thereof, the number and type of the Company's
securities called for thereby; except (i) as such
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<PAGE>
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification, contribution or
exculpation provision may be limited under applicable Federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(d) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the issuances and sales of all such securities complied in all material respects
with applicable Federal and state securities laws; the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
(e) Except as set forth in the Registration Statement and the
Prospectus, the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, respectively, free and clear of
all liens, encumbrances, claims, security interests, defects and restrictions of
any material nature whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
(f) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding pending or to the knowledge of the Company
threatened, against or involving the properties or business of the Company or
which if adversely determined could reasonably be expected to materially and
adversely affect the financial position, or prospects, or business of the
Company, except as referred to in the Prospectus.
(g) All contracts and other documents required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been described in the Registration Statement or the
Prospectus or filed
5
<PAGE>
with the Commission as Exhibits to the Registration Statement, as required.
(h) The financial statements of the Company, together with the
related notes, included in the Registration Statement and Prospectus fairly
present the financial positions and the results of operations of the Company, at
the dates and for the periods to which they apply; and such financial statements
have been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved. There has been no material
adverse change in financial conditions or results of operations of the Company,
or to the knowledge of the Company, any development involving a prospective
change in the condition or prospects of the Company, financial or otherwise,
since the date of the financial statements included in the Prospectus, except as
disclosed therein.
(i) Most, Horowitz & Company, LLP, whose reports are filed with
the Commission as a part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
(j) Except as otherwise set forth in the Prospectus, the Company
does not own, directly or indirectly, an interest in any corporation,
partnership, joint venture, trust or other business entity. The Company is duly
qualified and licensed and in good standing as foreign corporation in each
jurisdiction in which its ownership of property or business operations require
such qualification or licensing, except where the failure to be so qualified or
licensed would not have a material adverse affect on the Company. The Company
has all requisite corporate power and authority, and all necessary material
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies, to own or lease its
properties and conduct its business as described in the Prospectus. The Company
is and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and with all applicable
Federal, state and local laws, rules and regulations, including but not limited
to laws and regulations relating to environmental matters and employee health
and safety matters, and none of the aforementioned authorizations, approvals,
orders, licenses,
6
<PAGE>
certificates or permits have been suspended or revoked, nor are there any
proceedings pending or to the knowledge of the Company threatened which could
result in a suspension or revocation thereof. The Company has all requisite
corporate power and authority to enter into this Agreement, the Warrant
Agreement, the Underwriters' Warrant Agreement and the Financial Advisory and
Investment Banking Agreement and to carry out the provisions and conditions
hereof and thereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained. No consent, authorization
or order of, and no filing with, any court, government agency or other body is
required for the issuance of the Securities and the Underwriters' Securities,
pursuant to this Agreement, the Warrant Agreement, and the Underwriters' Warrant
Agreement, and as contemplated by the Prospectus, except with respect to
applicable Federal and state securities laws.
(k) The outstanding debt, the property and the business of the
Company conforms in all material respects to the descriptions thereof contained
in the Registration Statement and Prospectus.
(l) The Securities, the Underwriters' Warrants, the Underwriters'
Securities and any other securities issued or to be issued by the Company on or
before the Closing Dates (as defined in Section 3(d) hereof) described herein
conform, or will conform when issued, in all material respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
(m) Except as set forth in the Prospectus, no material default
exists in the due performance and observance of any term, covenant or condition
of any license, contract, indenture, mortgage, deed of trust, note, loan or
credit agreement, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company is
a party or by which the Company may be bound or to which any of the property or
assets of the Company are subject which default would reasonably be expected to
have a materially adverse effect on the financial condition or business of the
Company.
7
<PAGE>
(n) The Company is not in violation of any term or provision of
its Certificates of Incorporation or By-Laws. Neither the execution and delivery
of this Agreement, nor the issuance and sale of the shares of Common Stock, the
Public Warrants, the Underwriters' Warrants and the Underwriters' Securities,
nor the consummation of any of the transactions contemplated herein, nor the
compliance by the Company with the terms and provisions hereof has materially
conflicted with or will materially conflict with, or has resulted in or will
result in a material breach of, any of the terms and provisions of, or has
constituted or will constitute a material default under, or has resulted in or
will result in the creation or imposition of any lien, charge or encumbrance
upon the property or assets of the Company pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party, or by which the
Company is or may be bound, or to which any of the property or assets of the
Company is subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the Company or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
(o) Except as disclosed in the Prospectus, all taxes which are
due from the Company have been paid in full, unless being contested in good
faith by the Company, and the Company does not have any tax deficiency or claim
outstanding, proposed or assessed against it.
(p) Subsequent to the respective dates as of which information is
given in the most recently circulated Preliminary Prospectus included as a part
of the Registration Statement, and except as may otherwise be indicated or
contemplated herein or therein, (i) the Company has not issued any securities,
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock; (iii) incurred any material liability or
obligation, direct or contingent, for borrowed money; or (iv) entered into any
transaction other than in the ordinary course of business.
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<PAGE>
(q) To the Company's knowledge, the Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus or part
thereof.
(r) On the Effective Date, (i) the authorization of capital stock
of the Company is as set forth in the Registration Statement, and (ii) not more
than an aggregate of 2,811,434 shares of Common Stock shall be issued and
outstanding excluding: (A) 750,000 shares of Common Stock and the 750,000 shares
of Common Stock issuable upon the exercise of the Public Warrants; (B) up to an
additional 112,500 shares of Common Stock issuable upon the exercise of the
Over-allotment Option or the 112,500 shares issuable upon the exercise of the
Public Warrants issuable upon the exercise of the Over-allotment Option; (C) up
to an additional 75,000 shares issuable upon exercise of the Underwriters'
Warrants or the 75,000 shares issuable upon exercise of the Public Warrants
issuable upon the exercise of the Underwriters' Warrants (which warrants are
identical to the Public Warrants); (D) up to 500,000 shares of Common Stock
issuable upon the exercise of options granted, or to be granted, under the
Company's 1996 Employee Stock Option Plan; (E) up to 1,100,000 shares issuable
upon exercise of currently outstanding non-public warrants; and (F) up to
41,666.6666 shares issuable under the terms of a license agreement. Other than
the shares of Common Stock referred to in the immediately preceding sentence, no
other shares of capital stock or securities convertible into capital stock shall
be outstanding or reserved for issuance at the completion of the proposed public
offering without the consent of the Underwriters.
(s) Except for the registration rights granted under the
Underwriters' Warrant Agreement, to the Selling Stockholders named in the
Registration Statement (if any), or as disclosed in the Prospectus, no holders
of any securities of the Company or of any options, warrants or convertible or
exchangeable securities of the Company exercisable for or convertible or
exchangeable for securities of the Company have the right to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company.
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<PAGE>
(t) Assuming that there will be two "market makers" for the
Common Stock, at least 300 beneficial owners of the Common Stock and a
sufficient "public float" of the Shares, and that the Company's registration of
the Common Stock pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") becomes effective (all as contemplated by the requirements of the National
Association of Securities Dealers, Inc.), the Common Stock is eligible for
quotation on the Nasdaq Stock Market ("Nasdaq"). The Company has filed a
registration statement with the Commission pursuant to Section 12(g) of the
Exchange Act, and has used its best efforts to have same declared effective by
the Commission on an accelerated basis on the Effective Date.
(u) Except as described in the Prospectus, to the Company's
knowledge, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, commitments, payments or issuances of securities
with respect to the Company that may affect the Underwriters' compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD").
(v) Neither the Company, nor, to the knowledge of the Company,
any of its employees or officers or directors, agents or any other person acting
on behalf of the Company has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer, supplier, or official or governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist it
in connection with any actual or proposed transaction) which (i) could
reasonably be expected to subject the Company to any material damage or penalty
in any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, could reasonably be expected to have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the Prospectus, or (iii) if not
continued in the future, could reasonably be expected
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to materially adversely affect the assets, business, operations or prospects of
the Company.
(w) Except as described in the Prospectus, to the company's
knowledge, the Company owns or possesses the requisite licenses or rights to use
all trademarks, service marks, service names, trade names, patents and patent
applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collectively the "Intangibles") described as owned
or used by the Company in the Registration Statement. There is no claim, action
or proceeding by any person pending or, to the Company's knowledge, threatened,
which pertains to or challenges the rights of the Company with respect to any
Intangibles used in the conduct of the business of the Company, except as
described in the Prospectus. To the Company's knowledge, current products,
services and processes of the Company do not infringe on any Intangibles held by
any third party; provided, however, that the possibility exists that other
persons or entities, completely independently of the Company, or employees or
agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(x) Except as set forth in the Registration Statement, the
Company is not under any obligation to pay royalties or fees of any kind
whatsoever to any third party with respect to Intangibles it has developed,
uses, employs or intends to use or employ.
(y) The Company has generally enjoyed satisfactory
employer/employee relationships with its employees and is in material compliance
in all material respects with all Federal, state and local laws and regulations
respecting the employment of their respective employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. To the Company's knowledge, there are no pending or threatened
investigations involving the Company by the U.S. Department of Labor or
corresponding foreign agency, or any other governmental agency responsible for
the enforcement of such Federal, state or local laws and regulations. To the
Company's knowledge, there is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board or
corresponding foreign agency or any strike, picketing, boycott, dispute,
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slowdown or stoppage pending or threatened against or involving the Company, or
any predecessor entity, and none has occurred. No representation question exists
respecting the employees of the Company. No collective bargaining agreement or
modification thereof is currently in effect or being negotiated by the Company
and its employees. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company.
(z). Neither the Company, nor, to the Company's knowledge, any of
its officers or directors or any of its employees or stockholders, have taken,
directly or indirectly, any action designed to or which has constituted or which
could reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(aa). The Company does not maintain nor has it maintained,
sponsored or contributed to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"), except for the Stock Option Plan described in the Prospectus.
The Company neither presently maintains or contributes or at any time in the
past, maintained or contributed to a defined benefit plan, as defined in Section
3(35) of ERISA. The Company has never completely or partially withdrawn from a
"multiemployer plan."
(ab). Except as set forth in the Prospectus under "MANAGEMENT" or
"CERTAIN TRANSACTIONS," the Company is not a party to any agreement with any
officer, director or stockholder of the Company or any affiliate or associate of
any such person or entity which is required to be disclosed in the Prospectus
pursuant to Regulation SB. Except as set forth in the Prospectus, to the
Company's knowledge, no officer, director or stockholder of the Company or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Regulations) of any such person or entity or the Company, has or has
had, either directly or indirectly, (i) an interest in any person or entity
which (A)
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furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected.
(ac). The minute books of the Company have been made available to
counsel to the Underwriters and contain a complete summary of all director and
shareholder meetings and actions by unanimous consent of directors and actions
by written consent of stockholders holding a majority of the then issued and
outstanding shares since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
(ad). The Company has all requisite corporate power and authority
to enter into and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders required in connection herewith
have been obtained. Neither the execution and delivery of this Agreement, nor
the consummation of any of the transactions contemplated herein, nor the
compliance by the Company with the terms and provisions hereof has materially
conflicted with or will materially conflict with, or has resulted in or will
result in a material breach of, any of the terms and conditions or provisions
of, or has constituted or will constitute a material default under, or has
resulted in or will result in the creation or imposition of any lien, charge or
encumbrance upon the property or assets of the Company pursuant to the terms of
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party, or by which
the Company is or may be bound, or to which any of the property or assets of the
Company is subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the Company or
any contract or agreement, or any statute or any order, rule or regulation
applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
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<PAGE>
3. Purchase, Sale and Delivery of the Securities and Underwriters'
Warrants.
(a) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters 750,000 Shares of Common Stock and 750,000
Public Warrants, and the Underwriters agree to purchase such Securities from the
Company on a firm commitment basis at a purchase price of $4.50 per Share and
$.225 per Public Warrant, to be sold by the Underwriters at an initial public
offering price of $5.00 share and $.25 per Public Warrant.
(b) In addition, upon not less than two (2) days' notice from the
Underwriters to the Company, for a period of forty-five (45) days from the date
of the Prospectus, the Company agrees to sell to the Underwriters at a purchase
price of $4.50 per Share and/or $.225 per Public Warrant, all or any part of the
Option Securities, to be sold by the Underwriters hereunder at an initial public
offering price of $5.00 per Share or $.25 per Public Warrant. Delivery of the
Option Securities shall be made concurrently with tender of payment therefore.
Option Securities may be purchased by the Underwriters only for the purpose of
covering over-allotments in the sale of the Firm Securities, and the
Underwriters shall have no obligation to make any over-allotments. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) On Closing Date I (defined below in Section 3(d)), the
Company shall issue and sell to the Underwriters the Underwriters' Warrants,
which warrants shall entitle the holders thereof to purchase up to 75,000 Shares
and/or 75,000 Public Warrants. The total purchase price of the Underwriters'
Warrants shall be $10. The Underwriters' Warrants shall be exercisable in whole
or in part for up to an additional 75,000 shares and/or 75,000 Public Warrants
for a period of four (4) years commencing one (1) year from the date of the
Prospectus at a price of $6.00 per Share and $.30 per Public Warrant (120% of
the IPO price of the Securities). The Underwriters' Warrant Agreement and form
of Underwriters' Warrant Certificate shall be substantially in the form filed as
Exhibit ___ to the Registration Statement.
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(d) Payment for the Underwriters' Warrants shall be made on
Closing Date I. Payment for the Firm Securities and the Option Securities shall
be made on each of Closing Date I and Closing Date II, respectively, at the
Underwriters' election by certified or bank cashier's check in New York Clearing
House funds, payable to the order of the Company, or by wire transfer, at the
offices of one of the Underwriters, or at such other place as agreed upon by the
Underwriters and the Company, upon delivery of certificates (in form and
substance reasonably satisfactory to the Underwriters) representing the
Securities or by confirmation of electronic transfer of the Securities to the
Underwriters for the accounts of the Underwriters. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M. New York time, on or before the
fifth business day following the public offering or at such earlier time as the
Underwriters shall determine, or at such other time as shall be agreed upon by
the Underwriters and the Company. The hour and date of delivery and payment for
the Firm Securities are called "Closing Date I." The Firm Securities shall be
registered in such name or names and in such authorized denominations as the
Underwriters may request in writing at least two (2) full business days prior to
Closing Date I. The Company will permit the Underwriters to examine and package
any certificates representing the Firm Securities for delivery, at least one (1)
full business day prior to Closing Date I. Delivery for each of the Option
Securities as provided above shall be made within the two (2) business day
period after notice of exercise to the Company, and against payment therefor, as
provided above. The hour and date of such delivery and payment made subsequent
to Closing Date I for Option Securities is referred to as "Closing Date II" and
Closing Date I and Closing Date II are collectively referred to as Closing Date
I. The Option Securities shall be registered in such name or names and in such
denominations as the Underwriters may request in writing at the time of exercise
of the Over-allotment Option.
(e) The Company shall not be obligated to sell or deliver any
Firm Securities except upon tender of payment by the Underwriters for all the
Firm Securities.
4. Public Offering. The Underwriters are to make a public offering of
the Firm Securities and such of the Option
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Securities as they may determine. The Securities are to be initially offered to
the public at the offering price set forth on the cover page of the Prospectus
(such price being hereinafter called the "Public Offering Price"). The
Underwriters may, at their own expense, enter into one or more agreements as the
Underwriters, in their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers or co-underwriters in connection with
such public offering.
5. Covenants of the Company. The Company covenants and agrees that it
will:
(a) Use its best efforts to cause the Registration Statement to
become effective and will notify the Underwriters immediately, and confirm the
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Securities and the
Underwriters' Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, and (iv) of
the receipt of any comments from the Commission. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification at
any time, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
(b) File the Prospectus (in form and substance reasonably
satisfactory to the Underwriters) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission in accordance with
Rule 424, if the Prospectus is required to be so filed.
(c) During the time when a prospectus is required to be delivered
under the Act, use its reasonable best efforts to comply with all requirements
imposed upon it by the Act and the Exchange Act, as now and hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Securities and the
Underwriters' Securities in accordance with the provisions
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<PAGE>
hereof and the Prospectus. If at any time when a prospectus relating to the
Securities or the Underwriters' Securities is required to be delivered under the
Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriters, the Prospectus, as then
amended or supplemented, includes an 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, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act.
(d) Deliver to the Underwriters, without charge, such number of
copies of each Preliminary Prospectus and the Prospectus as the Underwriters may
reasonably request and, as soon as the Registration Statement or any amendment
or supplement thereto becomes effective, deliver to the Underwriters two (2)
signed copies of the Registration Statement, including exhibits, and all
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and signed copies of all consents of certified
experts.
(e) Endeavor in good faith, in cooperation with the Underwriters,
and Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP at or prior to the time
the Registration Statement becomes effective, to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as the
Underwriters may reasonably designate, provided that no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company (i)
would be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction; or (ii) would be subject to
qualification on "blue sky" in any state which requires a lock-up of inside
securities for a period greater than two (2) years. In each jurisdiction where
such qualification shall be effected, the Company will, unless the Underwriters
agree that such action is not at the time necessary or advisable, use its
reasonable best efforts to file and make such statements or reports at such
times
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<PAGE>
as are or may reasonably be required by the laws of such jurisdiction.
(f) Make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Act) covering a period of at least twelve
(12) consecutive months beginning after the Effective Date.
(g) For a period of five (5) years from the Effective Date,
furnish to the Underwriters copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish to
each Underwriter (i) a copy of each periodic report the Company shall file with
the Commission, (ii) a copy of every press release and every news item and
article with respect to the Company or its affairs, which was released by the
Company, (iii) a copy of each Form 8-K or Schedule 13D, 13G, 14D-1 or 13E-4
received or prepared by the Company, and (iv) such additional documents and
information with respect to the Company or any future subsidiaries or affiliates
of the Company as the Underwriters may from time to time reasonably request.
(h) Apply the net proceeds from the offering received by it in a
manner consistent in all material respects with the caption "USE OF PROCEEDS" in
the Prospectus.
(i) Deliver to the Underwriters, prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Underwriters shall reasonably object, after being furnished such copy, in
writing with reasonable specificity as to the nature and extent of any
objection.
(j) Furnish to the Underwriters as early as practicable prior to
Closing Date I, but not later than two (2) full business days prior thereto, a
copy of the latest available
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unaudited interim financial statements of the Company (which in no event shall
be as of a date more than thirty (30) days prior to the Effective Date) which
have been read by the Company's independent accountants as stated in their
letter to be furnished to the Underwriters pursuant to Section 7(g) hereof.
(k) For a period of three (3) years from Closing Date I, provide
the Underwriters, upon their reasonable request, at the Company's sole expense,
(i) with access to daily consolidated financial transfer sheets relating to the
Common Stock and designate American Stock Transfer & Trust Co. as transfer agent
for the Company's securities or such other transfer agent mutually agreeable to
the Company and the Underwriters and (ii) to cause the Company's depository to
fax a "special security position report" to each Underwriter on a daily basis.
(l) For a period of three (3) years after Closing Date I,
nominate and use its best efforts to engage a designee of the Underwriters as a
nonvoting advisor to the Company's Board of Directors (the "Advisor") or in lieu
thereof to designate an individual for election as a director, in which case the
Company shall use its best efforts to have such individual elected as a
director. The designee may be a director, officer, partner, employee or
affiliate of one or both of the Underwriters and the Underwriters shall
designate such person in writing to the Board. In the event the Underwriters
shall not have designated such individual at the time of any meeting of the
Board or such person is unavailable to serve, the Company shall notify the
Underwriters of each meeting of the Board. An individual, if any, designated by
the Underwriters shall receive all notices and other correspondence and
communications sent by the Company to members of the Board. Such Advisor or
director, as the case may be shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings including, but not limited
to, food, lodging, and transportation. In addition, such Advisor or Director
shall be entitled to the same compensation as the Company gives to other
non-employee directors for acting in such capacity. The Company further agrees
that, during said three (3) year period, it shall schedule no less than four (4)
formal and "in person" meetings of its Board of Directors in each such year at
which meetings such Advisor shall be permitted to attend as set forth herein;
said meetings shall be held quarterly each year and
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thirty (30) days advance notice of such meetings shall be given to the Advisor.
Further, during such three (3) year period, the Company shall give notice to the
Underwriters with respect to any proposed acquisitions, mergers, reorganizations
or other similar transactions.
The Company agrees to indemnify and hold harmless the
Underwriters and such Advisor against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of the Advisor at any such meeting described herein. In the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, it agrees, if possible, to include the
Advisor as an insured under such policy.
(m) Until the sooner of (i) seven (7) years from the date hereof,
or (ii) the sale to the public of the Underwriters' Securities, not take any
action or actions which may prevent or disqualify the Company's use of Form SB-2
(or another appropriate form) for the registration under the Act of the
Underwriters' Securities and the shares of Common Stock underlying the Public
Warrants.
(n) For a period of five (5) years from the Effective Date, use
its best efforts to maintain the quotation of the Securities by Nasdaq as well
as the listing thereof on the Boston Stock Exchange ("BSE").
(o) Supply each Underwriter with two (2), and Gersten, Savage,
Kaplowitz, Fredericks & Curtin LLP, counsel to the Underwriters, with three (3)
bound volumes of the underwriting materials within a reasonable time after the
latest Closing Date.
(p) For a period of two (2) years from the Effective Date, not
issue any other shares of Common Stock or Preferred Stock or securities
convertible into or exercisable for Common Stock or Preferred Stock without the
prior written consent of the Underwriters. Notwithstanding the foregoing, the
Company may issue securities upon (A) the exercise of any warrants or options
outstanding on the date hereof pursuant to the terms thereof, and (B) the
exercise of the Underwriters' Warrant.
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<PAGE>
(q) So long as the Securities or the Underwriters' Securities are
registered under the Exchange Act, hold an annual meeting of stockholders for
the election of directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years, provide the Company's stockholders with the audited financial statements
of the Company as of the end of the fiscal year just completed prior thereto.
Such financial statements shall be those required by Rule 14a-3 under the
Exchange Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(r) Engage a financial public relations firm reasonably
satisfactory to the Underwriters as soon as possible after Closing Date I, and
continuously engage such firm, or an acceptable substitute firm for at least the
period ending twenty four (24) months after Closing Date I.
(s) Enter into the Underwriters' Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (the "Consulting Agreement")
in substantially the form filed as Exhibits ___ and ___, respectively, to the
Registration Statement.
(t) As soon as possible after Closing Date I, take all necessary
and appropriate actions to be included in Standard and Poor's Corporation
Descriptions or other equivalent manual and to maintain its listing therein for
a period of five (5) years from the Effective Date.
(u) Cause all of the Company's officers and directors and
stockholders holding five (5) percent or more of the outstanding shares of
Common Stock, to enter into written agreements (the "Lock-up Agreements") that,
for a period of 24 months from the Effective Date, they will not, without the
consent of the Underwriters, (i) publicly sell any securities of the Company
owned directly or indirectly by them or owned beneficially by them (as defined
in the Exchange Act), or (ii) otherwise sell, or transfer such securities unless
the transferee agrees in writing to be bound by an identical lock-up.
21
<PAGE>
(v) Use its best efforts to obtain key-man life insurance in the
amount of $1,000,000 per policy on the lives of such executive officers of the
Company as the Underwriters shall request, with the Company named as beneficiary
of such policies.
(w) Use its best efforts to qualify its Common Stock and Public
Warrants for quotation on the NASDAQ system and listing on the BSE.
(x) For a period of two years from the Effective Date, the
Company shall not issue any of its securities in any offering pursuant to
Regulation S under the 1933 Act, without the prior written consent of the
Underwriters.
(y) Grant to the Underwriters a preferential right on the terms
and subject to the conditions set forth in this Section, for a period of three
(3) years from the Effective Date, to purchase for its account, or to sell for
the account of the Company or its present affiliates or subsidiaries or any of
its stockholders listed in the Prospectus under the caption "PRINCIPAL
STOCKHOLDERS" (the "Principal Stockholders"), any securities of the Company, on
terms not more favorable to the Company or such present or future subsidiary or
affiliate or the Principal Stockholders than they can secure elsewhere, to
purchase or sell any such securities. If the Underwriters fail to notify the
Company in writing of their intention to act as underwriter or placement agents
or otherwise participate or introduce a third party to participate in such
offering within fifteen (15) days after receipt of a notice containing such
proposal, then the Underwriters shall have no further claim or right with
respect to the proposal contained in such notice. If, thereafter, such proposal
is materially modified, the Company, and each present or future affiliate or
subsidiary or its Principal Stockholders shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided hereinabove with respect to the original proposal; (ii) If the
Underwriters act as underwriters or placement agents with respect to such
offering or introduce to the Company a third party (other than an underwriter)
which participates in such offering, then the Underwriters shall receive, as
compensation for services rendered, ten (10%) percent of the aggregate
consideration received by the Company through the Underwriters or the party
introduced by the Underwriters and a warrant to purchase an amount of securities
equal to ten (10%) percent of the securities sold by the Company in such
offering through the Underwriters or the party introduced by the
22
<PAGE>
Underwriters at an exercise price per security equal to the offering price of
such securities. If the Underwriters introduce another underwriter who acts as
underwriter with respect to such offering, then the Underwriters shall be
entitled to receive two and one-half (2 1/2%) percent of the aggregate
consideration received by the Company through such underwriter and warrant to
purchase an amount of securities equal to two and one-half (2 1/2%) percent of
the securities sold by the Company in such offering through such underwriter;
(iii) If the Underwriters are offered the right of first refusal and agree to
perform such functions, but fail to perform, the Underwriters will not be
entitled to any such compensation, and waive their right of first refusal with
respect to future offerings unless such failure to perform is caused by the
Company; (iv) If the Underwriters do not perform any of the functions set forth
in (ii) above and (iii) does not apply to such transaction, the Underwriters
shall be entitled to receive an aggregate of two and one-half (2 1/2%) percent
of the aggregate consideration received by the Company and warrants to purchase
an amount of securities equal to two and one-half (2 1/2%) percent of the
securities sold by the Company in such offering at an exercise price per
security equal to the offering price of such securities.
(z) Designate the Underwriters as the Company's exclusive Warrant
Solicitation Agents in the event of any solicitation of the exercise of the
Public Warrants, in connection with a redemption of the Public Warrants or
otherwise, and shall pay to the Underwriters a Warrant Solicitation fee of five
(5%) percent of the exercise price of all solicited Public Warrants, subject to
the rules and regulations of the NASD with regard to such fees.
(aa) Neither the Company nor any representative of the Company
has made or shall make any written or oral representation in connection with the
Offering and sale of the Securities or the Underwriters' Warrant which is not
contained in the Prospectus, which is otherwise inconsistent with or in
contravention of anything contained in the Prospectus, or which shall constitute
a violation of the Act, the Rules and
23
<PAGE>
Regulations, the Exchange Act or the rules and regulations promulgated under the
Exchange Act.
(ab) For so long as any Public Warrant is outstanding, the
Company shall, at its own expense: (i) use its reasonable best efforts to cause
post-effective amendments to the Registration Statement, or new registration
statements relating to the Public Warrants and the Common Stock underlying the
Public Warrants to become effective in compliance with the Act and without any
lapse of time between the effectiveness of the Registration Statement and of any
such post-effective amendment or new registration statement; provided, however,
that the Company shall have no obligation to maintain the effectiveness of such
Registration Statement or file a new Registration Statement, or to keep
available a prospectus at any time at which such registration or prospectus is
not then required; (ii) cause a copy of each Prospectus, as then amended, to be
delivered to each holder of record of a Public Warrant; (iii) furnish to the
Underwriters and dealers as many copies of each such Prospectus as the
Underwriters or dealers may reasonably request; and (iv) maintain the "blue sky"
qualification or registration of the Public Warrants and the Common Stock
underlying the Public Warrants, or have a currently available exemption
therefrom, in each jurisdiction in which the Securities were so qualified or
registered for purposes of the Offering.
6. Payment of Expenses.
(a) The Company hereby agrees to pay all expenses (other than
fees of counsel to the Underwriters) in connection with the offering, including
but not limited to, (i) the preparation, printing, filing and mailing (including
the payment of postage and overnight delivery with respect to such mailing) of
the Registration Statement and the Prospectus and the printing and mailing of
this Agreement and related documents, including the cost of all copies thereof
and of the Preliminary Prospectus and of the Prospectus and any amendments or
supplements thereto supplied to the Underwriters in quantities as hereinabove
stated, (ii) the printing, engraving, issuance and delivery of the shares of
Common Stock, the Public Warrants, and the Underwriters' Warrants, including any
transfer or other taxes payable thereon, (iii) the qualification of the
Securities, the Underwriters'
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<PAGE>
Warrants and the Underwriters' Securities under state or foreign securities or
"Blue Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," and "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, and the fees and disbursements of counsel for the
Underwriters relating to Blue Sky matters (which fees shall be payable by the
Company in the sum of $35,000 no part of which has previously been paid), (iv)
advertising costs and expenses including but not limited to the reasonable costs
and expenses in connection with the "road show," information meetings and
presentations, bound volumes and "tombstones" in publications selected by the
Underwriters and prospectus memorabilia, (v) costs and expenses in connection
with due diligence investigations, including but not limited to the reasonable
fees of any independent counsel or consultant retained, phone calls relating to
due diligence investigations, and all reasonable travel and lodging expenses
incurred by you and/or counsel to the Underwriters in connection with visits to,
and examination of, the Company's premises, (vi) fees and expenses of the
transfer agent and warrant agent, (vii) application and listing fees for
inclusion in Moody's OTC Manual or Standard and Poor's Corporation Descriptions
or other equivalent manuals, and (viii) the fees payable to the NASD and Nasdaq.
The $35,000 payment to counsel for the Underwriters shall not include fees of
special counsel if same is required to be incurred in a merit review state which
may require local counsel. In this connection, Blue Sky applications shall be
made in such states and jurisdictions as shall be requested by the Underwriters.
Payments with regard to items (i), (iii), (iv) and (v) shall be made on each of
Closing Date I and Closing Date II.
(b) The Company shall pay to the Underwriters an aggregate
non-accountable expense allowance, in addition to the expenses payable pursuant
to Section 6(a), equal to three (3%) percent of the gross proceeds received by
the Company from the sale of the Securities, of which $25,000 has been paid as
an advance against such expense allowance. In the event that the Underwriters
terminate the offering or are unable to consummate the offering within nine (9)
months of the date hereof, the advances toward the non-accountable expense
allowance shall become accountable and shall be returnable to the Company to the
extent
25
<PAGE>
its out-of-pocket expenses are less than the amount advanced to the
Underwriters, so that the Underwriters are reimbursed only for their actual
accountable out-of-pocket expenses.
7. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy in all material aspects of the
representations and warranties of the Company as of the date hereof and as of
each of the Closing Dates, to the accuracy in all material respects of the
statements of officers of the Company made pursuant to the provisions hereof and
to the performance by the Company of its obligations hereunder in all material
respects and to the following conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at each of the
Closing Dates, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Gersten, Savage, Kaplowitz,
Fredericks & Curtin, LLP, counsel to the Underwriters.
(b) At Closing Date I, the Underwriters shall have received the
favorable opinion of Greenberg Trauig Hoffman Lipoff Rosen & Quentel, P.A.,
counsel to the Company, dated Closing Date I, addressed to the Underwriters and
in form and substance satisfactory to Gersten, Savage, Kaplowitz, Fredericks &
Curtin, LLP, counsel to the Underwriters, in substantially the form attached as
Exhibit A hereto.
(c) On or prior to each of Closing Date I and Closing Date II,
counsel for the Underwriters shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to review or pass upon the matters referred to in Section 7(b), or
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
26
<PAGE>
(d) Prior to each of Closing Date I and Closing Date II, (i)
there shall have been no material adverse change, or development involving a
material adverse prospective change, in the conditions or prospects of the
business activities, financial or otherwise, of the Company from the latest
dates as of which such conditions are set forth in the Registration Statement
and Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company from the latest date as of which
their respective financial conditions are set forth in the Registration
Statement and Prospectus which is materially adverse to the Company; (iii) the
Company shall not be in material default under any provision of any instrument
relating to any outstanding indebtedness; (iv) no material amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (v) no action, suit or proceeding, at law
or in equity, shall be pending or threatened against the Company before or by
any court or Federal or state commission, board or other administrative agency
wherein an unfavorable result, decision, ruling or finding would materially
adversely affect the business, prospects, operations, or financial condition or
income of the Company, except as set forth in the Registration Statement and
Prospectus and except where such a result is deemed remote by counsel to the
Company with respect to such action or proceeding; (vi) no stop order shall have
been issued under the Act and no proceedings with respect thereto shall have
been initiated or threatened by the Commission; (vii) the market for securities
in general or political, financial or economic conditions shall not have
materially adversely changed from those reasonably foreseeable as of the date
hereof as to render it impracticable in the Underwriters' reasonable judgment to
make a public offering of the Securities, and there has not been a material
adverse change in market levels for securities in general or financial or
economic conditions which render it inadvisable in the Underwriters' judgment to
proceed; and (viii) there shall not have commenced or occurred a war or Act of
God or other calamity which would have a material adverse effect on, or result
in a material loss to, the Company.
<PAGE>
The Company agrees and acknowledges that the Underwriters
shall be the sole determining parties as to the
27
<PAGE>
presence of any such conditions, events, occurrences and provisions set forth in
this Section 7(d).
(e) At each of Closing Date I and Closing Date II, the
Underwriters shall have received a certificate of the Company signed by the
President and the Secretary of the Company, dated Closing Date I and Closing
Date II, respectively, to the effect that the conditions set forth in section
7(d)(i) through (vi) above have been satisfied and that, as of Closing Date I
and Closing Date II, respectively, the representations and warranties of the
Company set forth in Section 2 hereof are true and correct.
(f) By the Effective Date, the Underwriters shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(g) At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Underwriters shall have received a
letter, addressed to the Underwriters and in form and substance reasonably
satisfactory in all respects (including the nonmaterial nature of the changes or
decreases, if any, referred to in clause (3) below) to the Underwriters and to
Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP, counsel for the
Underwriters, from Most Horowitz & Company, LLP, dated as of the date of this
Agreement and as of each of Closing Date I and Closing Date II:
(i) confirming that they are independent accountants with respect to the
Company within the meaning of the Act and the applicable Regulations;
(ii) stating that in its opinion the financial statements of the Company
included in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Regulations thereunder;
(iii) stating that, they have read all of the minutes of meetings of the
shareholders and the Board of Directors of the Company as set forth in the
minute books from incorporation through [not more than 5 days before date of
letter], officials of
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the Company having advised us that the minutes of all such meetings through that
date were set forth therein and have carried out other procedures from ______,
1997 [not more than 30 days before date of letter] to [day prior to date of
letter] inclusive:
(A) With respect to the ten-month periods ended October 31, 1996 and 1995,
they have:
(1) performed the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial information on
the unaudited condensed consolidated balance sheet at October 31, 1996, and the
unaudited statements of operations, stockholders' equity (deficit) and cash
flows for the ten- month periods ended October 31, 1996 and 1995, included in
the Registration Statement ("Interim Financials"), and
(2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters as to whether the Interim
Financials, comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules regulations.
(B) With respect to latest interim period ending as of a date not
later than 30 days prior to the Effective Date, they have:
(1) read the unaudited consolidated financial statements for such
periods of both 1995 and 1996 furnished to us by the Company, officials of the
Company having advised us hat no such financial statements as of any date or for
any period subsequent to [12/31/96] were available; and
(2) Inquired of certain officials of the Company ho have
responsibility for financial and accounting matters as to whether the Interim
Financials are stated on a basis substantially consistent with that of the
audited consolidated financial statements in the Registration Statement.
(C) Nothing came to their attention as a result of the foregoing
procedures that caused them to believe that:
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<PAGE>
(1) any material modifications should be made to the Financials ,
for them to be in conformity with generally accepted accounting principles;
(2) the Interim Financials do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
related published rules and regulations; or
(3) (I) at [12/31/96], there was any change in the capital stock,
increase in long-term debt, increase in net current liabilities or increase in
stockholders' deficit of the consolidated companies as compared with the amounts
in the October 1996 balance sheet forming a part of the Interim Financials; or
(II) for the period from [12/1/96 to 12/31/96], there was any decrease, as
compared with the corresponding period in the preceding year, in consolidated
net sales or any increase in consolidated net loss, except in all instances for
changes, increases, or decreases which the Registration Statement discloses have
occurred or nay occur [except as follows:]
(D) Stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including
worksheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(iv) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may reasonably request.
(h) All proceedings taken in connection with the authorization,
issuance or sale of the Securities, the
30
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Underwriters' Warrants and the Underwriters' Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Underwriters and
to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP counsel to the
Underwriters.
(i) On each of Closing Date I and Closing Date II, there shall
have been duly tendered to you for your account the appropriate number of
Securities and individually for each Underwriter's own account the Underwriters'
Warrants.
(j) No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(e) hereof shall have been
issued on either Closing Date I or Closing Date II, and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Underwriters or
the Company, shall be contemplated.
(k) Prior to each of Closing Date I and Closing Date II there
shall not have been received or provided by the Company's independent public
accountants or attorneys, qualifications to the effect of either difficulties in
furnishing certifications as to material items including, without limitation,
information contained within the footnotes to the financial statements, or as
affecting matters incident to the issuance and sale of the Securities or as to
corporate proceedings or other matters.
(l) On or prior to Closing Date I, the Underwriters' Warrant
Agreement and the Financial Advisory and Investment Banking Agreement shall have
been executed and delivered by the Company, and the Lock-Up Agreements shall
have been executed and delivered by all of the Company's officers, directors and
stockholders.
Any certificate signed by any officer of the Company and
delivered to the Underwriters or to counsel to the Underwriters shall be deemed
a representation and warranty by the Company to the Underwriters as to the
statements made therein. If any condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at any Closing Date is not so fulfilled,
the Underwriters may terminate this Agreement or, if the Underwriters
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so elect, may waive any such conditions which have not been fulfilled or extend
the time for their fulfillment.
8. Indemnification.
(a) The Company shall indemnify and hold harmless each of the
Underwriters, and each controlling person, if any, who controls each of the
Underwriters (within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act), against any and all liabilities, claims, lawsuits, including
any and all awards and/or judgments to which it may become subject under the
Act, the Exchange Act or any other Federal or state statute, at common law or
otherwise, insofar as said liabilities, claims and lawsuits (including awards
and/or judgments) arise out of or are in connection with the Registration
Statement, Prospectus and related Exhibits filed under the Act, except for any
liabilities, claims and lawsuits (including awards and/or judgments), arising
out of acts or omissions of the Underwriters. In addition, the Company shall
also indemnify and hold harmless the Underwriters against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing liabilities, claims and lawsuits to which the indemnity applies.
The Underwriters shall give the Company prompt notice of any
such liability, claim or lawsuit which the Underwriters contend is the subject
matter of the Company's indemnification, and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise and dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
The Underwriters shall indemnify and hold harmless the
Company, and each controlling person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Act, the Exchange Act
or any other Federal or state statute, at common law or otherwise, insofar as
said liabilities, claims and lawsuits
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(including awards and/or judgments) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact required to be stated
or necessary to make the statement therein, not misleading, which statement or
omission was made in reliance upon information furnished in writing to the
Company by or on behalf of the Underwriters for inclusion in the Registration
Statement or Prospectus or any amendment or supplement thereto. In addition, the
Underwriters shall also indemnify and hold harmless the Company against any and
all costs and expenses, including reasonable counsel fees, incurred or relating
to the foregoing.
The Company shall give to the Underwriters prompt notice of
any such liability, claim or lawsuit which the Company contends is the subject
matter of the Underwriters' indemnification and the Underwriters thereupon shall
be granted the right to take any and all necessary and proper action, at their
sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
(b) In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 8 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 8, then, and in each such case, the Company and each of the Underwriters
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after any contribution from others) in such
proportion taking into consideration the relative benefits received by each
party from the offering covered by the Prospectus (taking into account the
portion of the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning
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the matter with respect to which the claim was assessed, the opportunity to
correct and prevent any statement or omission and other equitable considerations
appropriate under the circumstances; provided, however, that notwithstanding the
above in no event shall the Underwriters, in the aggregate, be required to
contribute any amount in excess of 10% of the initial public offering price of
the Securities; and provided, that, in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or his or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the contributing party will be
entitled to participate therein with the notifying party and any other
contributing party similarly notified. Any such contributing party shall not be
liable to any party seeking contribution on account of any settlement of any
claim, action or proceeding effected by such party seeking contribution without
the written consent of such contributing party. The indemnification provisions
contained in this Section 8 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
9. Representations and Agreements to Survive Delivery.
Except as the context otherwise requires, all representations, warranties
and agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements at the Closing Dates, and such
representations, warranties and agreements of the Underwriters and the Company,
including the indemnity agreements contained in Section 8 hereof,
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<PAGE>
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any of the Underwriters, the Company or
any controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the Underwriters until the earlier of
the expiration of any applicable statute of limitations and the seventh
anniversary of Closing Date II, at which time the representations, warranties
and agreements shall terminate and be of no further force and effect.
10. Effective Date of This Agreement and Termination hereof.
(a) This Agreement shall become effective at 9:30 a.m., New York
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by the
Underwriters of the Securities, whichever is earlier. The time of the initial
public offering, for the purpose of this Section 10, shall mean the time, after
the Registration Statement becomes effective, of the release by the Underwriters
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities or the time, after the Registration
Statement becomes effective, when the Securities are first released by the
Underwriters for offering by the Underwriters or dealers by letter or telegram,
whichever shall first occur. The Underwriters may prevent this Agreement from
becoming effective without liability to any other party, except as noted below,
by giving the notice indicated below in this Section 10 before the time this
Agreement becomes effective. The Underwriters agree to give the undersigned
notice of the commencement of the offering described herein.
(b) The Underwriters shall have the right, in their sole
discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities and the obligation to purchase the
Option Securities after the exercise of the Over-Allotment Option, by notice
given to the Company prior to delivery and payment for all the Firm Securities
or the Option Securities, as the case may be, if any of the conditions
enumerated in Section 7 are not either fulfilled or waived by the Underwriters
on or before any Closing Date.
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<PAGE>
(c) If the Underwriters elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Company shall be notified on the same day as such election is made by
the Underwriters by telephone or telegram, confirmed by letter.
(d) Anything herein to the contrary notwithstanding, if this
Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriters, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriters shall provide the Company with a statement of the Underwriters'
accountable expenses.
(e) In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
(f) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or termination of this Agreement, and whether
or not this Agreement is otherwise carried out, the provisions of Section 8
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Underwriters,
shall be mailed, delivered or telegraphed and confirmed to May Davis Group,
Inc., 20 Exchange Place, New York, New York 10005 Attention: President, with a
copy to Gersten, Savage, Kaplowitz, Fredericks & Curtin, LLP 575 Lexington
Avenue, New York, New York 10022, Attention: Jay Kaplowitz, Esq., and if to the
Company, shall be mailed, delivered or telegraphed and confirmed to it at 6542
U.S. Highway 41, Apollo Beach, Florida 33572 with a copy to Greenberg Traurig
Hoffman Lipoff Rosen & Quentel P.A., 111 North Orange Street, Orlando, Florida
32801 Attention: Randolph H. Fields, Esq.
12. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriters, the
36
<PAGE>
Company and the controlling persons, directors and officers referred to in
Section 8 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
13. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws. The parties agree to submit themselves to the
jurisdiction of the courts of the State of New York or of the United States of
America for the Southern District of New York, which shall be the sole tribunals
in which any parties may institute and maintain a legal proceeding against the
other party arising from any dispute in this Agreement. In the event either
party initiates a legal proceeding in a jurisdiction other than in the courts of
the State of New York or of the United States of America for the Southern
District of New York, the other party may assert as a complete defense and as a
basis for dismissal of such legal proceeding that the legal proceeding was not
initiated and maintained in the courts of the State of New York or of the United
States of America for the Southern District of New York, in accordance with the
provisions of this Section 13.
14. Entire Agreement. This Agreement, the Warrant Agreement, the
Underwriters' Warrant Agreement and the Financial Advisory and Investment
Banking Agreement contain the entire agreement between the parties hereto in
connection with the subject matter hereof and thereof.
If the foregoing correctly sets forth the understanding between
the Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
Apollo International of
Delaware, Inc.
37
<PAGE>
By:
Name: David W. Clarke
Title: President
Accepted as of the date
first above written.
New York, New York
May, Davis Group, Inc.
By:
Name:
Title:
38
<PAGE>
Dated __________,1997 ___________________ WARRANTS
UNDERWRITER'S WARRANT
THIS CERTIFIES THAT May Davis Group, Inc. (the "Holder") is entitled to
purchase from APOLLO INTERNATIONAL OF DELAWARE, INC. a Delaware corporation (the
"Company"), up to 75,000 shares of the Company's common stock, $.01 par value
(the "Shares"), and/or 75,000 redeemable common stock purchase warrants (the
Public Warrants"; together with the Shares, the "Securities") to purchase one
share of Common Stock at $5.50 per share (the "Warrant Exercise Price") at a
purchase price of $____ per Share (the "Share Exercise Price") and $____ per
Warrant (the "Warrant Exercise Price," collectively, with the Share Exercise
Price, the "Exercise Prices"), subject to adjustment as provided in paragraph 8
hereof, at any time during the 48 month period commencing 12 months from the
effective date of the Registration Statement, defined below, (the "Effective
Date"). This Underwriter's Warrant (the "Underwriter's Warrant") is exercisable
to purchase an aggregate of 75,000 Shares and/or 75,000 Public Warrants, issued
pursuant to an Underwriting Agreement dated ___________ , 1997, between the
Company and May Davis Group, Inc. (the "Underwriter" or "Underwriters") (as
defined in the Underwriting Agreement), in connection with a public offering,
through the Underwriter, of 750,000 shares of Common Stock and 750,000 Warrants
as therein described (and up to an additional 112,500 shares of Common Stock and
112,500 Warrants (the "Option Securities" covered by an over-allotment option
granted by the Company to the Underwriter) hereinafter referred to together with
the Option Securities, as the "Public Securities") and in consideration of
$10.00 received by the Company for the Underwriter's Warrant. The Shares and
Public Warrants issuable pursuant to the Underwriter's Warrant shall have same
terms and conditions as the shares of Common Stock and Public Warrants making up
the Public Securities, as described under the caption "Description of
Securities" in the Company's Registration Statement on Form SB-2, File No.
333-18071 (the "Registration Statement"), except that the Holder shall have
registration rights under the Securities Act of 1933 (the "Act"), for the
Underwriter's Warrant, the Shares, Warrants, and the Shares issuable on the
exercise of the Public Warrants.
<PAGE>
1. The rights represented by this Underwriter's Warrant shall be exercised
at the price, subject to adjustment in accordance with paragraph 8 hereof, and
during the periods as follows:
(a) During the period from the date hereof to _________, 1998 [12
months from the Effective Date] (the "Initial Period") inclusive, the Holder
shall have no right to purchase any Securities hereunder.
(b) Between ___________, 1997 and ___________, 2003 [5 years from the
Effective Date] (the "Expiration Date") inclusive, the Holder shall have the
option to purchase Shares hereunder at a price of $____ per Share and to
purchase Warrants at a price of $_____ per Warrant [120% above the public
offering price of the Shares and Public Warrants], subject to adjustment as
provided in paragraph 8 hereof.
(c) After the Expiration Date, the Holder shall have no right to
purchase any Securities hereunder.
2. (a) The rights represented by this Underwriter's Warrant may be
exercised at any time within the periods above specified, in whole or in part,
by (i) the surrender of the Underwriter's Warrant (with the purchase form at the
end hereof properly executed) at the principal executive office of the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company); (ii) payment to the Company of the Exercise Price then in effect for
the number of Securities specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any; and (iii) delivery to the Company
of a duly executed agreement signed by the person(s) designated in the purchase
form to the effect that such person(s) agree(s) to be bound by the provisions of
paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7 hereof. The
Underwriter's Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of business on the
date the Underwriter's Warrant is surrendered and payment is made in accordance
with the foregoing provisions of this paragraph 2, and the person or persons in
whose name or names the certificates for Shares and/or Public Warrants shall be
issuable upon such exercise shall become the holder or holders of record of such
Shares and Public Warrants at that time and Public Warrants so
2
<PAGE>
purchased shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Underwriter's
Warrant shall have been so exercised.
3. The Underwriter's Warrant shall not be transferred, sold, assigned, or
hypothecated (other than by will or pursuant to the laws of descent and
distribution) for a period of one year commencing ___________, 1997, except that
it may be transferred to successors of the Holder, and may be assigned in whole
or in part to any person who is an officer or director of the Holder or to any
member of the selling group and/or the officers/directors or shareholders or
partners thereof during such period. Any such assignment shall be effected by
the Holder by (i) executing the form of assignment at the end hereof and (ii)
surrendering the Underwriter's Warrant for cancellation at the office or agency
of the Company referred to in paragraph 2 hereof, accompanied by a certificate
(signed by an officer of the Holder if the Holder is a corporation), stating
that each transferee is a permitted transferee under this paragraph 3; whereupon
the Company shall issue, in the name or names specified by the Holder (including
the Holder) a new Underwriter's Warrant or Warrants of like tenor and
representing in the aggregate rights to purchase the same number of Securities
as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock which
may be purchased hereunder or upon exercise of the Underwriter's Warrants and/or
Public Warrants will, upon issuance against payment of the purchase price
therefor, be duly and validly issued, fully paid and nonassessable, and no
personal liability will attach to the holder thereof. The Company further
covenants and agrees that, during the periods within which the Underwriter's
Warrant may be exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of the Underwriter's Warrant and the Public Warrants.
5. The Underwriter's Warrant shall not entitle the Holder to any voting
rights or other rights as stockholders of the Company.
6. (a)(i) The Company shall advise the Holder or its transferees, whether
the Holder holds the Underwriter's Warrant or has exercised the Underwriter's
Warrant and holds shares of Common Stock and/or Public Warrants, by written
notice at least four weeks prior to the filing of any post-effective amendment
to
3
<PAGE>
the Registration Statement or of any new registration statement or
post-effective amendment thereto under the Act covering any securities of the
Company, for its own account or for the account of others, except for any
registration statement filed on Form S-4 or S-8 (including a Form S-3 related to
a Form S-8) and will, for a period of five years beginning one year after the
Effective Date, upon the request of the Holder, and subject to subparagraph
6(a)(ii), include in any such post-effective amendment to the Registration
Statement or in any new registration statement such information as may be
required to permit a public offering of the Underwriter's Warrant, the Common
Stock issuable upon the exercise thereof or upon exercise of the Public Warrants
and the Public Warrants (collectively, the "Registrable Securities"). The
Company shall supply prospectuses and such other document as the Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities, use its best efforts to register and qualify any
of the Registrable Securities for sale in such states as the Holder designates
and do any and all other reasonable acts and things which may be necessary or
desirable to enable the Holder to consummate the public sale or other
disposition of the Registrable Securities, all at no expense to the Holder or
the Underwriter, (other than the fees and disbursements of counsel for the
Holder or such holder and the underwriting discounts and commission, if any,
payable in respect of the Securities) of the Holder or any such holders, and
furnish indemnification in the manner provided in paragraph 7 hereof; provided,
however, the Company shall not be required to (A) qualify to do business in any
state by reason of this Section 6 in which it is not otherwise required to
qualify to do business, (B) or register or qualify in any state which will
impose material burdens on the Company or its principals, including without
limitation, the obligation to pay any corporate taxes. The Holder shall furnish
information and indemnification as set forth in paragraph 7 hereof. (ii) If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Holder as a
part of the written notice given pursuant to subparagraph 6(a)(i). If the
managing underwriter determines that a limitation of the number of shares to be
underwritten is required, the underwriter may exclude some or all Registrable
Securities from such registration (the "Excluded Registrable Securities");
provided, however, that if any securities of the Company are included in such
registration statement for the account of any person other than the company and
the Holder or any such holder, the securities included in such registration
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<PAGE>
statement for such other person shall have been reduced pro rata to the
reduction of the Underwriter's Securities which were requested to be included in
such registration.
(b) On any one occasion only, any 50.1% Holder (as defined below) may
give notice to the Company at any time to the effect that such Holder desires to
register under the Act any or all of the Registrable Securities under such
circumstances that a public distribution (within the meaning of the Act) of any
such securities will be involved, then the Company will promptly, but no later
than eight weeks after receipt of such notice, file a post-effective amendment
to the current Registration Statement or a new registration statement pursuant
to the Act, so that such designated Registrable Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective
(including the taking of such steps as are necessary to obtain the removal of
any stop order) within 90 days after the receipt of such notice of
effectiveness, provided, that such Holder shall furnish the Company with
appropriate information in connection therewith as the Company may reasonably
request in writing. Inclusive of this demand right shall be that the 50.1%
Holder may, at its option, request the filing of a post-effective amendment to
the current Registration Statement or a new registration statement under the
Act, inclusive of the right granted by subparagraph 6(a) on one occasion only
during the five-year period beginning one year from the Effective Date. The
50.1% Holder may, at its option, request the registration of the Underwriter's
Warrant and/or any of the securities underlying the Underwriter's Warrant in a
registration statement made by the Company as contemplated by subparagraph 6(a)
or in connection with a request made pursuant to this subparagraph 6(b) prior to
acquisition of the shares of Common Stock and/or Public Warrants issuable upon
exercise of the Underwriter's Warrant. The 50.1% Holder may, at its option,
request such post-effective amendment or new registration statement during the
described period with respect to the Underwriter's Warrant, or separately as to
the Common Stock and/or Public Warrant issuable upon the exercise of the
Underwriter's Warrant, and such registration rights may be exercised by the
50.1% Holder prior to or subsequent to the exercise of this Underwriter's
Warrant. Within ten days after receiving any such notice pursuant to this
subparagraph 6(b), the Company shall give notice to any other Holder of the
Underwriter's Warrant, advising that the Company is proceeding with such
post-effective amendment or registration statement and
5
<PAGE>
offering to include therein the securities underlying the Underwriter's Warrants
held by the other Holder, provided that they shall furnish the Company with such
appropriate information (relating to the intentions of such Holder) in
connection therewith as the Company shall reasonably request in writing. All
costs and expenses of the post-effective amendment or new registration statement
shall be borne by the Company, except that the Holder(s) shall bear the fees of
their own counsel and any underwriting discounts or commissions applicable to
any of the securities sold by them. The Company will maintain such registration
statement or post-effective amendment current under the Act for a period of at
least nine months (and for up to an additional three months if requested by the
Holder(s)) from the effective date thereof. The Company shall provide
prospectuses, and such other documents as the Holder(s) may request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its best efforts to register and qualify any of the Registrable Securities
for sale in such states as such Holder(s) designate and furnish indemnification
in the manner provided in paragraph 7 hereof.
(c) The term "50. 1 % Holder" as used in this paragraph 6 shall mean
the Holder(s) of at least 50.1% of the Underwriter's Warrant and/or the Common
Stock underlying the Underwriter's Warrant and the Public Warrants and shall
include any owner or combination of owners of such securities, which ownership
shall be calculated by determining the number of shares of Common Stock held by
such owner or owners as well as the number of shares then issuable upon exercise
of the Underwriter's Warrant and the Public Warrants.
(d) If at any time prior to the effectiveness of the registration
statement filed in connection with an offering pursuant to this paragraph 6 the
50.1% Holder shall determine not to proceed with the registration, upon notice
to the Company and the payment to the Company by the 50.1% Holder of the
Company's expenses, if any, theretofore incurred in connection with the
registration statement, the 50.1% Holder may terminate its participation in the
offering, and the registration statement previously filed shall not be counted
against the number of demand registrations permitted under this paragraph 6.
(e) Notwithstanding the foregoing, if the Company shall furnish to
such 50.1% Holder a certificate signed by the President of the Company stating
that in the good faith judgment
6
<PAGE>
of the Board of Directors it would be seriously detrimental to the Company or
its stockholders for a registration statement to be filed in the near future
containing the disclosure of material information required to be included
therein by reason of the federal securities laws, then the Company's obligation
to use its best efforts to file a registration statement shall be deferred for a
period during which such disclosure would be seriously detrimental, provided
that this period will not exceed 60 days and provided further, that the Company
shall not defer its obligation in this matter more than once in any 12 month
period.
7. (a) Whenever pursuant to paragraph 6 a registration statement relating
to the Underwriter's Warrant or any Common Stock issued or issuable upon the
exercise of the Underwriter's Warrant or the Public Warrants, or any Public
Warrants is filed under the Act, amended or supplemented, the Company will
indemnify and hold harmless each Holder of the securities covered by such
registration statement, amendment or supplement (such Holder being hereinafter
called the "Distributing Holder"), and each person, if any, who controls (within
the meaning of the Act) the Distributing Holder, and each underwriter (within
the meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against any losses,
claims, damages or liabilities, joint or several, to which the Distributing
Holder, any such controlling person or any such underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any such registration statement or any preliminary prospectus or final
prospectus constituting a part thereof or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or therein not misleading
and will reimburse the Distributing Holder or such controlling person or
underwriter for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement in
reliance upon and in conformity with written
7
<PAGE>
information furnished by such Distributing Holder or any other Distributing
Holder for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint, or several, to which the
Company or any such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arises out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder for use in the preparation thereof; and will
reimburse the Company or any such director, officer or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
paragraph 7.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, jointly with
8
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any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this paragraph 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
8. Adjustment of Exercise Price
(a) Except as hereinafter provided, in the event the Company shall, at
any time or from time to time after the date hereof, sell any shares of Common
Stock for a consideration per share less than the lower of (i) the closing bid
price of the Common Stock as reported on NASDAQ on the trading date next
preceding such sale (the "Market Price"), or (ii) the Share Exercise Price then
in effect, or issue any shares of Common Stock as a stock dividend to the
holders of Common Stock, or subdivide or combine the outstanding shares of
Common Stock into a greater or lesser number of shares (any such sale, issuance,
subdivision or combination being herein called a "Change of Shares"), then, and
thereafter immediately before the date of such sale or the record date for each
Change of Shares, the Share Exercise Price for the Common Stock included in this
Underwriter's Warrants (whether or not the same shall be issued and outstanding)
in effect immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent to the nearest cent) determined by
dividing (1) the product of (a) the Share Exercise Price in effect immediately
before such Change of Shares and (b) the sum (i) the total number of shares of
Common Stock outstanding immediately prior to such Change of Shares, and (ii)
the number of shares determined by dividing (A) the aggregate consideration, if
any, received by the Company upon such sale, issuance, subdivision or
combination, by (3) the lesser of (x) the Market Price, and (y) the Share
Exercise Price, in effect immediately prior to such Change of Shares; by (2) the
total number of shares of Common Stock outstanding immediately after such Change
of Shares.
(b) For the purposes of any adjustment to be made! in accordance with
this Section 8(a) the following provisions shall be applicable:
9
<PAGE>
(A) In case of the issuance or sale of shares of Common Stock (or
of other securities deemed hereunder to involve the issuance or sale of shares
of Common Stock) for a consideration part or all of which shall be cash, the
amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price (before deducting
any commissions or any expenses incurred in connection therewith), if shares of
Common Stock are offered by the Company for subscription, or (ii) the public
offering price (before deducting therefrom any compensation paid or discount
allowed in the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services, or any expenses incurred in connection
therewith), if such securities are sold to underwriters or dealers for public
offering without a subscription offering, or (iii) the gross amount of cash
actually received by the Company for such securities, in any other case.
(B) In case of the issuance or sale (otherwise than as a dividend
or other distribution on any stock of the Company, and otherwise than on the
exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash deemed to have been
received by the Company shall be the value of such consideration as determined
in good faith by the Board of Directors of the Company.
(C) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(D) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable
10
<PAGE>
to such shares of Common Stock shall be determined as provided in subsection (B)
of this Section 8(a).
(E) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(ii) Upon each adjustment of the Exercise Price pursuant to this
Section 8, the number of shares of Common Stock purchasable upon the exercise of
each Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Exercise
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Exercise Price.
(c) In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share (determined as provided in Section 8(a) and as
provided below) less than the lower of (i) the Market Price, or (ii) Share
Exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, or without
consideration (including the issuance of any such securities by way of dividend
or other distribution), the Exercise Price for the Common Stock included in this
Underwriter's Warrants (whether or not the same shall be issued and outstanding)
in effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making the computation in accordance with the
provisions of Section 8(a) hereof, provided that:
(A) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, for a consideration equal
to the minimum Exercise Price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the
11
<PAGE>
Company for such options, rights or warrants; provided, however, that upon the
expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (A) (and for the
purposes of subsection (E) of Section 8(a) hereof) shall be reduced by the
number of shares as to which options, warrants and/or rights shall have expired,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Exercise Price then in effect shall forthwith be readjusted
and thereafter be the price that it would have been had adjustment been made on
the basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon the exercise of those options, rights or warrants as to
which the exercise rights shall not have expired or terminated unexercised.
(B) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
expiration or other termination of the right to convert or exchange such
convertible or exchangeable securities (whether by reason of redemption or
otherwise), the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (B) (and for the purposes of subsection
(E) of Section 8(a) hereof) shall be reduced by the number of shares as to which
the conversion or exchange rights shall have expired or terminated unexercised,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Exercise Price then in effect shall forthwith be readjusted
and thereafter be the price that it would have been had adjustment been made on
the basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised.
(C) If any change shall occur in the exercise price per share
provided for in any of the options,
12
<PAGE>
rights or warrants referred to in subsection (A) of this section 8(b), or in the
price per share or ratio at which the securities referred to in subsection (3)
of this Section 8(b) are convertible or exchangeable, such options, rights or
warrants or conversion or exchange rights, as the case may be, to the extent not
theretofore exercised, shall be deemed to have expired or terminated on the date
when such price change became effective in respect of shares not theretofore
issued pursuant to the exercise or conversion or exchange thereof, and the
Company shall be deemed to have issued upon such date new options, rights or
warrants or convertible or exchangeable securities.
(d) In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants)
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, then, as a condition
of such reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the Registered Holder of each Public
Warrant then outstanding shall have the right thereafter to receive on exercise
of such Public Warrant the kind and amount of securities and property receivable
upon such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of securities issuable upon exercise of such Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and shall forthwith file at the Corporate Office of the Warrant
Agent a statement signed by its President or a Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary
evidencing such provision. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 8(a) and (b). The above provisions of this
Section 8(c) shall similarly apply to successive reclassifications and
13
<PAGE>
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(e) Irrespective of any adjustments or changes in the Share Exercise
Price or the number of shares of Common Stock purchasable upon exercise of the
Public Warrants, the Warrant Certificates theretofore and thereafter issued
shall, unless the Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(e) hereof, continue to express the Share
Exercise Price per share and the number of shares purchasable thereunder as the
Share Exercise Price per share and the number of shares purchasable thereunder
were expressed in the Warrant Certificates when the same were originally issued.
(f) After each adjustment of the Share Exercise Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (I) the
Exercise Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant, after such adjustment, and (iii) a
brief statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder at his
last address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(g) No adjustment of the Share Exercise Price shall be made as a
result of or in connection with (A) the issuance or sale of the Underwriter's
Warrants or the Securities underlying the Underwriter's Warrants, (B) the
issuance or sale of the securities pursuant to the Initial Public Offering,
including the securities underlying the Securities, (C) the issuance or sale of
shares of Common Stock pursuant to options, warrants, stock purchase agreements
and convertible or exchangeable securities outstanding or in effect on the date
hereof, or (D) the issuance or sale of shares of Common Stock if the amount of
said
14
<PAGE>
adjustment shall be less than $.02 for one share of Common Stock, provided,
however, that in such case, any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment that shall amount, together with
any adjustment so carried forward, to at least $.02 for one share of Common
Stock. In addition, Registered Holders shall not be entitled to cash dividends
paid by the Company prior to the exercise of any Public Warrant or Public
Warrants held by them.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, APOLLO INTERNATIONAL OF DELAWARE, INC., has caused this
Underwriter's Warrant to be signed by its duly authorized officers, and this
Underwriter's Warrant to be dated as of the date first above written.
EURO TECH HOLDINGS COMPANY LIMITED
By:_____________________________
Name:
Title:
15
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Underwriter Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, ______ Shares of APOLLO INTERNATIONAL OF
DELAWARE, INC. $0.01 per share, and/or Redeemable Common Stock Purchase Warrants
to purchase one (1) share of Common Stock, and herewith makes payment of $____
therefor (or hereby surrenders and delivers that portion of the Underwriter's
Warrant having equivalent value (as determined in accordance with the provisions
of subparagraph (d) of paragraph 2 of the Underwriter's Warrant)), and requests
that the certificates for shares of Common Stock and/or Warrants be issued in
the name(s) of, and delivered to whose addressees) is
(are):_________________________________________________
Dated: ____________, 19___
Signature: _____________________________
(Print name under signature)
(Signature must conform in all respects to the name
of holder as specified on the face of the
Underwriter's Warrant).
- ---------------
(Insert Social Security or Other Identifying Number of Holder)
16
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Warrant)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto (Please print
name and address of transferee) this Warrant, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint Attorney,
to transfer the within Warrant on the books APOLLO INTERNATIONAL OF DELAWARE,
INC. with full power of substitution.
Dated:______________________, 19____
Signature: ________________________________
(Print name under signature)
(Signature must conform in all respects to the name
of holder as specified on the face of the
Underwriter's Warrant.
- ---------------
(Insert Social Security or Other Identifying Number of Holder)
17
<PAGE>
Exhibit 4.1
FORM OF COMMON STOCK CERTIFICATE
COMMON STOCK COMMON STOCK
APOLLO INTERNATIONAL OF
DELAWARE, INC.
AP
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN
ABBREVIATIONS
CUSIP 037613 10 6
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
APOLLO INTERNATIONAL OF DELAWARE, INC.
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SECRETARY CORPORATE PRESIDENT
SEAL
Countersigned and Registered:
American Stock Transfer
& Trust Company,
Transfer Agent and Registrar
By: _________________________
Authorized Officer
<PAGE>
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -___Custodian____
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act__________________
in common (State)
UNIF TRF MIN ACT -___Custodian (until age)___
(Cust)
_____under Uniform Transfers
(Minor)
to Minors Act________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated________________________
___________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
_____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad.16.
<PAGE>
No. W__________ VOID AFTER ________, 2003
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
APOLLO INTERNATIONAL OF DELAWARE, INC.
NO. _______ CUSIP
037613114
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and non-assessable share of Common Stock, $.01 par
value, of Apollo Interantional of Delaware, Inc., a Delaware corporation (the
"Company"), at any time from ________, 1999 and prior to the Expiration Date
(as hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company, as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of $5.50
per share, subject to adjustment (the "Purchase Price"), in lawful money of the
United States of America in cash or by check made payable to the Warrant Agent
for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated ________,
1997, by and between the Company and the Warrant Agent.
<PAGE>
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
________, 2003. If each such date shall in the State of New York be a holiday or
a day on which the banks are authorized to close, then the Expiration Date shall
mean 5:00 P.M. (New York time) the next following day which in the State of New
York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that, if required by the Act, and unless during any period it is not
reasonably likely that the Warrants will be exercised, it will file a
registration statement under the Act, use its best efforts to cause the same to
become effective, keep such registration statement current, if required under
the Act, while any of the Warrants are outstanding, and deliver a prospectus
which complies with Section 10(a)(3) of the Act to the Registered Holder
exercising this Warrant. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number
2
<PAGE>
of Warrants, each of such new Warrant Certificates to represent such number of
Warrants as shall be designated by such Registered Holder at the time of such
surrender. Upon due presentment and payment of any tax or other charge imposed
in connection therewith or incident thereto, for registration or transfer of
this Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may
be redeemed at the option of the Company, at a redemption price of $.25 per
Warrant, at any time commencing after _________, 1999, provided that (i) the
average closing bid price for the Common Stock in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System, or (ii) the average closing sale price on the primary exchange on which
the Common Stock is traded, if the Common Stock is traded on a national
securities exchange, or (iii) the average closing sale price on NASDAQ, if the
Common Stock is quoted on NASDAQ, shall have for twenty (20) consecutive trading
days ending no more than fifteen (15) days prior to the Notice of Redemption, as
defined below, exceeded 150% of the exercise price (initially $7.50 per share)
of the Redeemable Warrants (subject to adjustment in the event of any stock
splits or other similar events). Notice of redemption (the "Notice of
Redemption") shall be given not later than the twenty-fifth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after the
date fixed for redemption, the Registered Holder shall have no rights with
respect to this Warrant except to receive the $.25 per Warrant upon surrender of
this Certificate.
Under certain circumstances, May Davis Group, Inc., their successors
and assigns shall be entitled to receive an aggregate of five percent (5%) of
the Purchase Price of the Warrants represented hereby.
3
<PAGE>
Prior to due presentment for registration or transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ____________, 1997
APOLLO INTERNATIONAL OF DELAWARE, INC.
SEAL
By:______________________________
Name: David W. Clarke, President
By:____________________________
Name: Christine Clewes
Title: Secretary
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
<PAGE>
AGREEMENT, dated this _________ day of ___________, 1996 by and
between APOLLO INTERNATIONAL OF DELAWARE, INC., a Delaware corporation (the
"Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as Warrant Agent (the
"Warrant Agent").
W I T N E S S E T H:
WHEREAS, in connection with (i) the offering to the public of up to
750,000 shares of the Company's common stock, $.01 par value ("Common Stock"),
and 750,000 redeemable warrants, entitling the holder to purchase one share of
Common Stock ("Redeemable Warrants") (collectively referred to as the
"Securities"), (ii) the over-allotment option to purchase up to 112,500 shares
of Common Stock and/or 112,500 Redeemable Warrants (the "Over-allotment
Option"), and (iii) the sale to May Davis Group, Inc. its successors and assigns
("May Davis") of warrants (the "Underwriter's Warrants") to purchase up to
75,000 shares of Common Stock and/or 75,000 Redeemable Warrants, such Redeemable
Warrants, except as otherwise set forth herein, being identical to the
Redeemable Warrants being sold to the public (the Redeemable Warrants issuable
upon the exercise of the Underwriter's Warrants are referred to as the "Common
Stock Warrants"), the Company will issue up to 862,500 Redeemable Warrants and
may issue up to 75,000 Common Stock Warrants (subject to increase as provided in
the Underwriter's Warrant Agreement); and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Redeemable Warrants and the Common Stock Warrants
(collectively, the "Warrants"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of certificates representing the
Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights
<PAGE>
and obligations thereunder of the Company, the Underwriter, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following meaenings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Company, par value
$.01 per share.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or its
successor) at which at any particular time its principal business shall be
administered, which office is located on the date hereof at 40 Wall Street, New
York, New York.
(c) "Exercise Date" shall mean, subject to the provisions of Section 5(b)
hereof, as to any Warrant, the date on which the Warrant Agent shall have
received both (i) the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder hereof with such
Registered Holder's signature guaranteed, and (ii) payment in cash or by bank or
cashier's check made payable to the Warrant Agent for the account of the
Company, of the amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean ________, 1999 for the
Redeemable Warrants and for the Common Stock Warrants.
(e) "Initial Warrant Redemption Date" shall mean _______, 1999, unless May
Davis shall have consented in wirting to the redemption at an earlier date, in
which event Initial Warrant Redemption Date shall mean such earlier date.
(f) "Purchase Price" shall mean, subject to modification and adjustment as
provided in Section 8, $5.50 per share of Common Stock.
2
<PAGE>
(g) "Registered Holder" shall mean the person in whose name any certificate
representing the Warrants shall be registered on the books maintained by the
Warrant Agent pursuant to Section 6.
(h) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the Board of Directors of such corporation (regardless of whether
or not at the time stock of any other class or classes of such corporation shall
have or may have voting power by reason of the happening of any contingency) is
at the time directly or indirectly owned by the Company or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
(i) "Transfer Agent" shall mean American Stock Transfer & Trust Company, or
its authorized successor.
(j) "Underwriting Agreement" shall mean the underwriting agreement dated
_________, 1997 between the Company and May Davis, relating to the purchase for
resale to the public of the Securities.
(k) "Underwriter's Warrant Agreement" shall mean the agreement dated as of
_______, 1997 between the Company and May Davis relating to and governing the
terms and provisions of the Underwriter's Warrants.
(l) "Warrant Certificate" shall mean a certificate representing each of the
Warrants substantially in the form annexed hereto as Exhibit A.
(m) "Warrant Expiration Date" shall mean, unless the Warrants are redeemed
as provided in Section 9 hereof prior to such date, 5:00 p.m. (Eastern time) on
_______, 2003 for the Redeemable Warrants and for the Common Stock Warrants or,
if such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, than 5:00 p.m. (Eastern time) on the next following day
which in the State of New York is not a holiday or a day on which banks are
authorized to close.
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SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) One Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase at the Purchase Price
therefor from the Initial Warrant Exercise Date until the Warrant Expiration
Date one share of Common Stock upon the exercise thereof, subject to
modification and adjustment as provided in Section 8
(b) Upon execution of this Agreement, Warrant Certificates representing
750,000 Redeemable Warrants to purchase up to an aggregate of 75,000 shares of
Common Stock (subject to modification and adjustment as provided in Section 8)
shall be executed by the Company and delivered to the Warrant Agent.
(c) Upon exercise of the Over-allotment Option, in whole or in part, and
payment of the applicable sums, Warrant Certificates representing up to 112,500
Redeemable Warrants to purchase up to an aggregate of 112,500 shares of Common
Stock (subject to modification and adjustment as provided in Section 8) shall be
executed by the Company and delivered to the Warrant Agent.
(d) Upon exercise of the Underwriter's Warrants as provided therein, and
payment of the applicable exercise price, Warrant Certificates representing
75,000 Common Stock Warrants to purchase up to an aggregate of 75,000 shares of
Common Stock (subject to modification and adjustment as provided in Section 8
hereof and in the Underwriter's Warrant Agreement), shall be executed by the
Company and delivered to the Warrant Agent.
(e) From time to time, up to the Warrant Expiration Date, as the case may
be, the Warrant Agent shall countersign and deliver Warrant Certificates in
required denominations of one or whole number multiplies thereof to the person
entitled thereto in connection with any transfer or exchange permitted under
this Agreement. Except as provided in Section 7 hereof, no Warrant Certificates
shall be issued except (i) Warrant Certificates initially issued hereunder, (ii)
Warrant Certificates issued upon any transfer or exchange of Warrants, (iii)
Warrant Certificates issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7, (iv) Warrant Certificates
issued upon exercise of the Underwriter's Warrant Agreement (including Common
Stock Warrants in excess of 75,000
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Underwriter's Warrants issued as a result of the antidilution provisions
contained in the Underwriter's Warrant Agreement), and (v) at the option of the
Company, Warrant Certificates in such form as may be approved by its Board of
Directors, to reflect any adjustment or change in the Purchase Price, the number
of shares of Common Stock purchasable upon exercise of the Warrants or the
Redemption Price therefor made pursuant to Section 8 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) and
may have such letters, numbers or other marks of identification or designation
and such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President and by its Treasurer or
an Assistant Treasurer or its Secretary or an Assistant Secretary, by manual
signatures or by facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates shall be
manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company.
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SECTION 4. Exercise.
(a) Warrants may be exercised commencing at any time on or after the
Initial Warrant Exercise Date, but not after the Warrant Expiration Date, upon
the terms and subject to the conditions set forth herein (including the
provisions set forth in Sections 5 and 9 hereof) and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the Exercise Date, provided that the Warrant
Certificate representing such Warrant, with the exercise form thereon duly
executed by the Registered Holder thereof with such Registered Holder's
signature guaranteed, together with payment in cash or by bank or cashier's
check made payable to the order of the Company, of an amount in lawful money of
the United States of America equal to the applicable Purchase Price has been
received in good funds by the Warrant Agent. The person entitled to receive the
securities deliverable upon such exercise shall be treated for all purposes as
the holder of such securities as of the close of business on the Exercise Date.
As soon as practicable on or after the Exercise Date and in any event within
five business days after such date, upon due exercise of Warrants, the Warrant
Agent on behalf of the Company shall cause to be issued to the person or persons
entitled to receive the same a Common Stock certificate or certificates for the
shares of Common Stock deliverable upon such exercise, and the Warrant Agent
shall deliver the same to the person or persons entitled thereto. Upon the
exercise of any two or more even whole number multiples of 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 subsection (b)
below, shall cause all payments of an amount in cash or by check made payable to
the order of the Company, equal to the Purchase Price, to be deposited promptly
in the Company's bank account.
(b) At any time upon the exercise of Warrants after one year and one day
from the date hereof, (i) the market price of the Company's Common Stock in
equal to or greater than the Purchase Price, (ii) the exercise of the Warrant is
solicited by May Davis at such time while May Davis is a member of the National
Association of Securities Dealers, Inc. ("NASD"), (iii) the Warrant is not held
in a discretionary account, (iv) disclosure of the compensation arrangement is
made in documents provided to the holders of the Warrants, and (v) the
solicitation of the Warrant
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is not in violation of Rule 10b-6 promulgated under the Securities Exchange Act
of 1934, then May Davis shall be entitled to receive from the Company upon
exercise of each of the Warrants so exercised, a fee of five percent (5%) of the
aggregate price of the Warrants so exercised (the "Exercise Fee"). Within five
(5) day after the end of each month, commencing in ____ 1998, the Warrant Agent
will notify May Davis of each Warrant Certificate which has been properly
completed for exercise by holders of Warrants during the last month. The Warrant
Agent will provide May Davis with such information, in connection with the
exercise of each Warrant, as May Davis shall reasonably request. The Company
hereby authorizes and instructs the Warrant Agent to deliver to May Davis the
Exercise Fee promptly after receipt by the Warrant Agent from the Company of a
check payable to the order of May Davis in the amount of the Exercise Fee. The
Warrant Agent shall not issue the shares of Common Stock issuable upon exercise
of the Warrants until receipt and forwarding of such check to May Davis. In the
event that an Exercise Fee is paid to May Davis with respect to a Warrant which
was not properly completed for exercise or in respect of which May Davis is not
entitled to an Exercise Fee, May Davis will return such Exercise Fee to the
Warrant Agent which shall forthwith return such fee to the Company. May Davis
and the Company may at any time after _____ 1997, and during business hours,
examine the records of the Warrant Agent, including its ledger of original
Warrant Certificates returned to the Warrant Agent upon exercise of Warrants.
Notwithstanding any provision to the contrary, the provisions of this Section
4(b) may not be modified, amended or deleted without the prior consent of May
Davis.
(c) The Company shall not be obligated to issue any fractional share
interests or fractional warrant interests upon the exercise of any Warrant or
Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fractional interest shall be eliminated.
(d) Anything in this Section 4 notwithstanding, no Warrant will be
exercisable unless at the time of exercise the Company has filed with the
Securities and Exchange Commission a registration statement under the Securities
Act of 1933 covering the shares of Common Stock issuable upon exercise of such
Warrant and such
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shares have been so registered or qualified or deemed to be exempt under the
securities laws of the state of residence of the holder of such Warrant.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery thereof, be duly and validly issued and
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issuance thereof, and that upon
issuance such shares shall be listed on each securities exchange, if any, on
which the other shares of outstanding Common Stock of the Company are then
listed.
(b) The Company covenants that, so long as any unexpired Warrants remain
outstanding, the Company will file such post-effective amendments to the
registration statement (Form SB-2, Registration No. 333-18071) (the
"Registration Statement") filed pursuant to the Securities Act of 1933 (the
"Act") with respect to the Warrants (or other appropriate registration
statements or post-effective amendment or supplements) as may be necessary to
permit it to deliver to each person exercising a Warrant, a prospectus meeting
the requirements of Section 10(a)(3) of the Act and otherwise complying
therewith, and will deliver such a prospectus to each such person. To the extent
that during any period it is not reasonably likely that the Warrants will be
exercised, due to market price or otherwise, the Company need not file such a
post-effective amendment during such period. The Company will use its reasonable
efforts to obtain appropriate approvals or registrations under state "blue sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered Holder in
any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and other
governmental charges that may be imposed with
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respect to the issuance of Warrants, or the issuance or delivery of any shares
of Common Stock upon exercise of the Warrants; provided, however, that if shares
of Common Stock are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate representing any Warrant being
exercised, then no such delivery shall be made unless the person requesting the
same has paid to the Warrant Agent the amount of transfer taxes or charges
incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the Transfer
Agent to requisition from time to time certificates representing shares of
Common Stock or other securities required upon exercise of the Warrants, and the
Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants or may be transferred in
whole or in part. Warrant Certificates to be so exchanged shall be surrendered
to the Warrant Agent at its Corporate Office, and the Company shall execute and
the Warrant's Agent shall countersign, issue and deliver in exchange therefor
the Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof. Upon due presentment for registration of
transfer of any Warrant Certificate at such office, the Company shall execute
and the Warrant Agent shall issue and deliver to the transferee or transferees a
new Warrant Certificate or Certificates representing an equal aggregate number
of Warrants.
(c) With respect to any Warrant Certificates presented for registration of
transfer, or for exchange or exercise, the subscription or exercise form, as the
case may be, on the reverse thereof shall be duly endorsed or be accompanied by
a written instrument or instruments of transfer and subscription, in form
satisfactory to the Company and the Warrant Agent, duly executed
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<PAGE>
by the Registered Holder thereof with such Registered Holder's signature
guaranteed.
(d) A $10 service charge shall be made for any exchange, registration or
transfer of Warrant Certificates. However, the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange shall
be promptly canceled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof of each Warrant represented
thereby (notwithstanding any notations of ownership or writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes and shall
not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation.
(a) Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate and (in the case of loss, theft or
destruction) of indemnity satisfactory to them, and (in case of mutilation) upon
surrender and cancellation thereof, the Company shall execute and the Warrant
Agent shall countersign and deliver in lieu thereof a new Warrant Certificate
representing an equal aggregate number of Warrants. Applicants for a substitute
Warrant Certificate shall also comply with such other reasonable regulations and
pay such other reasonable fees as the Warrant Agent shall establish.
SECTION 8. Adjustment of Exercise Price.
(a) Except as hereinafter provided, in the event the Company shall, at any
time or from time to time after the date hereof, sell any shares of Common Stock
for a consideration per share less than the lower of (i) the closing bid price
of the Common Stock as reported on NASDAQ on the trading date next preceding
such sale (the "Market Price"), or (ii) the Share
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Exercise Price then in effect, or issue any shares of Common Stock as a stock
dividend to the holders of Common Stock, or subdivide or combine the outstanding
shares of Common Stock into a greater or lesser number of shares (any such sale,
issuance, subdivision or combination being herein called a "Change of Shares"),
then, and thereafter immediately before the date of such sale or the record date
for each Change of Shares, the Share Exercise Price for the Common Stock
included in this Underwriter's Warrants (whether or not the same shall be issued
and outstanding) in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent to the nearest
cent) determined by dividing (1) the product of (a) the Share Exercise Price in
effect immediately before such Change of Shares and (b) the sum (i) the total
number of shares of Common Stock outstanding immediately prior to such Change of
Shares, and (ii) the number of shares determined by dividing (A) the aggregate
consideration, if any, received by the Company upon such sale, issuance,
subdivision or combination, by (3) the lesser of (x) the Market Price, and (y)
the Share Exercise Price, in effect immediately prior to such Change of Shares;
by (2) the total number of shares of Common Stock outstanding immediately after
such Change of Shares.
(b) For the purposes of any adjustment to be made in accordance with
Section 8(a) the following provisions shall be applicable:
(i)
(A) In case of the issuance or sale of shares of Common Stock (or
of other securities deemed hereunder to involve the issuance or sale of shares
of Common Stock) for a consideration part or all of which shall be cash, the
amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price (before deducting
any commissions or any expenses incurred in connection therewith), if shares of
Common Stock are offered by the Company for subscription, or (ii) the public
offering price (before deducting therefrom any compensation paid or discount
allowed in the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services, or any expenses incurred in connection
therewith), if such securities are sold to underwriters or dealers for public
offering without a subscription offering, or (iii) the gross amount of cash
actually received by the Company for such
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securities, in any other case.
(B) In case of the issuance or sale (otherwise than as a dividend
or other distribution on any stock of the Company, and otherwise than on the
exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash deemed to have been
received by the Company shall be the value of such consideration as determined
in good faith by the Board of Directors of the Company.
(C) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(D) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (B) of this Section 8(a).
(E) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(ii) Upon each adjustment of the Exercise Price pursuant to this
Section 8, the number of shares of Common Stock purchasable upon the exercise of
each Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Exercise
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Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Exercise Price.
(c) In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share (determined as provided in Section 8(a) and as
provided below) less than the lower of (i) the Market Price, or (ii) Share
Exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, or without
consideration (including the issuance of any such securities by way of dividend
or other distribution), the Exercise Price for the Common Stock included in this
Underwriter's Warrants (whether or not the same shall be issued and outstanding)
in effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making the computation in accordance with the
provisions of Section 8(a) hereof, provided that:
(A) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, for a consideration equal
to the minimum Exercise Price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants; provided, however, that upon
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (A) (and for the
purposes of subsection (E) of Section 8(a) hereof) shall be reduced by the
number of shares as to which options, warrants and/or rights shall have expired,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Exercise Price then in effect shall forthwith be readjusted
and thereafter be the price that it would have been had adjustment been made on
the basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon the exercise of those options, rights or warrants as to
which the exercise rights shall not have
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expired or terminated unexercised.
(B) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
expiration or other termination of the right to convert or exchange such
convertible or exchangeable securities (whether by reason of redemption or
otherwise), the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (B) (and for the purposes of subsection
(E) of Section 8(a) hereof) shall be reduced by the number of shares as to which
the conversion or exchange rights shall have expired or terminated unexercised,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Exercise Price then in effect shall forthwith be readjusted
and thereafter be the price that it would have been had adjustment been made on
the basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised.
(C) If any change shall occur in the exercise price per share
provided for in any of the options, rights or warrants referred to in subsection
(A) of this section 8(b), or in the price per share or ratio at which the
securities referred to in subsection (3) of this Section 8(b) are convertible or
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, to the extent not theretofore exercised, shall be deemed to
have expired or terminated on the date when such price change became effective
in respect of shares not theretofore issued pursuant to the exercise or
conversion or exchange thereof, and the Company shall be deemed to have issued
upon such date new options, rights or warrants or convertible or exchangeable
securities.
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(d) In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants)
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, then, as a condition
of such reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the Registered Holder of each Public
Warrant then outstanding shall have the right thereafter to receive on exercise
of such Public Warrant the kind and amount of securities and property receivable
upon such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of securities issuable upon exercise of such Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and shall forthwith file at the Corporate Office of the Warrant
Agent a statement signed by its President or a Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary
evidencing such provision. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 8(a) and (b). The above provisions of this
Section 8(c) shall similarly apply to successive reclassifications and changes
of shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(e) Irrespective of any adjustments or changes in the Share Exercise Price
or the number of shares of Common Stock purchasable upon exercise of the Public
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Share Exercise Price
per share and the number of shares purchasable thereunder as the Share Exercise
Price per share and
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the number of shares purchasable thereunder were expressed in the Warrant
Certificates when the same were originally issued.
(f) After each adjustment of the Share Exercise Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (I) the
Exercise Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant, after such adjustment, and (iii) a
brief statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder at his
last address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(g) No adjustment of the Share Exercise Price shall be made as a result of
or in connection with (A) the issuance or sale of the Underwriter's Warrants or
the Securities underlying the Underwriter's Warrants, (B) the issuance or sale
of the securities pursuant to the Initial Public Offering, including the
securities underlying the Securities, (C) the issuance or sale of shares of
Common Stock pursuant to options, warrants, stock purchase agreements and
convertible or exchangeable securities outstanding or in effect on the date
hereof, or (D) the issuance or sale of shares of Common Stock if the amount of
said adjustment shall be less than $.02 for one share of Common Stock, provided,
however, that in such case, any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment that shall amount, together with
any adjustment so carried forward, to at least $.02 for one share of Common
Stock. In addition, Registered Holders shall not be entitled to cash dividends
paid by the Company prior to the exercise of any Public Warrant or Public
Warrants held by them.
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SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the Company may, on
30 days prior written notice redeem all the Redeemable Warrants at $.25 per
Redeemable Warrant, provided, however, that before any such call for redemption
of Warrants can take place, the (A) average closing bid price for the Common
Stock in the over-the-counter market as reported by the NASD Automated Quotation
System or (B) the average closing sale price on the primary exchange on which
the Common Stock is traded, if the Common Stock is traded on a national
securities exchange, shall have for twenty (20) consecutive trading days ending
not more than 15 days prior to the notice of redemption exceeded 150% of the
Purchase Price (initially $7.50 per share of Common Stock) (subject to
adjustment in the event of any stock splits or other similar events as provided
in Section 8 hereof). All Redeemable Warrants must be redeemed if any are
redeemed.
(b) In the event the Company exercises its right to redeem all of the
Redeemable Warrants, it shall give or cause to be given notice to the Registered
Holders of the Redeemable Warrants, by mailing to such Registered Holders a
notice of redemption, first class, postage prepaid, within 15 calendar days of
the aforementioned twenty (20) consecutive trading days and not later than the
twenty-fifth (25th) day before the date fixed for redemption, at their last
address as shall appear on the records of the Warrant Agent. Any notice mailed
in the manner provided herein shall be conclusively presumed to have been duly
given whether or not the Registered Holder receives such notice. At the time of
the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to May Davis a
similar notice telephonically and confirmed in writing together with a list of
the Registered Holders (including their respective addresses and number of
Warrants beneficially owned) to whom such notice of redemption has been or will
be given.
(c) The notice of redemption shall specify (i) the redemption price, (ii)
the date fixed for redemption, (iii) the place where the Warrant Certificate
shall be delivered and the redemption price shall be paid, and (iv) that the
right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on
the business day immediately preceding the date fixed for redemption. The date
fixed for the redemption of the Warrants
17
<PAGE>
shall be the Redemption Date. 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 (a) to whom notice was not
mailed or (b) whose notice was defective. An affidavit of the Warrant Agent or
the Secretary or Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New York
time) on the business day immediately preceding the Redemption Date. The
redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a ministerial capacity
for the Company and May Davis, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not, by issuing and delivering
Warrant Certificates or by any other act hereunder, be deemed to make any
representations as to the validity or value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any stock issued upon
exercise of any Warrant is fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (iii) be liable
for
18
<PAGE>
any act or omission in connection with this Agreement except for its own gross
negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board of Directors, Vice-Chairman or Secretary (unless other
evidence in respect thereof is herein specifically prescribed). The Warrant
Agent shall not be liable for any action taken, suffered or omitted by it in
accordance with such notice, statement, instruction, request, direction, order
or demand.
(e) The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; the Company further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or willful misconduct), after giving 30
days prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation the Company shall
appoint in writing a new warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust
19
<PAGE>
company having a capital and surplus, as shown by its last published report to
its stockholders, of not less than $10,000,000 or a stock transfer company doing
business in New York, New York. After acceptance in writing of such appointment
by the new warrant agent is received by the Company, such new warrant agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named herein as the warrant agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged, any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent or
any new warrant agent shall be a successor warrant agent under this Agreement
without any further act, provided that such corporation is eligible for
appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its Subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effect as though it were not Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two years from the date
of exercise any Warrant Certificate received by it upon such exercise, marked to
indicate its cancellation thereof in accordance with Section 6(e) hereof.
20
<PAGE>
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement without the approval of any holders
of Warrants (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; (ii) that they may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Warrant Certificates; or
(iii) which may be required by law; provided, however, that this Agreement shall
not otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Registered Holders representing not less than 50%
of the Warrants then outstanding; provided, further, that no change in the
number of the securities purchasable upon the exercise of any Warrant, or the
Purchase Price therefor, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate, other than such changes as are
specifically permitted or prescribed by this Agreement as originally executed.
In addition, this Agreement may not be modified, amended or supplemented without
the prior written consent of May Davis, other than (i) to cure any ambiguity or
to correct any provision which is inconsistent or which is a manifest mistake or
error; (ii) to make any such change that is necessary or desirable and which
shall not adversely affect the interests of May Davis; or (iii) except as may be
required by law.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or five
days after mailed first-class postage prepaid, or upon receipt when sent by
facsimile, with confirmation received, if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company at 4000 Hollywood Boulevard,
Suite 385, South Tower, Hollywood, Florida 33021 Attention: Chairman, or at such
other address as may have been furnished to the Warrant Agent in writing by the
Company; and if to the Warrant Agent, at its Corporate Office. Copies of any
notice delivered pursuant to this Agreement shall be delivered to May Davis at
20 Exchange Place, New York, New York 10005, Attention: President, or at such
other addresses as may
21
<PAGE>
have been furnished to the Company and the Warrant Agent in writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. May Davis is, and shall at all
times irrevocably be deemed to be, a third-party beneficiary of this Agreement,
with full power, authority and standing to enforce the rights granted to it
hereunder. In the event of any conflict relating to the Underwriter's Warrant
between the terms hereof and the terms of the Underwriter's Warrant Agreement,
the terms of the Underwriter's Warrant Agreement shall prevail.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
[SEAL]
22
<PAGE>
APOLLO INTERNATIONAL OF AMERICAN STOCK TRANSFER & TRUST
DELAWARE, INC. COMPANY
By: By:
David W. Clarke, Name:
President Title:
23
<PAGE>
Exhibit A
No. W__________ VOID AFTER ________, 2003
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
APOLLO INTERNATIONAL OF DELAWARE, INC.
NO. _______ CUSIP
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and non-assessable share of Common Stock, $.01 par
value, of Apollo Interantional of Delaware, Inc., a Delaware corporation (the
"Company"), at any time from ________, 1999 and prior to the Expiration Date
(as hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company, as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of $5.50
per share, subject to adjustment (the "Purchase Price"), in lawful money of the
United States of America in cash or by check made payable to the Warrant Agent
for the account of the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated ________,
1997, by and between the Company and the Warrant Agent.
24
<PAGE>
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
________, 2003. If each such date shall in the State of New York be a holiday or
a day on which the banks are authorized to close, then the Expiration Date shall
mean 5:00 P.M. (New York time) the next following day which in the State of New
York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that, if required by the Act, and unless during any period it is not
reasonably likely that the Warrants will be exercised, it will file a
registration statement under the Act, use its best efforts to cause the same to
become effective, keep such registration statement current, if required under
the Act, while any of the Warrants are outstanding, and deliver a prospectus
which complies with Section 10(a)(3) of the Act to the Registered Holder
exercising this Warrant. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number
25
<PAGE>
of Warrants, each of such new Warrant Certificates to represent such number of
Warrants as shall be designated by such Registered Holder at the time of such
surrender. Upon due presentment and payment of any tax or other charge imposed
in connection therewith or incident thereto, for registration or transfer of
this Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may
be redeemed at the option of the Company, at a redemption price of $.25 per
Warrant, at any time commencing after _________, 1999, provided that (i) the
average closing bid price for the Common Stock in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System, or (ii) the average closing sale price on the primary exchange on which
the Common Stock is traded, if the Common Stock is traded on a national
securities exchange, or (iii) the average closing sale price on NASDAQ, if the
Common Stock is quoted on NASDAQ, shall have for twenty (20) consecutive trading
days ending no more than fifteen (15) days prior to the Notice of Redemption, as
defined below, exceeded 150% of the exercise price (initially $7.50 per share)
of the Redeemable Warrants (subject to adjustment in the event of any stock
splits or other similar events). Notice of redemption (the "Notice of
Redemption") shall be given not later than the twenty-fifth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after the
date fixed for redemption, the Registered Holder shall have no rights with
respect to this Warrant except to receive the $.25 per Warrant upon surrender of
this Certificate.
Under certain circumstances, May Davis Group, Inc., their successors
and assigns shall be entitled to receive an aggregate of five percent (5%) of
the Purchase Price of the Warrants represented hereby.
26
<PAGE>
Prior to due presentment for registration or transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ____________, 1997
APOLLO INTERNATIONAL OF DELAWARE, INC.
SEAL
By:______________________________
Name: David W. Clarke, President
By:____________________________
Name: Christine Clewes
Title: Secretary
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
<PAGE>
By:_________________________
Authorized Officer
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise ___________________ Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
----------------------------------------------
----------------------------------------------
----------------------------------------------
(please print or type name and address)
and be delivered to
----------------------------------------------
----------------------------------------------
----------------------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
<PAGE>
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was solicited by May
Davis Securities, Inc. |_|
2. The exercise of this Warrant was solicited by
__________________________________. |_|
3. If the exercise of this Warrant was not solicited,
please check the following box. |_|
Dated:_________________199____ X_____________________________
------------------------------
------------------------------
Address
------------------------------
Social Security or Taxpayer
Identification Number
------------------------------
Signature Guaranteed
------------------------------
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _____________________________, hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
----------------------------------------------
----------------------------------------------
----------------------------------------------
(please print or type name and address)
___________________________________________________ of the Warrants represented
by this Warrant Certificate, and hereby irrevocably constitutes and appoints
_____________________________________ Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated:_________________199____ X_____________________________
Signature Guaranteed
------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE MEDALLION
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE, WHO IS A MEMBER OF THE
MEDALLION PROGRAM.
<PAGE>
No. ___________ Warrant to Purchase 250,000 shares of Common Stock
APOLLO INTERNATIONAL OF DELAWARE, INC.
Common Stock Purchase Warrant
December 15, 1996
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS
AVAILABLE.
THIS CERTIFIES THAT Matthias E. Lukens, Jr. (hereinafter sometimes
called the "Holder"), is entitled to purchase from Apollo International of
Delaware, Inc., a Delaware corporation (the "Company"), at the price and during
the period hereinafter specified, up to 250,000 shares of the Company's common
stock, $.01 par value (the "Common Stock" or "Warrant Shares").
This Warrant, together with warrants of like tenor, is subject to
adjustment in accordance with Paragraph 7 of this Warrant.
1. The rights represented by this Warrant shall be exercisable, at
any time commencing two years from June 1, 1998 (unless the Company agrees to an
earlier exercise) until June 1, 2002 (the "Exercise Period") at a purchase price
of $5.50 per share (the "Exercise Price"), subject to adjustment in accordance
with Paragraph 7. After June 1, 2002 the Holder shall have no right to purchase
any shares of Common Stock underlying this Warrant.
2. The rights represented by this Warrant may be exercised at any
time within the Exercise Period above specified, in whole or in part, by (i) the
surrender of this Warrant (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); and (ii)
payment to the Company of the Exercise Price then in effect for the number of
shares of Common Stock specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any. This Warrant shall be deemed to
have been exercised, in whole or in part to the extent specified, immediately
prior to the close of business on the date this Warrant is surrendered and
payment is made in accordance with the foregoing provisions of this Paragraph 2,
and the person or person in whose name or names the certificates for shares of
Common Stock shall be issuable upon such exercise shall become the holder or
holders of record of such shares of Common Stock at that time and date. The
certificate or certificates for the shares of Common Stock so purchased shall be
delivered to such person or persons within a reasonable time, not exceeding
thirty (30) days, after this Warrant shall have been exercised.
1
<PAGE>
3. Neither this Warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act of 1933, as
amended (the "1933 Act") nor under any state securities law and shall not be
transferred, sold, assigned or hypothecated in violation thereof. If permitted
by the foregoing, any such transfer, sale, assignment or hypothecation shall be
effected by the Holder surrendering this Warrant for cancellation at the office
or agency of the Company referred to in Paragraph 2 hereof, accompanied by an
opinion of counsel satisfactory to the Company and its counsel, stating that
such transferee is a permitted transferee under this Paragraph 3 and that such
transfer does not violate the 1933 Act or such state securities laws.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued upon exercise of this Warrant will, upon issuance, be duly
and validly issued, fully paid and nonassessable and no personal liability will
attach to the Holder thereof. The Company further covenants and agrees that
during the Exercise Period, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of this Warrant.
5. The Warrant shall not entitle the Holder to any rights, including,
without limitation, voting rights, as a stockholder of the Company.
6. If at any time after June 1, 1998 the Company conducts a secondary
offering of its Common Stock pursuant to a Registration Statement on Form S-1 or
Form SB-2, the Company shall include in such registration the Common Stock
issuable upon exercise of this Warrant, subject to any lock-up or other
limitations that may be imposed by an underwriter if such offering is an
underwritten public offering.
7. The Exercise Price and Exercise Period in effect at any time and
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
a. If the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the effective date or record date, as the case may be, for
such sale, dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
b. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraph 7a. above, the number of shares of
Common Stock purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of shares of Common Stock initially issuable
upon exercise of this Warrant by the Exercise Price in effect on the date hereof
and dividing the product so obtained by the Exercise Price, as adjusted.
c. Notwithstanding any adjustment in the Exercise Price or the
number or kind of shares of Common Stock purchasable upon the exercise of this
Warrant, certificates for Warrants issued
2
<PAGE>
prior or subsequent to such adjustment may continue to express the same price
and number and kind of shares of Common Stock as are initially issuable pursuant
to this Warrant.
d. The Company may, but under no circumstances is obligated to,
modify the terms of this Warrant to provide for an earlier commencement of the
Exercise Period, or to extend the Exercise Period or to lower the Exercise
Price, at any time prior to the expiration of this Warrant.
8. Upon the occurrence of a Terminating Event as defined in the
amended and restated consulting agreement between Holder and the Company dated
as of November 30, 1996 (the "Consulting Agreement"), Holder shall be entitled
to exercise only a pro rata portion of the Warrant based on the number of months
service provided under the Consulting Agreement as follows: in such case, the
number of Warrant Shares that may be received by Holder shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon exercise
of the Warrant by a fraction, of which the numerator shall be the number of
months, or portion thereof, from October 1, 1996 to the date of the Terminating
Event, and of which the denominator shall be the number of months representing
the full term of the Consulting Agreement (60 months). Any exercised portion of
this Warrant in excess of such amount may be terminated by the Company, in the
Company's sole discretion.
9. This Agreement shall be governed by and in accordance with the
laws of the State of Florida, without regard to its conflicts of laws
principles.
IN WITNESS WHEREOF, APOLLO INTERNATIONAL OF DELAWARE, INC. has caused
this Warrant to be signed by its duly authorized officer as of the date set
forth on the first page hereof.
APOLLO INTERNATIONAL OF DELAWARE, INC.
By:
David W. Clarke
President
3
<PAGE>
EXERCISE FORM
To Be Executed by the Holder
in Order to Exercise Warrant
The undersigned Holder hereby irrevocably elects to exercise this Warrant
and to purchase _____ shares of the Company's Common Stock issuable upon the
exercise of such Warrant, and requests that certificates for such securities
shall be issued in name of:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(please print or type name and address)
______________________________________________________________________________
(please insert social security or other identifying number)
and be delivered:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(please print or type name and address)
______________________________________________________________________________
(please insert social security or other identifying number)
and if such number of shares of Common Stock shall not be all the shares
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such shares be registered in the name of, and delivered to, the
Holder.
<PAGE>
Exhibit 4.14
Warrant to Purchase 50,000 shares of Common Stock
APOLLO INTERNATIONAL OF DELAWARE, INC.
Common Stock Purchase Warrant
June 30, 1996
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS
AVAILABLE.
THIS CERTIFIES THAT Imagine Holdings (hereinafter sometimes called the
"Holder"), is entitled to purchase from Apollo International of Delaware, Inc.,
a Delaware corporation (the "Company"), at the price and during the period
hereinafter specified, up to 50,000 shares of the Company's common stock, $.01
par value (the "Common Stock").
This Warrant, together with warrants of like tenor, is subject to
adjustment in accordance with Paragraph 7 of this Warrant.
1. The rights represented by this Warrant shall be exercisable, at
any time commencing two years from June 30, 1998 (unless the Company agrees to
an earlier exercise) until June 30, 2002 (the "Exercise Period") at a purchase
price of $5.50 per share (the "Exercise Price"), subject to adjustment in
accordance with Paragraph 7. After June 30, 2002 the Holder shall have no right
to purchase any shares of Common Stock underlying this Warrant.
2. The rights represented by this Warrant may be exercised at any
time within the Exercise Period above specified, in whole or in part, by (i) the
surrender of this Warrant (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); and (ii)
payment to the Company of the Exercise Price then in effect for the number of
shares of Common Stock specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any. This Warrant shall be deemed to
have been exercised, in whole or in part to the extent specified, immediately
prior to the close of business on the date this Warrant is surrendered and
payment is made in accordance with the foregoing provisions of this Paragraph 2,
and the person or person in whose name or names the certificates for shares of
Common Stock shall be issuable upon such exercise shall become the holder or
holders of record of such shares of Common Stock at that time and date. The
certificate or certificates for the shares of Common Stock so purchased shall be
delivered to such person or persons within a reasonable time, not exceeding
thirty (30) days, after this Warrant shall have been exercised.
3. Neither this Warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act of 1933, as
amended (the "1933 Act") nor under any state securities law and shall not be
transferred, sold, assigned or hypothecated in violation thereof. If permitted
by the foregoing, any such transfer, sale, assignment or hypothecation shall be
effected by the Holder
<PAGE>
surrendering this Warrant for cancellation at the office or agency of the
Company referred to in Paragraph 2 hereof, accompanied by an opinion of counsel
satisfactory to the Company and its counsel, stating that such transferee is a
permitted transferee under this Paragraph 3 and that such transfer does not
violate the 1933 Act or such state securities laws.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued upon exercise of this Warrant will, upon issuance, be duly
and validly issued, fully paid and nonassessable and no personal liability will
attach to the Holder thereof. The Company further covenants and agrees that
during the Exercise Period, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of this Warrant.
5. The Warrant shall not entitle the Holder to any rights, including,
without limitation, voting rights, as a stockholder of the Company.
6. If at any time after June 30, 1998 the Company conducts a
secondary offering of its Common Stock pursuant to a Registration Statement on
Form S-1 or Form SB-2, the Company shall include in such registration the Common
Stock issuable upon exercise of this Warrant, subject to any lock-up or other
limitations that may be imposed by an underwriter if such offering is an
underwritten public offering.
7. The Exercise Price and Exercise Period in effect at any time and
the number and kind of securities purchaseable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
a. If the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the effective date or record date, as the case may be, for
such sale, dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
b. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraph 7a. above, the number of shares of
Common Stock purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of shares of Common Stock initially issuable
upon exercise of this Warrant by the Exercise Price in effect on the date hereof
and dividing the product so obtained by the Exercise Price, as adjusted.
c. Notwithstanding any adjustment in the Exercise Price or the
number or kind of shares of Common Stock purchasable upon the exercise of this
Warrant, certificates for Warrants issued prior or subsequent to such adjustment
may continue to express the same price and number and kind of shares of Common
Stock as are initially issuable pursuant to this Warrant.
d. The Company may, but under no circumstances is obligated to,
modify the terms of this Warrant to provide for an earlier commencement of the
Exercise Period, or to extend the Exercise Period or to lower the Exercise
Price, at any time prior to the expiration of this Warrant.
<PAGE>
8. This Agreement shall be governed by and in accordance with the
laws of the State of Florida, without regard to its conflicts of laws
principles.
IN WITNESS WHEREOF, APOLLO INTERNATIONAL OF DELAWARE, INC. has caused
this Warrant to be signed by its duly authorized officer as of the date set
forth on the first page hereof.
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /s/David W. Clarke
President
<PAGE>
EXERCISE FORM
To Be Executed by the Holder
in Order to Exercise Warrant
The undersigned Holder hereby irrevocably elects to exercise this Warrant
and to purchase _____ shares of the Company's Common Stock issuable upon the
exercise of such Warrant, and requests that certificates for such securities
shall be issued in name of:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(please print or type name and address)
_____________________________________________________________________
(please insert social security or other identifying number)
and be delivered:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(please print or type name and address)
_____________________________________________________________________
(please insert social security or other identifying number)
and if such number of shares of Common Stock shall not be all the shares
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such shares be registered in the name of, and delivered to, the
Holder.
<PAGE>
Exhibit 4.15
Warrant to Purchase 50,000 shares of Common Stock
APOLLO INTERNATIONAL OF DELAWARE, INC.
Common Stock Purchase Warrant
November 1, 1996
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER
SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE.
THIS CERTIFIES THAT Robert Swatland (hereinafter sometimes called the
"Holder"), is entitled to purchase from Apollo International of Delaware, Inc.,
a Delaware corporation (the "Company"), at the price and during the period
hereinafter specified, up to 50,000 shares of the Company's common stock, $.01
par value (the "Common Stock").
This Warrant, together with warrants of like tenor, is subject to
adjustment in accordance with Paragraph 6 of this Warrant.
1. a. The rights represented by this Warrant shall be exercisable,
at any time commencing on the earlier of (i) twelve (12) months from the date
that a registration statement is declared effective by the Securities and
Exchange Commission for an initial public offering of the Company's securities,
if any (the "Effective Date"); and (ii) November 1, 1998, until November 1,
2001 (the "Exercise Period") at a purchase price of $5.50 per share (the
"Exercise Price"), subject to adjustment in accordance with Paragraph 6. After
5:00 p.m. local time, November 1, 2001, the Holder shall have no right to
purchase any shares of Common Stock underlying this Warrant.
2. The rights represented by this Warrant may be exercised at any
time within the Exercise Period above specified, in whole or in part, by (i) the
surrender of this Warrant (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company); and (ii)
payment to the Company of the Exercise Price then in effect for the number of
shares of Common Stock specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any. This Warrant shall be deemed to
have been exercised, in whole or in part to the extent specified, immediately
prior to the close of business on the date this Warrant is surrendered and
payment is made in accordance with the foregoing provisions of this Paragraph 2,
and the person or person in whose name or names the certificates for shares of
Common Stock shall be issuable upon such exercise shall become the holder or
holders of record of such shares of Common Stock at that time
1
<PAGE>
and date. The certificate or certificates for the shares of Common Stock so
purchased shall be delivered to such person or persons within a reasonable time,
not exceeding thirty (30) days, after this Warrant shall have been exercised.
3. Neither this Warrant nor the shares of Common Stock issuable upon
exercise hereof have been registered under the Securities Act of 1933, as
amended (the "1933 Act") nor under any state securities law and shall not be
transferred, sold, assigned or hypothecated in violation thereof. If permitted
by the foregoing, any such transfer, sale, assignment or hypothecation shall be
effected by the Holder surrendering this Warrant for cancellation at the office
or agency of the Company referred to in Paragraph 2 hereof, accompanied by an
opinion of counsel satisfactory to the Company and its counsel, stating that
such transferee is a permitted transferee under this Paragraph 3 and that such
transfer does not violate the 1933 Act or such state securities laws.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued upon exercise of this Warrant will, upon issuance, be duly
and validly issued, fully paid and nonassessable and no personal liability will
attach to the Holder thereof. The Company further covenants and agrees that
during the Exercise Period, the Company will at all times have authorized and
reserved a sufficient number of shares of its Common Stock to provide for the
exercise of this Warrant.
5. The Warrant shall not entitle the Holder to any rights, including,
without limitation, voting rights, as a stockholder of the Company.
6. The Exercise Price and Exercise Period in effect at any time and
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
a. If the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the effective date or record date, as the case may be, for
such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
b. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraph 6a. above, the number of shares of
Common Stock purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of shares of Common Stock initially issuable
upon exercise of this Warrant by the Exercise Price in effect on the date hereof
and dividing the product so obtained by the Exercise Price, as adjusted.
c. Notwithstanding any adjustment in the Exercise Price or the
number or kind of shares of Common Stock purchasable upon the exercise of this
Warrant, certificates for Warrants issued prior or subsequent to such adjustment
may continue to express the same price and number and kind of shares of Common
Stock as are initially issuable pursuant to this Warrant.
2
<PAGE>
d. The Company may, but under no circumstances is obligated to,
modify the terms of this Warrant to provide for an earlier commencement of the
Exercise Period, or to extend the Exercise Period or to lower the Exercise
Price, at any time prior to the expiration of this Warrant.
7. This Agreement shall be governed by and in accordance with the
laws of the State of Florida, without regard to its conflicts of laws
principles.
IN WITNESS WHEREOF, APOLLO INTERNATIONAL OF DELAWARE, INC. has caused
this Warrant to be signed by its duly authorized officer as of the date set
forth on the first page hereof.
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /s/ David W. Clarke
--------------------------
President
3
<PAGE>
EXERCISE FORM
To Be Executed by the Holder
in Order to Exercise Warrant
The undersigned Holder hereby irrevocably elects to exercise this Warrant
and to purchase _____ shares of the Company's Common Stock issuable upon the
exercise of such Warrant, and requests that certificates for such securities
shall be issued in name of:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
________________________________________________________________________________
(please insert social security or other identifying number)
and be delivered:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
________________________________________________________________________________
(please insert social security or other identifying number)
and if such number of shares of Common Stock shall not be all the shares
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such shares be registered in the name of, and delivered to, the
Holder.
4
<PAGE>
DRAFT
March , 1997
Apollo International of Delaware, Inc.
5200 South Washington Avenue
Titusville, Florida 32780
Gentlemen:
You have requested our opinion in connection with the Registration Statement
on Form SB-2 (the "Registration Statement") of Apollo International of Delaware,
Inc. (the "Company") relating to the following securities of the Company (the
"Securities") to be issued pursuant to the Company's initial public offering and
pursuant to exercise of registered warrants as set forth therein:
(a) 862,500 shares of Common Stock (including 112,500 shares which the
Underwriters have the option to purchase to cover over-allotments) (the "Common
Stock");
(b) 862,500 redeemable Common Stock Purchase Warrants (including 112,500
warrants which the Underwriters have the option to purchase to cover
over-allotments) (the "Warrants"); and
(c) 862,500 shares of Common Stock issuable upon exercise of said Warrants
(including 112,500 over-allotment option) pursuant to the Warrant Agreement
between the Company and American Stock Transfer & Trust Company to be executed
in connection with the Company's initial offering (the "Warrant Agreement").
We have made such examination of the corporate records and proceedings of
the Company and have taken such further action as we deemed necessary or
appropriate to the rendering of our opinion herein.
Based on the foregoing, we are of the opinion that the Common Stock and
Warrants, when issued as contemplated by the Registration Statement, will be
legally issued, fully paid and non-assessable. We are of the opinion that the
Common Stock underlying the Warrants, when paid for and issued as contemplated
by the Warrant Agreement, will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the heading "Legal Matters" therein.
Sincerely,
GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
<PAGE>
Exhibit 10.7
SOUTH HILLSBOROUGH COMMUNITY BANK/OFFICE COMPLEX
COMMERCIAL LEASE AGREEMENT
PARTIES: This Lease Agreement between SOUTH HILLSBOROUGH COMMUNITY BANK
OFFICE/COMPLEX, RICHARD L. PHAGAN, CO-OWNER hereinafter referred to as the
LESSOR(S), and APOLLO INTERNATIONAL OF DELAWARE, INC. hereinafter referred to as
the LESSEE(S), do hereby agree to the following terms of agreement.
LEASED AREA: THE LESSEE HEREBY OFFERS TO RENT FROM THE LESSOR THE PREMISES
DESCRIBED AS: Suite 215 o f South Hillsborough Community Bank Office Complex
located at 6542-44 North U.S. Highway 41, Apollo Beach, Florida 33572 consisting
of 2,193 s.f. of NET RENTABLE AREA. NET RENTABLE AREA is the net usable area
multiplied by the loan factor of 1.15 for the pro-rata share of the common area.
TERM: The term hereof shall commence on November 1, 1995 and continue until
October 31, 1998.
RENT: Rent shall be $1,900.00 per month plus 6.5 per cent sales tax per month,
payable in advance upon the first (1st) day of each month to LESSOR at the
address shown below.
LATE FEE: LESSEE agrees to pay a LATE FEE OF 10 PERCENT of the rental amount if
the monthly rent is not RECEIVED by the LESSOR by the fifth (5th) day of each
month. By imposing a late fee, LESSOR does not waive its right to evict LESSEE
for breach of this Agreement. Rent paid by check will not constitute payment
until it has cleared LESSEE'S bank. A 5 PER CENT SERVICE CHARGE will be imposed
when a check is returned for any reason.
POSSESSION: Possession of the premises will not be given to the LESSEE until
this application has been approved by the LESSOR, an until the rent period
begins unless agreed to otherwise in this agreement.
If the LESSEE fails to take possession of premises and/or fails to pay the first
month's rent by the commencement date of the Agreement, the security deposit
shall be forfeited to the LESSOR as liquidated damages.
LESSEE is responsible for rent until possession of premises is delivered to
LESSOR. The return of all keys to the LESSOR constitutes return of possession
to LESSOR.
DEFAULT: If LESSEE fails to pay rent when due and the default continues for
three (3) days after delivery of written demand by the LESSOR for payment of
rent or possession of the premises, the LESSEE shall become a
tenant-at-sufferance, and the Agent shall be entitled immediately to re-enter
and retake possession and recover damages, including costs and attorneys' fees.
SECURITY DEPOSIT: A DEPOSIT IN THE AMOUNT OF ONE MONTHS RENT (unless otherwise
agreed herein) shall be held as a Security Deposit for performance of this
Rental Agreement and against damage or loss to the rental unit other than normal
wear and tear. Upon the specified vacation of the rental unit, the LESSOR shall
return said security deposit within fifteen (15) days or give written notice by
certified mail of the LESSOR'S intention to impose a claim thereon at the
LESSEE'S last known mailing address. Vacation of lease prior to the lease
expiration will cause entire remaining payments on lease to become due and
payable. LESSEE shall not apply the security deposit in payment of last month's
rent.
LESSOR will hold all deposits advanced by LESSEE in a segregated, non-interest
bearing account as provided by Chapter 83, Florida Statutes.
If this application is rejected, the deposit will be returned. The offeror
hereby waives any claim for damages by reason of non-acceptance of this
application which the LESSOR may reject without stating any reason for so doing.
<PAGE>
MAINTENANCE, REPAIRS, ALTERATIONS: LESSEE agrees to take good care of the
property rented and to be liable for any damage to the property, including the
payment of any charges caused by stoppage of plumbing and/or damage to other
fixtures or equipment caused by improper care of misuse. LESSEE agrees that no
alterations, additional locks or bolts to the doors or windows are to be made or
added, or paints or stains or nails, screws, tape or glue to the woodwork,
walls, floors or furnishings are to be applied without the written consent of
the LESSOR. Consent will normally be given however consideration must be given
to the proposed change. If LESSEE incurs property related expenses by
requesting services without the consent of the LESSOR, LESSOR will not be
responsible for the payment of such services.
LESSOR'S SERVICES: Lessor shall provide the office unit and the common Areas
with electricity for lighting and the operation of equipment normally used in a
commercial office in addition shall furnish (a) heat and air conditioning
reasonably required for the use and occupation of the Leasehold during
reasonable business hours, such heat and air conditioning to be provided by
utilizing the existing systems in the building; (b) water; (c) sewage; (d) trash
pickup; (e) janitorial service and supplies on each business day or as agreed
herein; (f) pest control. In addition, Lessor shall pay all real property (ad
valorem) taxes and assessments levied against or related to the Building and the
Common Areas.
USE: The premises shall be used as a OFFICE and for no other purposes without
the prior written consent of the LESSOR. LESSEE agrees not to violate the
ordinances of Hillsborough County, Laws of the State of Florida, or permit the
premises to be used for any unlawful or immoral purposes whatsoever, nor for any
purpose that will injure the reputation of said premises or the neighborhood.
ASSIGNMENT AND SUBLETTING: LESSEE shall not assign this Agreement or sublet any
portion of the premises without prior written consent of the LESSOR.
ENTRY AND INSPECTION: The LESSOR shall have the right to enter said premises
during all reasonable hours to examine or protect the same, to show said
premises to prospective buyers or renters or to make such repairs, additions or
alterations thereto as may be deemed necessary. If the entry is not an
emergency the Lessor will give at least 24 hours notice.
POSSESSION: If LESSOR is unable to deliver possession of the premises at the
commencement hereof, LESSOR shall not be liable for any damage caused thereby,
nor shall this Agreement be void or voidable, but LESSEE shall not be liable for
any rent until possession is delivered.
INDEMNIFICATION: LESSOR shall not be liable for any damage or injury to LESSEE,
or any other person, or to any property, occurring on the premises, or any part
thereof, or in common areas thereof that are caused by the LESSEE, and LESSEE
agrees to hold LESSOR harmless from any claims for damages, cause by the LESSEE.
INSURANCE: LESSEE understands that LESSOR does not insure personal property
belonging to LESSEE against any hazard, nor does LESSOR provide liability
insurance or any other coverage for benefit of LESSEE, and LESSEE is advised to
obtain such insurance coverage as they deem appropriate.
MULTIPLE OCCUPANCY: It is expressly understood that this Agreement is between
the LESSOR, and each signatory, individually and severally. In the event of
default of any one signatory, each and every remaining signatory shall be
responsible for timely payment of rent and all other provisions of this
agreement.
OFFICE RULES: LESSEE agrees to abide by the Office Rules, whether promulgated
before or after the execution hereof, including, but not limited to, rules with
respect to noise, odors, disposal of refuse, parking and use of commons areas.
To date, no rules have been made that are not contained in this lease, but
lessor reserves the right to do so in the future for the well being of the
Tenants and/or LESSOR.
WAIVER: No failure of the LESSOR to enforce any term hereof shall be deemed a
waiver, nor shall any acceptance of a partial payment of rent be deemed a waiver
of LESSOR'S right to the full amount thereof.
Page 2
<PAGE>
HOLDING OVER: Any holding over after expiration hereof, and with the written
consent of the LESSOR, shall be construed as a month-to-month tenancy in
accordance with the terms hereof, as applicable. The rental amount will
automatically be adjusted on a monthly basis with the consumer price index for
expired leases except that if the CPI decreases no adjustment will be made.
TIME: Time is of the essence in this Agreement.
NOTICE: Any notice which either party may or is required to give, may be given
by mailing the same to LESSEE or LESSOR at the last known address.
ENTIRE AGREEMENT: This document constitutes the entire Agreement between the
parties and may be modified only by a writing signed by both parties. It is
understood and agreed that there is no agreement or verbal understanding of any
kind or nature whatsoever with the LESSOR/OWNER, or any of his representatives,
except as set forth in the Agreement. The following Exhibits, if any, have been
made a part of this agreement before the parties' execution hereof:
ADDITIONAL TERMS AND CONDITIONS:
Lessee has the right to request additional space in the building owned by Lessor
and Lessor agrees to accommodate space expansion whenever possible and
practical. Lessor agrees to replace carpet at a cost to Lessor not to exceed
$2.00/sq. Ft. ($18.00/yd.) installed. Lessee agrees to remove desk in one of
the offices and to repair any resulting damages. Lessee has the option to use
desk on premises or store same in Lessors storage. Lessor agrees to provide
additional entrance to Break Room and have current door keyed for Lessee's use.
It is agreed that this Lease replaces former lease.
DEPOSIT RECEIPT:
Received from LESSEE, the sum of ($1,000.00) ONE THOUSAND DOLLARS AND 00 CENTS.
ITEMIZED AS:
RENT PRORATED to the first of the month: Rent for the days from: N.A
N/A equals N/A days times N/A Per day or $N/A
Monthly rent for month of November 1995 $1,900.00
Security Deposit $1,900.00
Other special charges $N/A
Other (Sales Tax on November Rent) $123.50
SUB TOTAL $3,923.50
TOTAL AMOUNT RECEIVED FROM LESSEE: $1,000.00
--------
TOTAL DUE $2,923.50
--------
--------
Page 3
<PAGE>
ANTICIPATED LENGTH OF OCCUPANCY: Three (3) years.
10/27/95 /s/ David Clarke
- ---------------------------------------------------------------
WITNESS DATE TENANT/OFFEROR
- ---------------------------------------------------------------
WITNESS DATE TENANT/OFFEROR
10/31/95 /s/ R. Phagan
- ---------------------------------------------------------------
WITNESS DATE TENANT/OFFEROR
LESSOR'S ADDRESS: (Send lease payments to
South Hillsborough Community
Bank Office Complex
Att: Richard L. Phagan, Owner/Mgr.
928 Allegro Lane
Apollo Beach, Florida 33572
Lessor's phone # Pager: 271-3741 Home/Office 645-8880
Broker's Name: Phone:
------------------------------------------------
Broker's Address:
---------------------------------------------
Salesman's Name: Phone:
-----------------------------------------------
<PAGE>
ADDENDUM A
(THIS ADDENDUM AMENDS THE LEASE DATED BY LESSEE 10/27/95)
APOLLO INTERNATIONAL OF DELAWARE COMMERCIAL LEASE
AGREEMENT
WHEREAS, the Lessee desires to lease additional space in the South
Hillsborough Office Complex and the Lessor desire to rent same, the following
terms and agreements are revised and hereby agreed to and the previous lease
with Lessor and Lessee is hereby amended.
TERM: Commence on April 1, 1996 and continue until March 31, 1999. The
leased area for this term is a net rentable area of 1,119 square feet. This
area was formally known as the ESM and Presbyterian Foundation areas and is room
numbers, 212 and 214. The additional rent for this area on a monthly basis is
$979.13 per month plus applicable Florida sales tax and is based on an annual
rental rate of $10.50 per square foot. This additional amount will commence on
April 1, 1996 and continue until March 31, 1999.
In addition to the above named space, the Lessee desires to rent the
space formally known as the Scarola and D&E space (room 201A) which contains
an additional area of 2,220 square feet of net rentable area. The term of
this particular area shall commence on May 1, 1996 and continue until March
31, 1999. The rent for this space is calculated as 2,220 square feet of net
rentable area times $10.50 per year and is divided by 12 months and equals an
additional monthly amount of $1,942.50 plus applicable Florida sales tax.
The former lease dated October 27, 1994 remains at the same monthly rate for
the same space as previously rented but the term is changed to expire with
the other leased areas which is March 31, 1999. The former leased area has
been recalculated by computer and is 2,292 square feet of net rentable space
where as the lease was for 2,193 square feet. However, no change in the
original lease is being made.
<PAGE>
WHEREAS, the Lessor is desirous of being part of the Lessee's corporation
as a stockholder and whereas the Lessee is desirous of reducing the monthly
rental expenditure, it is therefore agreed that in consideration of the Lessee
giving the Lessor 2,000 shares of Apollo International common stock at an amount
of $10.00 per share for a total of $20,000.00, the Lessor will reduce the rent
by $555.56 per month. Since the term of the lease is 36 months, the monthly
amount to be subtracted is therefore $20,000 divided by 36 months which equals
$555.56 per month. Therefore, the following schedule of payments shall commence
on April 1, 1996.
1) Amount due for lease signed 10/27/95 by Lessee $1,900.00
plus sales tax = $2,023.50
2) Former ESM & Presbyterian space (room 212 & 214) 1,119
square feet at $979.13 plus sales tax = $1,126.00
Subtotal rent due by 4/5/96: $3,149.50
Less monthly credit for stock (555.56)
---------
ACTUAL RENT DUE 4/5/96: $2,593.94
---------
3) Former Scarola and D&E space (room 201A) 2,220
square feet at $1,942.50 plus sales tax = $2,068.76
Subtotal rent due 5/5/96 and thereafter = $5,218.26
Less monthly credit for stock (555.56)
---------
ACTUAL RENT DUE 5/5/96 AND AFTER $4,662.70
---------
/s/ Iris Abbruo /s/ David Clarke
- --------------------------------------------------------------------------------
WITNESS DATE TENANT/OFFEROR
/s/ Iris Abbruo /s/ R. Phayan
- --------------------------------------------------------------------------------
WITNESS DATE LESSOR/ACCEPTANCE
<PAGE>
Exhibit 10.7.1
SOUTH HILLSBOROUGH COMMUNITY BANK/OFFICE COMPLEX
COMMERCIAL LEASE AGREEMENT
Lessor's phone # Office: (813)229-3100 Office Fax: 223-2827 Pager: 271-3741
Home/Office: 645-8880 Hm Fax: 671-1971
Lessor's Payment Address: 928 Allegro lane, Apollo Beach, FL 33572
PARTIES: This Lease is made between SOUTH HILLSBOROUGH COMMUNITY BANK
OFFICE/COMPLEX, C/O RICHARD L. PHAGAN, CO-OWNER herein referred to as the
LESSOR(S), and APOLLO INTERNATIONAL OF DELAWARE, INC. herein referred to as the
LESSEE(S).
LEASED AREA: The LESSEE hereby and the lessor hereby leases rent from the
LESSOR the premises described as: Suite 205A of South Hillsborough Community
Bank Office Complex located at 6542-44 North U.S. Highway 41, Apollo Beach, FL
33572 consisting of 1,599 square feet of NET RENTABLE AREA. NET RENTABLE AREA
is defined as the net usable area multiplied by the load factor of 1.15 for the
pro-rata share of the common area. In the event of a dispute in the area
rented, the total dollar amount of the leased area shall prevail.
TERM: The space is leased for a term of 24 months and shall commence on 10/1/96
and continue until 10/31/98.
RENT: The total term rental is the sum of ($37,296.00) Thirty Seven Two Hundred
Ninety Six and No/100 Dollars which is payable in equal monthly installments of
$1,554.00/mo., in advance, on the first day of each month. Lessee shall pay
rent plus sales taxes as may be levied by competent authority from time to time
in addition to the base rental to LESSOR at the above address or at such other
place as LESSOR may designate in writing. Current state sales tax is 6.5%.
LATE FEE: LESSEE agrees to pay a LATE FEE OF 10 PER CENT of the rental amount
if the monthly rent is not received by the LESSOR by the fifth (5th) day of each
month. By imposing a late fee, LESSOR does not waive its right to evict LESSEE
for breach of this Agreement. A 5 PERCENT SERVICE CHARGE will be imposed when a
check is returned for any reason. Any checks returned for insufficient funds
will be subject to late fee.
POSSESSION: Possession of the premises will not be given to the LESSEE until
this Lease has been approve by the LESSOR, and until the rent period begins
unless agreed to otherwise herein. If the LESSEE fails to take possession of
premises and/or fails to pay the first month's rent by the commencement date of
the Agreement, the security deposit or advanced payment, if any, shall be
forfeited to the LESSOR as liquidated damages. LESSEE is responsible for rent
until possession of premises is delivered to LESSOR. The return of all keys to
the LESSOR constitutes return of possession to LESSOR.
DEFAULT: If LESSEE fails to pay rent when due and the default continues for
three (3) days after delivery of written demand by the LESSOR for payment of
rent or possession of the premises, the LESSEE shall become a
tenant-at-sufferance, and the LESSOR shall be entitled immediately to re-enter
and retake possession and recover all damages, plus costs and attorneys' fees.
SECURITY DEPOSIT: A deposit in the amount of $ N/A shall be held as a Security
Deposit for performance of this Rental Agreement and against damage or loss to
the rental unit other than normal wear and tear. Upon the specified vacation of
the rental unit, the LESSOR shall return said
Page 1 of 5
<PAGE>
SOUTH HILLSBOROUGH COMMUNITY BANK/OFFICE COMPLEX
security deposit within fifteen (15) days or give written notice by certified
mail of the LESSOR'S intention to impose a claim thereon at the LESSEE'S last
known mailing address. Vacation of lease prior to lease expiration will cause
entire remaining payments on lease to become due and payable. LESSEE shall not
apply the security deposit in payment of last month's rent.
If this Lease Agreement is rejected by LESSOR, the deposit will be returned.
The offeror hereby waives any claim for damages by reason of non-acceptance of
this application which the LESSOR may reject without stating any reason for so
doing.
MAINTENANCE, REPAIRS, ALTERATIONS, TENANT'S IMPROVEMENTS: LESSEE agrees to take
good care of the property rented and to be liable for any damage to the
property, including the payment of any charges caused by stoppage of plumbing
and/or damage to other fixtures or equipment caused by improper care or misuse.
LESSEE agrees that no alterations, additional locks or bolts to the doors or
windows are to be made or added, or paints or stains or nails, screws, tape or
glue to the woodwork, walls, floors or furnishings are to be applied without the
written consent of the LESSOR. Consent will normally be given however
consideration must be given to the proposed change. If LESSEE incurs property
related expenses by requesting services without the consent of the LESSOR,
LESSOR will not be responsible for the payment of such services. All
improvements made by LESSEE to the premises which are so attached to the
premises that they cannot be removed without material injury to the premises,
shall become a part of the property of the LESSOR upon installation. Not later
than the last day of the term, LESSEE shall at LESSEE'S expense, remove all of
the LESSEE'S personal property and any improvements made by the LESSEE which
have not become the property of LESSOR, including trade fixtures, cabinet work,
moveable paneling, partitions and the like; repair all injury done by or in
connection with the installation or removal of the property improvements;
surrender the premises in as good a condition as they were at the beginning of
the term, reasonable wear and damages by fire, the elements, casualties, or
other cause not due to the misuse or neglect by the LESSEE or LESSEE'S agents,
servants, visitors, servants or licensees, excepted. All property of the LESSEE
remaining on the property after the last day of the term of this lease shall be
conclusively deemed abandoned and may be removed by the LESSOR, and the LESSEE
shall reimburse LESSOR for the cost of such removal. LESSOR may have any such
property stored at LESSEE'S risk and expense. LESSEE shall not do or suffer
anything to be done on the premises which will cause an increase in the rate of
fire insurance on the building. LESSEE shall not permit the accumulation of
waste or refuse matter on the leased premises or anywhere in or near the
building and no hazardous waste may be stored, abandoned or disposed of on the
premises.
UNFORESEEN DAMAGES TO BUILDING: If the building is damaged by fire or any other
cause to such extent that the cost of restoration as reasonable estimated by
LESSOR, will equal or exceed 50% of the replacement value of the building, just
prior to the occurrence of the damage, then LESSOR may, no later than the
seventh day following the damage, give the LESSEE a notice of election to
terminate the lease. In the event of such election, this lease shall be deemed
to terminate as of the date of the damage or destruction, and LESSEE shall
surrender the premise within a reasonable time thereafter, and any prepaid rent
shall be refunded proportionally.
EMINENT DOMAIN: If the premises or any part of the premises, or any part of
the building materially affecting the LESSEE's use of the premises, be taken
by eminent domain, this lease shall terminate at the option of the LESSOR on
the date when title vests pursuant to such taking. The rent shall be
apportioned as of the termination date and any rent paid for any period
beyond such date shall be repaid to LESSEE. It is specifically understood
that the LESSEE may not gain
Page 2 of 5
<PAGE>
SOUTH HILLSBOROUGH COMMUNITY BANK/OFFICE COMPLEX
an interest in the Real Property Estate for purposes of eminent domain
proceedings. However, any relocation costs, business damages or other awards
for which a tenant would qualify under the laws of the State of Florida will be
awarded to the LESSEE.
LESSOR'S SERVICES: Lessor shall provide the office unit and the Common Areas
with electricity for lighting and the operation of equipment normally used in
a commercial office and shall furnish (a) heat and air conditioning
reasonably required for the use and occupation of the Leasehold during
reasonable business hours, such heat and air conditioning to be provided by
utilizing the existing systems in the building; (b) water, (c) sewage; (d)
trash pickup; (e) janitorial service and supplies on each business day or as
agreed herein; (f) pest control. In addition, Lessor shall pay all real
property (ad valorem) taxes and assessments levied against or related to the
Building and the Common Areas.
USE: The premises shall be used as an OFFICE and for no other purposes without
the prior written consent of the LESSOR. LESSEE agrees not to violate the
ordinances of Hillsborough County, Laws of the State of Florida, or permit the
premises to be used for any unlawful or immoral purposes whatsoever, nor for any
purpose that will injure the reputation of said premises or the neighborhood.
ASSIGNMENT AND SUBLETTING: LESSEE shall not assign this Agreement or sublet any
portion of the premises without prior written consent of the LESSOR.
ENTRY AND INSPECTION: The LESSOR shall have the right to enter said premises
during all reasonable hours to examine or protect the same, to show said
premises to prospective buyers or renters or to make such repairs, additions or
alterations thereto as may be deemed necessary.
POSSESSION: If LESSOR is unable to deliver possession of the premises at the
commencement hereof, LESSOR shall not be liable for any damage caused thereby,
nor shall this Agreement be void or voidable, but LESSEE shall not be liable for
any rent until possession is delivered.
INDEMNIFICATION: LESSOR shall not be liable for any damage or injury to LESSEE,
or any other person, or to any property, occurring on the premises, or any part
thereof, or in common areas thereof that are caused by the LESSEE, and LESSEE
agrees to hold LESSOR harmless from any claims for damages, caused by the
LESSEE.
INSURANCE: LESSEE understands that lessor does not insure personal property or
fixtures installed by or belonging to LESSEE against any hazard, nor does LESSOR
provide liability insurance or any other coverage for benefit of LESSEE, and
LESSEE is advised to obtain such insurance coverage as they deem appropriate.
MULTIPLE OCCUPANCY: It is expressly understood that this agreement is between
the LESSOR, and each signatory, individually and severally. In the event of
default of any one signatory, each and every signatory shall be responsible for
timely payment of rent and all other provisions of this Agreement.
OFFICE RULES: LESSEE agrees to abide by the Office Rules, whether promulgated
before or after the execution hereof, including, but not limited to, rules with
respect to noise, odors, smoke, disposal of refuse, parking and use of common
areas. To date, no rules have been made that are
Page 3 of 5
<PAGE>
SOUTH HILLSBOROUGH COMMUNITY BANK/OFFICE COMPLEX
not contained in this lease, but LESSOR reserves the right to do so in the
future for the well being of the Tenants and/or LESSOR.
WAIVER: No failure of the LESSOR to enforce any term hereof shall be deemed a
waiver, nor shall any acceptance of a partial payment of rent be deemed a waiver
of LESSOR'S right to the full amount thereof.
NOTICE TO VACATE: LESSEE agrees to give LESSOR no less than 30 days notice
prior to the 1st of the month of LESSEE'S intent to vacate the premises.
Failure of proper notice will constitute an additional month's rent.
LESSEE shall not, without first obtaining the written consent of the LESSOR,
abandon the premises, or allow the premises to become vacant or deserted.
HOLDING OVER: Any holding over after expiration hereof, and with the written
consent of the LESSOR, shall be construed as a month-to-month tenancy in
accordance with the terms hereof, as applicable. The rental amount will
automatically be adjusted on a monthly basis with the consumer price index (CPI)
beginning at the original lease date for expired leases except that if the CPI
decreases no adjustment will be made.
TIME: Time is of the essence in this Agreement.
NOTICE: Any notice which either party may or is required to give, may be given
by mailing the same to LESSEE or LESSOR at the last known address.
ADDITIONAL TERMS AND CONDITIONS: IN AS MUCH AS APOLLO INTERNATIONAL IS RENTING
THE ENTIRE UPSTAIRS AREA OF BUILDING A, LESSEE IS ENTITLED TO THE USE OF ALL
HALLWAYS, ETC. AS IF IT WERE RENTABLE AREA.
INDEMNIFICATION: LESSEE shall not be liable for any injury to LESSOR, or any
other person, or to any property, occurring on the premises, or any part
thereof, or in common areas thereof that are caused by the LESSOR, and LESSOR
agrees to hold LESSEE harmless from any claims for damages, caused by the
LESSOR.
ENTIRE AGREEMENT: This document constitutes the entire Agreement between the
parties and may be modified only by a writing signed by both parties. It is
understood and agreed that there is no agreement or verbal understanding of any
kind or nature whatsoever with the LESSOR/OWNER, or any of his representatives,
except as set forth in this Agreement. The following Exhibits, if any, have
been made a part of this agreement before the parties' execution hereof:
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<PAGE>
SOUTH HILLSBOROUGH COMMUNITY BANK/OFFICE COMPLEX
ITEMIZED AS:
Rent pro-rated to the first of the month: Rent for the days from ___ to ___ days
times
$______ per day or $________
Monthly rent for month of October, $1,544.00
Security Deposit $________
Other special charges $________
Other (signs) $________
State sales tax (6.5%) $ 101.01
TOTAL INITIAL AMOUNT TO BE RECEIVED FROM LESSEE.......................$1,655.01
REGULAR MONTHLY PAYMENT INCLUDING SALES TAX IS........................$1,655.01
/s/ 9/24/96 David Clarke
- --------------------------------------------------------------------------
WITNESS DATE LESSEE/OFFEROR
- --------------------------------------------------------------------------
WITNESS DATE LESSEE/OFFEROR
/s/ 9/23/96 R. Phagan
- --------------------------------------------------------------------------
WITNESS DATE LESSOR/ACCEPTANCE
LESSOR'S ADDRESS: (Please send lease payments to:)
South Hillsborough Community Bank/Office Complex
Attn: Richard L. Phagan, Owner/Mgr.
928 Allegro Lane
Apollo Beach, FL 33572
LESSEE'S CREDIT INFORMATION: (By signature above, LESSEE gives LESSOR
permission to conduct a credit check)
Page 5 of 5
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of the 30th
day of November, 1996 by and between Matthias E. Lukens, Jr., an individual
("Consultant") and Apollo International of Delaware, Inc., a Delaware
corporation ("Company").
W I T N E S S E T H:
WHEREAS, Company is engaged in the business of owning and operating a high
technology design and manufacturing company; and
WHEREAS, Consultant is a business consultant providing services with
respect to certain non-operational matters such as sales and marketing, general
administration, and product development and has significant knowledge and
expertise which the Company deems of great value to its continued operations;
and
WHEREAS, Company desires to engage Consultant as an independent contractor
on the terms and subject to the conditions hereinafter set forth; and
WHEREAS, Consultant is desirous of providing services to the Company as
specified herein in consideration of the compensation hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. ENGAGEMENT.
(a) Company hereby engages Consultant, and Consultant hereby accepts
such engagement by Company to provide business advice from time to time to
Company.
(b) Consultant will furnish Consultant's service as an independent
contractor and not as an employee of Company or of any affiliate with Company.
<PAGE>
2. TERM. The term of this Agreement shall commence on October 1, 1996
(the "Commencement Date") and shall expire on the date that is five (5) years
after the Commencement Date.
3. COMPENSATION.
(a) Company agrees to pay Consultant during the term, and Consultant
agrees to accept for Consultant's services hereunder, compensation in the form
of 250,000 common stock purchase warrants ("Warrants"). Each Warrant shall
entitle Consultant to acquire one share of the Company's Common Stock at an
exercise price of $5.50 per share commencing June 1, 1998 and terminating June
1, 2002. The Warrants shall provide Consultant with piggy-back registration
rights in the event the Company conducts a secondary offering of its Common
Stock pursuant to a Form S-1 or Form SB-2 registration statement, subject to any
lock-up or other limitations that may be imposed by an underwriter if such
offering is an underwritten public offering. Any such piggy-back registration
rights shall not be exercisable by Consultant until June 1, 1998. Upon issuance
of any shares of Common Stock pursuant to Consultant's exercise of the Warrants,
and as a condition to the issuance of any such shares, Consultant shall enter
into a Shareholders Voting Agreement with David W. Clarke in substantially the
form attached hereto as EXHIBIT A and grant David W. Clarke an irrevocable proxy
to vote such shares in substantially the form attached hereto as EXHIBIT B,
which proxy shall be effective until the earlier of: (i) June 1, 2002, and (ii)
such time as such shares are included in a registration statement pursuant to
Consultant's piggy-back registration rights hereunder.
(b) Upon the occurrence of:
(i) Consultant's breach of this Agreement, or
(ii) Consultant's (or Consultant's agent's) dishonesty or fraud
resulting in damages to the Company (a "Terminating Event"), the Company may, in
its sole discretion, terminate this Agreement without further liability (except
for earned and unpaid fees under Section 3(c) accrued and unpaid expenses of
Consultant under Section 3(d)) whereupon Consultant shall be entitled to
exercise only a pro rata portion of the Warrants based on the number of months
service provided under this Agreement as follows: in such case, the number of
Warrants that may be exercised by Consultant shall be determined by multiplying
the number
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<PAGE>
of Warrant Shares theretofore purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the number of months, or portion
thereof, from the Commencement Date to the date of the Terminating Event, and of
which the denominator shall be the number of months representing the full term
of this agreement (60 months). Any unexercised Warrants in excess of such
amount may be terminated by the Company, in the Company's sole discretion.
(c) Company will reimburse Consultant for all expenses reasonably
incurred by Consultant in connection with the performance by Consultant of his
duties hereunder.
4. INDEMNITY. The Consultant shall indemnify and hold Company harmless
from and against any and all liability, loss, damage, cost or expense (including
reasonable attorney fees) arising out of or relating to Consultant's performance
of his services or which Company may incur or sustain by reason of any
malpractice, negligence or other legal liability of Consultant.
5. NATURE OF RELATIONSHIP. Consultant herein is an independent
contractor and will not act as Company's agent, nor shall be deemed an employee
of Company for the purposes of any employee benefit programs, or be deemed an
employee of Company for purposes of income tax withholding, FICA taxes,
unemployment benefits, workers compensation benefits, or otherwise. The
Consultant shall not enter into any agreement or incur any obligations on
Company's behalf, or commit Company in any manner without Company's prior
written consent. As an independent contractor, the Consultant understands and
agrees that Consultant is solely responsible for the control and supervision of
the means by which Consultant's services are performed.
6. NONDISCLOSURE COVENANTS. Except as permitted or directed by Company,
neither Consultant nor its principals or agents shall, during the term of
Consultant's retention or thereafter divulge, furnish or make accessible to
anyone or use in any way any confidential, trade secret or proprietary
information of Company which Consultant has acquired or become acquainted with
during any period of the retention of the Consultant by Company, whether
developed by the Consultant or by others. The Consultant acknowledges that the
above-described knowledge or information constitutes a unique and valuable asset
of Company and represents a substantial investment by Company, and that any
disclosure or other use of such knowledge or information, other than for the
sole benefit of Company, would be wrongful and would cause irreparable harm to
Company. The
3
<PAGE>
Consultant will refrain from any acts or omissions that would reduce the value
of such knowledge or information to Company. The foregoing obligations of
confidentiality shall not apply to any knowledge or information the entirety of
which is now published or subsequently becomes generally publicly known, other
than as a direct or indirect result of the breach of this Agreement by the
Consultant or a breach of a confidentiality obligation owed to Company by any
third party. Consultant further agrees that upon completion or termination of
this Agreement, Consultant will turn over to Company or make such disposition
thereof as may be directed or approved by Company, any notebook, data,
information or other material acquired or compiled by Consultant in carrying out
the terms of this Agreement.
7. NON-COMPETITION. During the term hereof and for a period of three (3)
years following the termination or expiration hereof, consultant agrees that
neither Consultant nor its principals or agents will, directly or indirectly, in
any country in which the Company then operates either directly or through
distributors, sales representatives, or original equipment manufacturers, own,
manage, work for, consult to, operate, or control, in each case directly or
indirectly, any business that is in the same line of business as the Company.
8. INJUNCTIVE RELIEF. The Consultant agrees that it would be difficult
to compensate Company fully for damages for any violation of the provisions of
Section 6 or Section 7 of this Agreement. Accordingly, the Consultant
specifically agrees that Company shall be entitled to temporary and permanent
injunctive relief to enforce Section 6 or Section 7 of this Agreement and that
such relief may be granted without the necessity of proving actual damages.
This provision with respect to injunctive relief shall not, however, diminish
the right of Company to claim and recover damages in addition to injunctive
relief. The provisions of Section 6, Section 7 and this Section 8 shall survive
the termination or expiration of this Agreement.
9. INVESTMENT INTENT. Consultant hereby represents and warrants to the
Company that Consultant is acquiring the Warrants (and Common Stock issuable
upon exercise of said Warrants) (collectively, the "Securities") for investment
purposes only without a view to distribution of the Securities and that
Consultant has no present intent to dispose of or otherwise transfer the
Securities nor is Consultant a party to any agreement for disposition of the
Securities.
4
<PAGE>
10. GENERAL PROVISIONS.
(a) In the event of a merger or consolidation where Company is not
the surviving or consolidated corporation, or in the event of a transfer of all
or substantially all of the assets of Company, the transferee of Company's
assets shall have the benefit of and be bound by the provisions of this
Agreement.
(b) It is agreed that the invalidity or unenforceability of any
paragraph, section or provision (or any part of any thereof) of this Agreement
shall not affect the validity or enforceability of any one or more of the other
paragraphs, sections or provisions (or other parts of any such paragraph,
section or provision) of this Agreement.
(c) This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof, and supersedes any other or prior
agreement between the parties, including any other consulting agreements between
the parties hereto dated as of the date hereof. This Agreement may not be
amended, modified or renewed, nor may any of these provisions hereof be waived,
except by a writing signed by the parties hereto. A waiver by either party of
any of the terms or conditions of this Agreement, or of any breach thereof,
shall not be deemed a waiver of such term or condition for the future or of any
term or condition, or of any subsequent breach thereof.
(d) This Agreement is a personal contract and may not be assigned or
transferred by Consultant.
(e) Headings herein are for convenience only and shall in any way
define, limit or affect this Agreement.
(f) Any notice required or desired to be given under this Agreement
shall be deemed given if in writing and sent by certified mail, return receipt
requested, to the Consultant's residence or to the Company's principal office,
as the case may be. Such notice shall be deemed delivered seventy-two (72)
hours after deposit into the U.S. Mail.
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
(h) This Agreement shall be governed by and construed in accordance
with Florida law and the parties
5
<PAGE>
hereby submit to the jurisdiction and venue of the state and federal courts
located in Orange County, Florida.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
and effective the day and year first above written.
Consultant:
By: /s/ Matthias E. Lukens, Jr.
----------------------------------
Matthias E. Lukens, Jr.
Company:
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /s/ David W. Clarke
-----------------------------------
David W. Clarke
Its: President
6
<PAGE>
Exhibit 10.9
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of and
effective the 20th day of December 1996 by and between Frank J. Mancini, an
individual ("Consultant") and Apollo International of Delaware, Inc., a Delaware
corporation ("Company").
W I T N E S S E T H:
WHEREAS, Company is engaged in the business of owning and operating a high
technology design and manufacturing company; and
WHEREAS, Consultant has significant business knowledge and expertise which
the Company deems of great value to its continued operations; and
WHEREAS, Company desires to engage Consultant as an independent contractor
on the terms and subject to the conditions hereinafter set forth; and
WHEREAS, Consultant is desirous of providing services to the Company as
specified herein in consideration of the compensation hereinafter set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. ENGAGEMENT.
(a) Company hereby engages Consultant, and Consultant hereby accepts
such engagement by Company to provide business advice from time to time to
Company.
(b) Consultant will furnish Consultant's service as an independent
contractor and not as an employee of Company or of any affiliate with Company.
2. TERM. The term of this Agreement shall commence on December 1, 1996
(the "Commencement Date") and shall expire on September 30, 1997 (the "Term").
1
<PAGE>
(a) Company agrees to pay Consultant, and Consultant agrees to accept
for Consultant's services hereunder, compensation of $4,000 per month commencing
on the first day of the calendar month next following the closing of the
Company's initial public offering and continuing thereafter until and including
September 1, 1996.
This compensation is in addition to fees for prior consulting services to be
paid Consultant by the Company from the proceeds of the Company's initial public
offering in the approximate amount of $23,000.
(b) Company will reimburse Consultant for all expenses reasonably
incurred by Consultant in connection with the performance by Consultant of his
duties hereunder.
4. NATURE OF RELATIONSHIP. Consultant herein is an independent
contractor and will not act as Company's agent, nor shall be deemed an employee
of Company for the purposes of any employee benefit programs, or be deemed an
employee of Company for purposes of income tax withholding, FICA taxes,
unemployment benefits, workers compensation benefits, or otherwise. The
Consultant shall not enter into any agreement or incur any obligations on
Company's behalf, or commit Company in any manner without Company's prior
written consent. As an independent contractor, the Consultant understands and
agrees that Consultant is solely responsible for the control and supervision of
the means by which Consultant's services are performed.
5. NONDISCLOSURE COVENANTS. Except as permitted or directed by Company,
neither Consultant nor its principals or agents shall, during the term of
Consultant's retention or thereafter divulge, furnish or make accessible to
anyone or use in any way any confidential, trade secret or proprietary
information of Company which Consultant has acquired or become acquainted with
during any period of the retention of the Consultant by Company, whether
developed by the Consultant or by others. The Consultant acknowledges that the
above-described knowledge or information constitutes a unique and valuable asset
of Company and represents a substantial investment by Company, and that any
disclosure or other use of such knowledge or information, other than for the
sole benefit of Company, would be wrongful and would cause irreparable harm to
Company. The Consultant will refrain from any acts or omissions that would
reduce the value of such knowledge or information to Company. The foregoing
obligations of confidentiality shall not apply to any knowledge or information
the entirety of which is now published or subsequently becomes generally
2
<PAGE>
publicly known, other than as a direct or indirect result of the breach of this
Agreement by the Consultant or a breach of a confidentiality obligation owed to
Company by any third party. Consultant further agrees that upon completion or
termination of this Agreement, Consultant will turn over to Company or make such
disposition thereof as may be directed or approved by Company, any notebook,
data, information or other material acquired or compiled by Consultant in
carrying out the terms of this Agreement.
6. NON-COMPETITION. During the term hereof and for a period of three (3)
years following the termination or expiration hereof, consultant agrees that
neither Consultant nor its principals or agents will, directly or indirectly, in
any country in which the Company then operates either directly or through
distributors, sales representatives, or original equipment manufacturers, own,
manage, work for, consult to, operate, or control, in each case directly or
indirectly, any business that is in the same line of business as the Company.
7. INJUNCTIVE RELIEF. The Consultant agrees that it would be difficult
to compensate Company fully for damages for any violation of the provisions of
Section 5 or Section 6 of this Agreement. Accordingly, the Consultant
specifically agrees that Company shall be entitled to temporary and permanent
injunctive relief to enforce Section 5 or Section 6 of this Agreement and that
such relief may be granted without the necessity of proving actual damages.
This provision with respect to injunctive relief shall not, however, diminish
the right of Company to claim and recover damages in addition to injunctive
relief. The provisions of Section 5, Section 6 and this Section 7 shall survive
the termination or expiration of this Agreement.
8. GENERAL PROVISIONS.
(a) In the event of a merger or consolidation where Company is not
the surviving or consolidated corporation, or in the event of a transfer of all
or substantially all of the assets of Company, the transferee of Company's
assets shall have the benefit of and be bound by the provisions of this
Agreement.
(b) It is agreed that the invalidity or unenforceability of any
paragraph, section or provision (or any part of any thereof) of this Agreement
shall not affect the validity or enforceability of any one or more of the other
paragraphs, sections or provisions (or other parts of any such paragraph,
section or provision) of this Agreement.
3
<PAGE>
(c) This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof, and supersedes any other or prior
agreement between the parties hereto. This Agreement may not be amended,
modified or renewed, nor may any of these provisions hereof be waived, except by
a writing signed by the parties hereto. A waiver by either party of any of the
terms or conditions of this Agreement, or of any breach thereof, shall not be
deemed a waiver of such term or condition for the future or of any term or
condition, or of any subsequent breach thereof.
(d) This Agreement is a personal contract and may not be assigned or
transferred by Consultant.
(e) Headings herein are for convenience only and shall in any way
define, limit or affect this Agreement.
(f) Any notice required or desired to be given under this Agreement
shall be deemed given if in writing and sent by certified mail, return receipt
requested, to the Consultant's residence or to the Company's principal office,
as the case may be.
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
(h) This Agreement shall be governed by and construed in accordance
with Florida law and the parties hereby submit to the jurisdiction and venue of
the state and federal courts located in Orange County, Florida.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
and effective the day and year first above written.
Consultant:
/s/Frank J. Mancini
Company:
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /s/Steven D. Smith
Its: Vice President
4
<PAGE>
Exhibit 10.10
AGREEMENT
This Agreement (the "Agreement") is entered into this 31st day of January,
1996, by and between Phasetronics, Inc., a Florida corporation ("Phasetronics"),
P.O. Box 17150, Clearwater, Florida 34622-0159, and Apollo International of
Delaware, Inc., a Delaware corporation ("Apollo"), of 6542 US Highway 41, Suite
215, Apollo Beach, Florida 33572.
RECITALS
Phasetronics, a manufacturer of solid state power and motor control
products, wishes to engage the services of Apollo to design, develop and supply
a working prototype of a digital starter module with communications control
software to be manufactured by Phasetronics in the development and marketing of
a soft start device for motors.
Apollo is in the business of designing and producing products such as a
digital starter module and agrees to perform the services called for under this
Agreement in accordance with its terms and conditions.
NOW, THEREFORE, in consideration of the premises, covenants, and terms set
forth herein, the parties agree as follows:
1. RECITALS. The Recitals set forth above are true and correct and are
incorporated herein by reference.
2. APOLLO'S RESPONSIBILITIES. Apollo agrees, in consideration of the
amounts to be paid by Phasetronics under Section 3 of this Agreement, and at no
additional charge to Phasetronics, to undertake and perform the following
functions pursuant to the terms of this Agreement:
a. Apollo shall design, develop, manufacture and supply to
Phasetronics a solid state digital starter module to include communications
control software with RS232 and RS485 connections (the "module"), in strict
accordance with the hardware and software specifications which are attached
hereto as Exhibits "A" and "B" respectively and incorporated herein by
reference, which shall be capable of being utilized by Phasetronics in the
development and marketing of a digital soft start device for motors.
b. Apollo shall supply three years of updates, enhancements, and any
new communications protocols for the module hardware and software which may
result from Apollo's ongoing
<PAGE>
development. Such updates, enhancements and communications protocols shall be
supplied to Phasetronics promptly upon their availability.
c. Apollo shall supply three years of technical support and a
minimum of six months of field support to Phasetronics for the module. In
addition, Phasetronics shall be entitled to direct access to the designers
engaged by Apollo in the design and creation of the module hardware and software
and to any designers of the future updates, enhancements, or communications
protocols described in Section 2b above.
d. Apollo shall indemnify and hold Phasetronics harmless from any
loss or damage which Phasetronics shall incur, including its reasonable
attorneys fees and costs of defending claims, as a result of damage to any motor
belonging to Phasetronics or any of its customers which results directly or
indirectly from the failure of the module, including the hardware, software, or
any part thereof, to perform its motor protective functions. Phasetronics shall
indemnify and hold Apollo harmless from any loss or damage which Apollo shall
incur, including its reasonable attorneys fees and costs of defending claims, as
a result of damage to any motor belonging to Phasetronics or any of its
customers which results directly or indirectly from any failure of the soft
start device manufactured by Phasetronics to perform its motor protective
functions and which is not directly or indirectly related to a failure of the
module component to perform its functions.
e. Apollo agrees that the module and all plans, specifications,
software, programs, drawings, notes, calculations, prototypes, and all other
materials related to the design, creation or production of the module
(hereinafter referred to as the "Confidential Information") shall be the sole
and exclusive property of Phasetronics. Apollo agrees not to disclose such
Confidential Information to any other person or entity without the prior written
permission of Phasetronics. Further, Apollo shall not use any such Confidential
Information for its own benefit or the benefit of any other person or entity.
Apollo shall, at the request of Phasetronics, deliver any and all such
Confidential Information to Phasetronics. In addition, Apollo agrees that it
shall, at the request of Phasetronics, execute any documentation evidencing sole
ownership of the module and any of the Confidential Information by Phasetronics.
f. Apollo agrees that for a period of five years from the date of
this Agreement it shall not, directly or indirectly: (1) contract with any
other person, firm or entity for the design, development or creation of a soft
start type of control,
-2-
<PAGE>
(2) manufacture or market any soft start type of control under any name, or (3)
assist any other entity, as a consultant, partner, joint venturer, or otherwise,
in the design, development, manufacture or marketing of a soft start type of
control.
g. Apollo shall, upon the signing of this Agreement deliver to
Phasetronics a copy of the existing software that operates the Model CMPR motor
protection relay which is currently being manufactured by Apollo.
h. Within sixty days from the date of this Agreement Apollo shall
deliver to Phasetronics at its plant in Clearwater, Florida, a working prototype
for the module.
i. Within ninety days from the date of this Agreement, Apollo shall
deliver to Phasetronics at its plant in Clearwater, Florida, the Windows version
of the communications control software for the module including the RS232 and
RS485 connections.
3. PAYMENT. As full payment for the services set forth in Section 2
above, Phasetronics shall pay the following sums to Apollo:
a. $20,000.00 upon the signing of this Agreement.
b. $20,000.00 within thirty days after delivery and acceptance of
the working prototype for the module.
c. $20,000.00 within thirty days after delivery and acceptance of
the Windows version of the communications control software for the module
including the RS232 and RS485 connections. This payment shall not be due unless
the working prototype for the module has been previously delivered and accepted.
d. $20,000.00 after six continuous months of successful field
operation of the module, including all hardware and software, by Phasetronics.
4. ASSIGNMENT. Apollo shall not assign, subcontract or delegate its
rights or responsibilities under this Agreement without the written permission
of Phasetronics, which it may give or withhold in its sole discretion.
Phasetronics may assign its rights and obligations under this Agreement.
5. ATTORNEYS FEES. In the event that either party institutes an action
to enforce the terms of this Agreement, the
-3-
<PAGE>
successful party in any such action shall be entitled to recover its reasonable
costs and attorneys fees for such action.
6. ENTIRE AGREEMENT. The terms and provisions contained herein
constitute the entire agreement between the parties with respect to the subject
matter hereof. This Agreement shall not be modified except in writing, signed
by both parties.
7. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida and any action brought to
enforce the terms of this Agreement shall be brought in the appropriate court of
competent jurisdiction located in Pinellas County, Florida.
8. SEVERABILITY. Should any part of this Agreement for any reason be
declared by a court of competent jurisdiction to be invalid, such decision shall
not affect the validity of the remaining portion, which shall continue in full
force and effect as if this Agreement had been executed with the invalid portion
eliminated therefrom. In the event that a portion of this Agreement shall be
declared to be invalid, the parties agree that they shall, in good faith,
negotiate with one another to replace such invalid provision with a valid
provision as similar as possible to that which had been held invalid to the
extent permissible by applicable laws.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf as of the date first above written.
Witnesses: Phasetronics, Inc., a Florida
corporation
/S/ By: /S/
- ----------------------------------------- -------------------------
Name: James R. Mitchell
Title: President
/S/
- ----------------------------------------- -------------------------
Apollo International of
Delaware, Inc., a Delaware
corporation
/S/ By: /S/
- ----------------------------------------- -------------------------
Name: David Clarke
Title: President
/S/
- -----------------------------------------
-4-
<PAGE>
Exhibit 10.11
AGREEMENT
This Agreement (the "Agreement") is entered into this 31st day of January,
1997, by and between Phasetronics, Inc., a Florida corporation ("Phasetronics"),
P.O. Box 17150, Clearwater, Florida 34622-0159, and Apollo International of
Delaware, Inc., a Delaware corporation ("Apollo"), of 6542 US Highway 41, Suite
215, Apollo Beach, Florida 33576.
RECITALS
Phasetronics is a manufacturer and distributor of solid state power and
motor control products. Many of these products are distributed under the trade
name "Motortronics".
Apollo is the manufacturer of two motor protection relays known as the
Model CMPR and CMPR2 (hereinafter the "relays").
Phasetronics and Apollo desire to enter into this Agreement whereby Apollo
will supply the relays to Phasetronics for distribution by Phasetronics under
the Motortronics trade name.
NOW, THEREFORE, in consideration of the premises, covenants, and terms set
forth herein, the parties agree as follows:
1. RECITALS. The Recitals set forth above are true and correct and are
incorporated herein by reference.
2. APOLLO'S RESPONSIBILITIES. In furtherance of this Agreement, Apollo
agrees to do the following:
a. Apollo shall supply CMPR and CMPR2 motor protection relays to
Phasetronics during the term of this Agreement for the net price per relay in
accordance with the attached price list set forth in Exhibit "A" attached
hereto, f.o.b. Apollo's plant. Apollo shall cause all relays supplied to
Phasetronics under this Agreement to be labeled with the Motortronics name in
accordance with a design to be supplied by Phasetronics. Phasetronics has the
right to distribute the relays under the Motortronics name on a world wide
basis. Phasetronics rights are not exclusive and shall not prohibit Apollo from
marketing and/or distributing the relays under its own or another name.
b. Apollo shall supply the relays in the quantities and at the times
requested by Phasetronics within fourteen days from receipt of an order from
Phasetronics.
<PAGE>
c. Apollo shall supply adequate training to Phasetronics engineers
and sales personnel in the use, repair and maintenance of the relays. Apollo
further agrees to supply operating manuals and trouble shooting guides for the
relays and shall, upon request by Phasetronics, supply other technical data
pertaining to the relays.
d. Apollo warrants that the relays shall conform to high standards
of quality and will conform to the technical specifications set forth in Exhibit
"B" to this Agreement. Apollo shall warrant to Phasetronics and to the
customers of Phasetronics that the relays are free from material an construction
defects for a period of eighteen months after delivery to the customer.
3. PHASETRONICS' RESPONSIBILITIES. In furtherance of this Agreement,
Phasetronics agrees to do the following:
a. Phasetronics shall pay the price for the relays set forth in
Section 2a above within thirty days from the date of invoice for each shipment.
b. Phasetronics shall not alter or modify the relays in any manner
without the written permission of Apollo. This shall not prohibit Phasetronics
from repairing a relay as needed.
4. SPECIFICATIONS. The specifications for the CMPR and CMPR2 relays are
set forth on Exhibit "B" which is attached hereto and incorporated herein by
reference.
5. TERM OF AGREEMENT. This Agreement shall terminate two years from the
date hereof unless terminated by a written mutual agreement of the parties prior
to such date.
6. ASSIGNMENT. Apollo shall not assign, subcontract or delegate its
rights or responsibilities under this Agreement without the written permission
of Phasetronics, which it may give or withhold in its sole discretion.
Phasetronics may assign its rights and obligations under this Agreement.
7. ATTORNEYS FEES. In the event that either party institutes an action
to enforce the terms of this Agreement, the successful party in any such action
shall be entitled to recover its reasonable costs and attorneys fees for such
action.
8. ENTIRE AGREEMENT. The terms and provisions contained herein
constitute the entire agreement between the parties with respect to the subject
matter hereof. This Agreement shall not be modified except in writing, signed
by both parties.
-2-
<PAGE>
9. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida and any action brought to
enforce the terms of this Agreement shall be brought in the appropriate court of
competent jurisdiction located in Pinellas County, Florida.
10. SEVERABILITY. Should any part of this Agreement for any reason be
declared by a court of competent jurisdiction to be invalid, such decision shall
not affect the validity of the remaining portion, which shall continue in full
force and effect as if this Agreement had been executed with the invalid portion
eliminated therefrom. In the event that a portion of this Agreement shall be
declared to be invalid, the parties agree that they shall, in good faith,
negotiate with one another to replace such invalid provision with a valid
provision as similar as possible to that which had been held invalid to the
extent permissible by applicable law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf as of the date first above written.
Witnesses: Phasetronics, Inc., a Florida
corporation
/S/ By: /S/
- ------------------------------------ ---------------------------
Name:James R. Mitchell
Title: President
/S/
- ------------------------------------
Apollo International of
Delaware, Inc., a Delaware
corporation
/S/ By: /S/
- ------------------------------------ ---------------------------
Name:David Clarke
Title:President
/S/
- ------------------------------------
-3-
<PAGE>
Exhibit 10.12
SALE OF ACCOUNTS RECEIVABLE AGREEMENT
AGREEMENT made October 31, 1996, between APOLLO INTERNATIONAL OF DELAWARE,
INC., a Delaware company ("Seller"), and QUEENSBURY, INC. (the "Company").
The Seller desires to sell to the Company accounts receivable ("accounts")
evidencing sales and deliveries of personal property usually dealt in by the
Seller, or work, labor, and services performed by the Seller.
It is therefore agreed:
1. The Seller shall offer to sell, assign and transfer to the Company all
outstanding accounts now in existence and future accounts as they are created by
the Seller's business, such assignments to be made upon forms prescribed by the
Company so that the Company may be and become subrogated to all the rights
possessed by the Seller. Seller shall also deliver invoices of each account in
duplicate, with proof of sale and delivery. The Company shall, from time to
time during the term of this Agreement, buy such accounts belonging to the
Seller, as may be approved in writing by the credit department of the Company,
and shall pay therefor 94% of the invoice amount thereof. The Company shall
have all the rights of the Seller with respect to the accounts assigned,
including the right of stoppage in transit, and the Company shall not be liable
to any person or in any manner for refusing to approve shipment or delivery of
any goods sold by the Seller or for exercising any rights thereunder.
2. In lieu of a reserve requirement, the Seller will accrue and pay
interest from its operating account at the rate of 1% per month computed on a
daily rate, when factored advances exceed 30 days. The interest amount will be
calculated as of the end of the month, payable by the 10th of the next month.
For calculating the 30 days period, the time starts at the date of receipt of
the wire transfer by the seller. For purposes of the amount subject to interest
calculations, the amount is the principal advanced by the Company.
3. The Seller will, at its own cost and expense, but as the Company's
agent, endeavor to collect from the customers whose accounts have been
assigned to the Company under this Agreement, as and when the same become
due, the installment amounts owning on each account so assigned to the
Company hereunder. In the event of a default under any such account, the
Seller shall have the power and the authority, on the Company's behalf, but
at the Seller's own cost and expense, to take such action with respect to any
defaulted account as the Seller, in the absence of instructions from Buyer,
may deem advisable. Seller hereby agrees to defend and indemnify the Company
against all claims and liability with respect to Seller's act relative to the
assigned accounts. For purposes of this Section 3, an account which shall
have failed to make a payment for six or more consecutive months shall be
deemed a Delinquent Account.
<PAGE>
In the event an account assigned by the Seller to the Company pursuant to
this Agreement becomes a Delinquent Account (as hereinafter defined), the Seller
shall remit to the Company an amount equal to 94% of the monies due from the
Delinquent Account, and upon receipt of such payment, the Company shall reassign
the Delinquent Account to the Seller.
4. The Seller represents and warrants that every account to be assigned
to the Company will be based upon a BONA FIDE written order or contract obtained
from the Seller's customer and that the account assigned will be for goods sold
and delivered or for work, labor and services performed or materials furnished,
pursuant to the terms of such written order or contract. The Seller covenants
that there will be no offsets or counterclaims against any account receivable or
chose in action assigned, nor will the Seller, subsequent to such assignment,
incur any obligation which may create any offset or counterclaim thereto. The
Seller shall not sell, grant a security interest in, or assign any of its
accounts elsewhere during the term of this Agreement.
5. The Seller shall, as its own expense, keep proper books of account
showing all sales, claims, and allowances on sales and on merchandise.
Immediately upon the consummation of the purchase of accounts hereunder, the
Seller shall make proper entries in its books disclosing the absolute sale of
such accounts to the Company, and the Seller shall further, upon demand, execute
and deliver to the Company all instruments and do all things necessary to carry
into effect the terms of this agreement. The Seller shall permit the Company to
examine and make extracts from the books and records of the Seller during
Seller's business hours and upon two (2) business days prior notice for the
purpose of certifying the validity of any account assigned or to ascertain any
facts in connection therewith.
6. The Seller shall, as its own expense, promptly adjust all disputes
with its customers. In case any dispute remains unadjusted at the time any
account becomes due, the Company shall have the right to charge back to the
Seller the accounts involved, and the Seller shall pay the amount of such
accounts to the Company upon demand, provided, however, any such payment by
Seller should not exceed the amount received by Seller from the Company for such
accounts.
7. In the event of the return or nonacceptance, in whole or in part, of
merchandise, the sale of which resulted in such assigned accounts, the Seller
shall give to the Company immediate notice of such return or nonacceptance, and
shall immediately turn over such merchandise to the Company and legibly mark
such merchandise as the property of the Company, and thereafter, upon demand,
the Seller shall repurchase such merchandise from and pay to the Company the 94%
of the invoice price thereof, and upon such payment the Seller shall be entitled
to the redelivery of such merchandise. If the Seller fails to make such
purchase and payment immediately upon demand, the Company shall be entitled to
exercise its rights and remedies an provided herein and under the laws of the
State of Florida. In conjunction therewith, the Company shall have the right to
sell such merchandise at commercially reasonable public or private sale in
accordance with the Florida Uniform Commercial Code and to charge the Seller's
account with the difference between 94% of the invoice price of such merchandise
and the
2
<PAGE>
amount realized upon the sale, plus all charges, fees and commissions, and, upon
such sale, the company may become a bidder and purchaser.
8. The Seller shall hold in trust for the Company all checks, drafts,
notes, acceptances, cash or other evidences of payment received in payment or on
account of any account purchased by the Company hereunder, and shall transmit or
deliver these to the Company at its office within two (2) business days from
receipt. The failure of the Seller to comply with this provision shall
constitute conversion. The Company is hereby authorized and given power of
attorney to indorse the name of the Seller upon all checks, drafts, notes, money
orders, and all other instruments that may require such indorsement. The
Company shall also have the right to receive all amounts remitted by the
Seller's customers, and relate to the accounts assigned to the Company and such
remittances are to be considered payments on account. The seller will utilize
the Barnett Bank lock box service.
9. This Agreement shall continue for a period of 365 days from the date
hereof, and shall be deemed renewed from month to month thereafter unless
terminated as follows:
(a) Either party may, upon at least 30 days written notice to the
other party, cancel this agreement as to future transactions at
the end of any monthly period.
(b) Should the Seller make an assignment for the benefit of
creditors, or should a receiver be appointed for the Seller, or
should a bankruptcy proceeding be commenced, voluntarily or
involuntarily, on behalf of the Seller (and if involuntarily,
such proceeding has not been dismissed within ninety (90) days of
commencement), this agreement may be terminated by the Company,
without notice, immediately upon the happening of any such
events.
10. Should any excise, sales, or other tax be imposed by state, federal,
or local authorities in respect to the sales herein, or if the merchandise
affected by such sales is in such form that the Company is required to withhold
or pay the amount of such taxes, the Seller shall indemnify the Company in
respect to such taxes; and any amount which the Company may be required to
withhold or pay may be charged to the Seller's account.
11. This Agreement shall not be modified or altered without the written
consent of both parties hereto. The failure of either party hereto to insist
upon strict observance of all the terms of this agreement in any one or more
instances shall not be deemed a waiver of such terms for the future.
12. The Seller affirms that its only place of business and the place where
the records concerning the accounts herein referred to are kept is the one that
appears beneath the signature of its president below and if such place of
business or records location is changed, the Company will be promptly notified.
3
<PAGE>
13. This Agreement shall be binding upon the successors, and assigns of
the parties hereto.
14. This Agreement shall be governed by and construed in accordance with
the Law of Florida and venue and jurisdiction for resolution of any disputes
shall be Orange County Florida.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year written above.
APOLLO INTERNATIONAL OF DELAWARE, INC. QUEENSBURY, INC.
"Seller" "Company"
By: /s/ DAVID W. CLARKE, PRESIDENT /s/ BRENDA S. HEARTFIELD, PRESIDENT
6542 N. US HWY. 41, SUITE 215 4900 WOODWAY, SUITE 650
APOLLO BEACH, FL 33572 HOUSTON, TX 77056
4
<PAGE>
Exhibit 10.13
CASH ADVANCE AND SECURITY AGREEMENT
This cash advance and security Agreement ("Agreement") is entered into this
20th day of December, 1996 by and between Apollo International of Delaware,
Inc., a Delaware corporation (the "Company") and Framan Company.
RECITALS:
WHEREAS, the Company desires to have available more cash for purchase of
parts; and
WHEREAS, Framan Co. desires to make available to the Company cash advances
for such purposes.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are
incorporated herein by reference.
2. CASH ADVANCES. Upon delivery by the Company to Framan Co. of a
properly approved invoice or purchase order for parts inventory as ordered
from time to time by the Company from its vendors, Framan Co. shall provide
the Company with cash equal to the amount of such invoice, which cash shall
be wired, or transferred by other means, to the Company's operating account
pursuant to the wiring instructions as provided by the Company (the
"Advances"). In addition to the delivery to Framan Co. of such invoice(s),
the Company shall concurrently provide Framan Co. with the following: (a) a
copy of the Company's check made payable to the applicable vendor for the
amount of the invoice, (b) a copy of the applicable invoice and/or purchase
order, properly approved for payment, and (c) a copy of a current schedule of
such advances, the form of which is attached hereto as Exhibit A, (d) other
documentation regarding such transaction as may be requested by Framan Co.
Framan Co. shall have the right to limit the total cash advanced to the
Company under this Agreement.
3. NEGOTIATION OF BEST PRICE. The Company shall use its best efforts to
negotiate the best possible price for products and inventory ordered from its
vendors. The amount payable to vendors as reflected in the invoices and/or
purchase orders shall represent the best price the Company was able to obtain
based on cash terms.
4. REPAYMENT TERMS. The Advances shall accrue interest at the rate of
two percent (2%) above the prime rate as quoted by the Wall Street Journal on
the date such Advances are transferred to the Company, and all such outstanding
and unpaid Advances
<PAGE>
and accrued and unpaid interest thereon shall be paid by the Company from the
proceeds of the Company's initial public offering of its Common Stock.
5. COLLATERAL AND SECURITY INTEREST. The collateral for the Advances
shall be the Company's parts inventory, fixtures, equipment and all other assets
(the "Collateral"). To secure the payment of the Advances and interest thereon
(together, the "Obligation"), the Company does hereby grant to Framan Co. a
security interest in each and all of the Collateral. The Company shall grant
Framan Co. access to the Company's books for the purposes of review with prior
notice during normal business hours.
6. DEFAULT. The occurrence of one or more of the following events shall
constitute a default in this Agreement:
(a) The failure or omission of the Company to pay when due any of the
Liabilities;
(b) The making of an assignment by the Company for the benefit of the
Company's creditors;
(c) The commencement of proceedings in bankruptcy for reorganization
of the Company or for the adjustment of any of its debts under the U.S.
Bankruptcy Code or under any law, whether state or federal, now or hereafter
existing for the relief of debtors; or
(d) The appointment of a receiver or trustee for the Company or for
any substantial part of its assets, or the institution of any proceedings for
the dissolution, or the full or partial liquidation of the Company.
7. RIGHTS UPON DEFAULT. Upon the occurrence of any default under this
Agreement, Framan Co. shall have and may exercise any or all of the following
rights:
(a) To declare the Liabilities, or any of them immediately due and
payable without demand or notice and the same thereupon shall immediately become
due and payable without demand or notice.
(b) To exercise from time to time any and all rights and remedies of
a secured party under the Uniform Commercial Code of the State of Florida and
any and all rights and remedies available to it under any other applicable law.
8. PERFECTION. In order to perfect the security interest in the
Collateral granted to Framan Co. hereunder, the Company agrees to execute and
have recorded with the Florida Department of State a UCC-1 Financing Statement
reflecting Framan Co.'s security interest in the Collateral.
<PAGE>
9. NOTICE. All notices under the Agreement shall be in writing and shall
be deemed to be given (i) in the case of delivery, when delivered to the address
set forth on the signature page to this Agreement and addressed to the recipient
party; (ii) in the case of mailing, on the sixth business day after deposit in
the U.S. Mail, postage prepaid, and sent by certified or registered mail, and
addressed to the recipient party; and (iii) in the case of facsimile or
telecopier, when the same has been actually received by the other party as
confirmed by the sending party. Either party hereto may change the address at
which said notices are to be sent by the giving of notice of such change to the
other party as set forth herein.
10. TERM. This Agreement and the rights and privileges granted hereunder
to Framan Co. shall continue and remain in full force and effect until all
Liabilities have been paid in full to Framan Co. At such time, this Agreement
shall be marked "Canceled" and returned to the Company and Framan Co. shall
further execute a termination statement in regard to any financing statement
that is solely related to the Collateral.
11. WAIVER. No waiver by Framan Co. of any default shall operate as a
waiver of any other default or of the same default on a future occasion. No
delay or omission on the part of Framan Co. in exercising any right or remedy
shall operate as a waiver thereof.
12. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with and governed by the laws of the State of Florida.
13. SEVERABILITY. If any provision of this Agreement shall be declared
invalid or unenforceable by a court of competent jurisdiction, such provision
shall be ineffective to the extent of such invalidity or unenforceability,
without invalidating or rendering unenforceable the remainder of such provision
or the remaining provisions of this Agreement.
14. COSTS AND ATTORNEY'S FEES. In the event of any legal proceedings in
connection with this Agreement, Framan Co. shall be entitled to receive from the
Company its reasonable legal fees (including costs incurred) in connection with
such proceeding, including costs of collection.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto in regard to the subject matter hereof and this
Agreement may not be altered, amended or otherwise modified except by a writing
signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
APOLLO INTERNATIONAL OF
DELAWARE, INC.
By: /s/
-----------------------------
David W. Clarke, President
6542 N. US Highway 41
Suite 215
Apollo Beach, FL 33572
FRAMAN COMPANY
By: /s/
-----------------------------
Frank J. Mancini
P.O. Box 157
Zolfo Springs, FL 33890-0157
<PAGE>
AMENDEMENT TO
CASH ADVANCE AND SECURITY AGREEMENT
THIS AMENDMENT TO CASH ADVANCE AND SECURITY AGREEMENT (the "Amendment") is
entered into this 24th day of February, 1997 by and between Apollo International
of Delaware, Inc., a Delaware corporation (the "Company") and Framan Company
("Framan").
RECITALS:
WHEREAS, the Company and Framan entered into a Cash Advance and Security
Agreement (the "Agreement") on December 20th, 1996 and both parties desire to
amend the Agreement; and
WHEREAS, the Company and Framan desire to amend Section 4 of the Agreement
regarding repayment terms, upon the terms and conditions stated below.
NOW, THEREFORE , in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are
incorporated herein by reference and form a part of this Amendment.
2. EFFECTIVE DATE. The provisions of this Amendment shall be retroactive
and shall become effective as of the date of the Agreement which is December
20th, 1996 (the "Effective Date").
3. REPAYMENT TERMS. The Advances (as defined in the Agreement) shall
accrue simple interest as of the Effective Date at the rate of two (2%) percent
above the prime rate as quoted by the Wall Street Journal on the date such
Advances are transferred to the Company. The repayment of the Advances shall be
as follows:
a. The Company shall make interest only payments to Framan
commencing on the first business day of the month following the Closing of the
Company's initial public offering and continuing on the first business day of
each month thereafter until the Advances and all interest accrued thereon are
repaid in full to Framan.
b. Company shall repay up to one-half (1/2) of the then outstanding
principal balance of the Advances on the earlier of (i) June 1, 1998; or (ii)
the last day of the first fiscal quarter that the Company's gross revenue
exceeds Five Hundred Thousand
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($500,000) dollars, subject to the determination by the Company's President that
there will be sufficient funds available to meet the Company's expenses.
c. Company shall repay one-half (1/2), or more, of the then
outstanding principal balance of the Advances on the last day of each subsequent
fiscal quarter that the Company's gross revenue exceeds Five Hundred Thousand
($500,000) dollars, subject to the determination by the Company's President that
there will be sufficient funds available to meet the Company's expenses.
d. Any outstanding principal balance of Advances and accrued and
unpaid interest shall be paid in full no later than December 31, 1998.
4. AMENDMENT. Except as expressly modified and amended herein, the
Agreement shall remain in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first written above.
APOLLO INTERNATIONAL OF
DELAWARE, INC
By: /s/ David W. Clarke, President
FRAMAN COMPANY
By: /s/ Frank J. Mancini
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Exhibit 10.14
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement dated as of this _____ day of _________,
1997 ("Agreement"), is made and entered into by and between APOLLO INTERNATIONAL
OF DELAWARE, INC., a Delaware corporation ("Company"), and
__________________("Indemnitee"):
RECITALS
A. Competent and experienced persons are becoming increasingly reluctant
to serve publicly-held corporations as directors, officers, or in other
capacities unless they are provided with adequate protection through liability
insurance or adequate indemnification against inordinate risks of claims and
actions against them arising out of their service to the corporation; and
B. The current unavailability, inadequacy, and extraordinary cost of
adequate insurance and the uncertainties relating to indemnification have
increased the difficulty of attracting and retaining such persons; and
C. The Board of Directors of the Company (the "Board") has determined
that the inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
D. Section 145 of the Delaware General Corporation Law (the "Corporate
Law") and the Bylaws of the Company empower the Company to indemnify its
officers, directors, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as directors, officers, employees, or
agents or other corporations or enterprises, and Section 145 of the Corporate
Law and the Bylaws expressly provide that the indemnification provided therein
is not exclusive; and
E. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified; and
F. Indemnitee is willing to serve, or continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
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NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "CHANGE OF CONTROL" means a change in control of the Company
occurring after the Effective Date (as hereinafter defined) of a nature that
would be required to be reported in response to Item 1 of the Current Report on
Form 8-K (or in response to any similar item on any similar schedule or form)
promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or
not the Company is then subject to such reporting requirement; and, in addition,
a Change of Control shall be deemed to have occurred if after the Effective Date
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing thirty percent
(30%) or more of the combined voting power of the Company's then outstanding
securities without the prior approval of at least two-thirds of the members of
the Board in office immediately prior to such person attaining such percentage;
(ii) the Company is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of the
Board in office immediately prior to such transaction or event constitute less
than a majority of the Board of Directors thereafter; or (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Board (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at
least a majority of the Board.
(b) "CORPORATE STATUS" describes the status of a person who is or was
a director, officer, employee, agent or fiduciary of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "DISINTERESTED DIRECTOR" means a director of the Company who is
not and was not a party to the Proceeding (as hereinafter defined) in respect of
which indemnification is sought by Indemnitee.
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(d) "EFFECTIVE DATE" means the date first above written.
(e) "EXPENSES" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a proceeding.
(f) "INDEPENDENT COUNSEL" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
(g) "PROCEEDING" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, including
any appeal thereof, whether or not initiated prior to the Effective Date, except
a proceeding initiated by an Indemnitee pursuant to Section 11 of this Agreement
to enforce his rights under this Agreement.
2. AGREEMENT TO SERVE. Indemnitee agrees to serve as a _______________
of the Company. If Indemnitee is an employee of the Company and has entered
into an employment agreement with the Company, Indemnitee may resign from such
position only as provided for in the employment agreement of even date herewith
(and subject to any other contractual obligation or any obligation imposed by
operation of law). The Company shall have no obligation under this Agreement to
continue Indemnitee in any position with the Company.
3. INDEMNIFICATION - GENERAL. The Company shall indemnify, and advance
Expenses to Indemnitee as provided in this Agreement and to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law
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may thereafter from time to time permit. The rights of Indemnitee provided
under the preceding sentence shall include, but shall not be limited to, the
rights set forth in the other sections of this Agreement.
4. THIRD PARTY ACTIONS. Indemnitee shall be entitled to the rights of
indemnification provided in this Section 4 if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to any threatened, pending
or completed Proceeding, other than a Proceeding by or in the right of the
Company. Pursuant to this Section 4, Indemnitee shall be indemnified against
Expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with any such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company, and, with respect to any criminal Proceeding, had no reasonable
cause to believe his conduct was unlawful.
5. DERIVATIVE ACTIONS. Indemnitee shall be entitled to the rights of
indemnification provided in this Section 5 if by reason of his Corporate Status
he is or is threatened to be made, a party to any threatened, pending or
completed Proceeding brought by or in the right of the Company to procure a
judgment in its favor. Pursuant to this Section, Indemnitee shall be
indemnified against Expenses actually and reasonably incurred by him or on his
behalf in connection with the defense or settlement of such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the foregoing, no
indemnification shall by made by Company in respect of any claim, issue or
matter in such Proceeding as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
or the court in which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, the Indemnitee is fairly and reasonably entitled to
indemnity for such Expenses which the Court of Chancery or such other court
shall deem proper.
6. INDEMNIFICATION FOR EXPENSES OF AN INDEMNITEE. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a party to and is successful on the merits or otherwise
in defense of any Proceeding, or in defense of any claim, issue or matter
therein, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is not
wholly successful in such
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Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or on his behalf in connection with each successfully resolved claim, issue
or matter; PROVIDED, HOWEVER, that this sentence shall not limit or prohibit
Indemnitee's right to indemnification pursuant to Sections 4 and 5 above. For
purposes of this Section 6 and without limitation, the termination of any claim,
issue or matter in such a Proceeding by dismissal, with or without prejudice,
shall be deemed to be a successful result as to such claim, issue or matter.
7. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is by reason of his
Corporate Status, a witness in any Proceeding, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
8. ADVANCEMENT OF EXPENSES. The Company shall advance all reasonable
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty (20) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.
9. INDEMNIFICATION PROCEDURE.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Secretary of the Company (or to such other officer as may be
designated by the Board) a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary, or other designated officer, of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to Section 9(a) hereof, a determination,
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if required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case: (i) if a Change of Control (as herein
defined) shall have occurred, by Independent Counsel (as herein defined) (unless
Indemnitee shall request that such determination be made by the Board or the
stockholders, in which case by the person or persons or in the manner provided
for in clauses (ii) or (iii) of this Section 9(b)) in a written opinion to the
Board, a copy of which shall be delivered to Indemnitee; (ii) if a Change of
Control shall not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors or (B) if a quorum of the Board consisting
of Disinterested Directors is not obtainable or, even if obtainable, such quorum
of Disinterested Directors so directs, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) if
directed by the Directors, by the stockholders of the Company; or (iii) as
provided in Section 10(b) of this Agreement; and, if it is so determined that
Indemnitee is entitled to indemnification, payment to or on behalf of Indemnitee
shall be made within ten (10) days after such determination. Indemnitee shall
cooperate with the person, persons or entity making such determination with
respect to Indemnitee's entitlement to indemnification, including providing to
such person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from disclosure
and which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any Expenses incurred by Indemnitee in so cooperating with the
person, persons or entity making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 9(b) hereof, the
Independent Counsel shall be selected as provided in this Section 9(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board, and the Company shall give written notice to Indemnitee
advising him of the identity of the independent counsel so selected. If a
Change of Control shall have occurred, the Independent Counsel shall be selected
by Indemnitee (unless Indemnitee shall request that such selection be made by
the Board, in which event the preceding sentence shall apply), and Indemnitee
shall give written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the Company, as
the case may be, may, within seven (7) days after such written notice of
selection
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shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection. Such objection may be asserted only
on the ground that the Independent Counsel so selected does not meet the
requirements of "Independent Counsel" as defined in Section 1 of this Agreement,
and the objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 9(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the Court of Chancery
of the State of Delaware for resolution of any objection which shall have been
made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Court or by such other person as the Court shall designate, and the
person with respect to whom an objection is so resolved or the person so
appointed shall act as Independent Counsel under Section 9(b) hereof. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to Section 9(b) hereof, and the Company shall pay all reasonable fees and
Expenses incident to the procedures of this Section 9(c), regardless of the
manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial Proceeding pursuant to Section 11(a) of this
Agreement, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
10. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether
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Indemnitee is entitled to indemnification shall not have made a determination
within sixty (60) days after receipt by the Company of the request therefor, the
requisite determination of entitlement to indemnification shall be deemed to
have been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided, however,
that such 60-day period may be extended for a reasonable time, not to exceed an
additional thirty (30) days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; and provided, further, that the foregoing
provisions of this Section 10(b) shall not apply (i) if the determination of
entitlement to indemnification is to be made by the stockholders pursuant to
Section 9(b) of this Agreement and if (A) within fifteen (15) days after receipt
by the Company of the request for such determination the Board has resolved to
submit such determination to the stockholders for their consideration at an
annual meeting thereof to be held within seventy-five (75) days after such
receipt and such determination is made thereat or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination is
made thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 9(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself, adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
11. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii)
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advancement of Expenses is not timely made pursuant to Section 8 of this
Agreement, (iii) the determination of entitlement to indemnification is to be
made by Independent Counsel pursuant to Section 9(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion within
ninety (90) days after receipt by the Company, of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section
5 of this Agreement within ten (10) days after receipt by the Company of a
written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Sections 9 or 10 of this Agreement, Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of expenses. Indemnitee shall commence such proceeding seeking an
adjudication within one hundred eighty (180) days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 11(a). The Company shall not oppose Indemnitee's right to seek any such
adjudication.
(b) In the event that a determination shall have been made pursuant
to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial Proceeding commenced pursuant to this Section 11
shall be conducted in all respects as a de novo trial on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination. If
a Change of Control shall have occurred, in any judicial Proceeding commenced
pursuant to this Section 11 the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Sections 9 or 10 of this Agreement that Indemnitee is entitled
to indemnification, the Company shall be bound by such determination in any
judicial Proceeding commenced pursuant to this Section 11, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
Proceeding commenced pursuant to this Section 11 that the procedures and
presumptions of this Agreement are not
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valid, binding and enforceable and shall stipulate in any such court that the
Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 11, seeks
a judicial adjudication to enforce his rights under, or to recover damages for
breach of, this Agreement, Indemnitee shall be entitled to recover from the
Company, and shall be indemnified by the Company against, any and all expenses
(of the types described in the definition of Expenses in Section 1 of this
Agreement) actually and reasonably incurred by him in such judicial
adjudication, but only if he prevails therein. If it shall be determined in
said judicial adjudication that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the expenses
incurred by Indemnitee in connection with such judicial adjudication shall be
appropriately prorated.
12. NON-EXCLUSIVITY: SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Articles of Incorporation, the Bylaws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such
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rights, including execution of such documents as are necessary to enable the
Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
(e) The Company may, to the fullest extent authorized by law, create
a trust fund, grant a security interest and/or use other means (including,
without limitation, letters of credit, surety bonds and other similar
arrangements) to ensure the payment of such amounts as may become necessary to
effect indemnification provided hereunder.
13. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director, officer, employee, agent or fiduciary
of the Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which Indemnitee served at the request
of the Company; or (b) the final termination of all pending Proceedings in
respect of which Indemnitee is granted rights of indemnification or advancement
of Expenses hereunder and of any Proceeding commenced by Indemnitee pursuant to
Section 11 of this Agreement relating thereto. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of Indemnitee and his heirs executors and administrators.
14. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
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15. EXCEPTIONS TO INDEMNIFICATION RIGHTS. Notwithstanding any other
provision of this Agreement, Indemnitee shall not be entitled to indemnification
or advancement of Expenses under this Agreement with respect to any Proceeding,
or any claim therein, brought or made by him against the Company.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
17. CAPTIONS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
18. AMENDMENT AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
20. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified mail, return
receipt requested, with postage prepaid, and shall be deemed delivered on the
third business day after the date on which it is so mailed:
(a) If to Indemnitee, to the address set forth immediately following
Indemnitee's signature hereinbelow;
(b) If to the Company, to 101 Phillippe Parkway, Suite 300, Safety Harbor,
Florida 34695, Attention: Thomas E. Conlan;
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or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. GOVERNING LAW. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware.
22. GENDER. Use of the masculine pronoun shall be deemed to include usage
of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
APOLLO INTERNATIONAL OF
DELAWARE, INC.:
"Company"
By:
---------------------------------
As Its:
-----------------------------
INDEMNITEE:
By:
------------------------------
Name:
------------------------------
Address:
---------------------------
-13-
<PAGE>
REVOLVING LINE OF CREDIT AGREEMENT
REVOLVING LINE OF CREDIT AGREEMENT (the "Agreement') entered into this
____ day of February, 1997, by and among, APOLLO INTERNATIONAL OF DELAWARE,
INC., a Delaware corporation (the "Borrower"), and QUEENSBURY, INC., a Florida
corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, Borrower designs, develops and manufactures computer
monitoring devices used to monitor industrial motors and electric powered
transformers; and
WHEREAS, Borrower desires to receive a revolving line of credit from
Lender and shall grant to Lender a security interest in Borrower's specific and
itemized present and future accounts receivable. (the term "accounts receivable"
or "account", as used herein, means Borrower's right to payment for goods sold
or services rendered by it, which is not evidenced by an instrument or chattel
paper); and
WHEREAS, Borrower's accounts receivable are evidence of sales and
deliveries of personal property usually dealt in by the Borrower or work, labor
and services performed by the Borrower.
NOW, THEREFORE, for the reasons set forth hereinabove, and in
consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree as follows:
1. Recitals. The foregoing recitals are true and correct and form a
part of this Agreement.
2. Advancement of Funds. Subject to the terms of this Agreement,
Lender may from time to time elect to advance funds (the "Loan") to Borrower,
secured by specific and itemized acceptable accounts receivable of Borrower (the
term "acceptable account receivable" or "acceptable account", as used herein,
means an account receivable which conforms to the warranties set forth in
Section 6 and is accepted in writing by Lender.) The amount of each Loan shall
be ninety four and one-half (94.5%) percent of the face value of the specific
acceptable accounts receivable which are collateral for that specific Loan. The
total aggregate principal sum of the Loans outstanding at any one time shall not
exceed FIVE HUNDRED THOUSAND AND 00/100 ($500,000) DOLLARS. Each loan shall be
evidenced by Borrower's collateral note in a form satisfactory to Lender.
Borrower will pay simple interest on each Loan from its operating account at the
rate of one (1%) percent per month computed on a daily rate. Interest will begin
to accrue on the date of receipt of the wire transfer by the Borrower, but
interest payments shall not be due and payable unless a Loan has an outstanding
balance thirty (30) days from the date of receipt of the wire transfer by the
Borrower. The interest amount will be calculated as of the end of the month,
payable by the 10th of the next month. For purposes of the amount subject to
interest calculations at the end of each month, the amount is the then
outstanding principal balance of each Loan that was advanced at least thirty
(30) days prior.
<PAGE>
3. Repayment. Borrower shall repay the Loans to Lender in an amount
equal to the principal sum of the Loans stated above, plus an additional amount
equal to the difference between the principal sum of the Loan and the total face
value of the acceptable accounts receivable which are collateral for that
specific Loan (hereinafter collectively referred to as "Amount Owed"). As
Borrower receives payments from account debtors on specific acceptable accounts
receivable that are collateralized under this Agreement, such payments shall be:
(i) remitted to Lender within three (3) business days of receipt by Borrower,
and (ii) applied to the Amount Owed for the Loan for which such acceptable
accounts receivable is collateral. Any Amount Owed on any Loan and corresponding
interest thereon, may be repaid by Borrower to Lender in part or in full at any
time without penalty. All Amounts Owed shall be repaid in full no later than
December 31, 1998. Until Borrower has repaid the principal sum amount of each
Loan in full, Borrower will pay interest on the Loan in accordance with Section
2 above. All Payments, including interest payments, shall be sent to Lender at
Lender's address listed at the end hereof.
4. Accounts Receivable as Security. As security for the repayment of
the principal sum and interest of all Loans made hereunder, Borrower grants
Lender a security interest in only those specific acceptable accounts receivable
to which each Loan applies and Borrower has borrowed funds against.
5. Collections. Borrower shall continue to collect and enforce the
accounts receivable. Borrower shall bear all costs of collection and
enforcement, including attorneys' fees and out-of-pocket expenses.
6. Borrower's Warranties and Representations as to Accounts. Borrower
warrants and represents with respect to each acceptable account receivable that:
a. The account receivable is due and payable and is not past
due or in default. For purposes of this Section 6, an account receivable on
which a payment has not been made for six (6) or more consecutive months shall
be deemed in default.
b. The account receivable arose from an outright sale of
goods by Borrower, or from services rendered by Borrower, and, if from a sale,
that the goods have been delivered to the account debtor, and Borrower has in
its possession shipping and delivery receipts evidencing shipment and delivery.
c. The account receivable is based on a bona fide written
order or contract obtained from the Borrower's customer and that the account is
for goods sold and delivered or for work, labor and services performed or
materials furnished pursuant to the terms of such written order or contract.
d. The account receivable is not subject to any assignment,
claim, lien, or security interest and Borrower will not create any further
security interest therein, nor permit its rights therein to be reached by
attachment, levy, garnishment, or other judicial process.
e. The account receivable is not subject to any defense,
counterclaim or set-off, or to any claim for credits, allowances, or adjustment
by the account debtor for any reason
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<PAGE>
except a discount allowed for prompt payment, nor will Borrower, subsequent to
such assignment, incur any obligation which may create any defense, counterclaim
or set-off thereto.
f. If the account debtor refuses to accept or returns any of
the goods, in whole or in part, Borrower will immediately notify Lender and
substitute a new acceptable accounts receivable of equal face value.
g. No notice of the bankruptcy or insolvency of the account
debtor has been received.
h. The account receivable is accurately posted in Borrower's
books and records showing all sales, claims, and allowances on sales and
merchant associated with such account receivable.
7. Borrower's Covenants as to Accounts. Borrower covenants with respect
to acceptable accounts receivable that:
a. Any account which was originally an acceptable accounts
receivable shall lose its acceptable status if (1) it becomes more than six (6)
months past due; (2) the account debtor refuses to accept or returns any of the
goods from the sale of which the account arose; or (3) the account does not
continue to conform to the other warranties set forth in Section 6.
b. If any acceptable accounts receivable loses its
acceptable status, the Borrower shall substitute a new acceptable accounts
receivable of equal face value and immediately notify Lender in writing and
execute the necessary documents to give Lender a security interest in the
substitute accounts receivable and perfect such interest therein.
8. Other Covenants of Borrower. Borrower covenants that:
a. It will at all times keep, at its principal place of
business in Apollo Beach, Florida, accurate and complete records and accounts
concerning all accounts receivable, and will submit to Lender, in the form
prescribed by the latter, reconciliations of accounts receivable which set forth
the total amount of all of its accounts receivable outstanding as of the date of
the report, and which of them are then acceptable accounts receivable.
b. Borrower will promptly advise Lender in writing of its
opening of any new places of business, or the closing of any existing places of
business.
c. Borrower will sign any financing statement or statements,
in form satisfactory to Lender, that Lender at any time may request or wishes to
file in order to protect its security interest in any collateral for Loans made
hereunder.
3
<PAGE>
d. Borrower will execute and deliver to Lender all
instruments, documents, or other writing that Lender deems necessary to carry
out the terms hereof and to perfect its security interest in acceptable accounts
receivable that are being used as collateral.
e. Lender, or any of its agents shall have the right to, at
Borrower's place or places of business and with three (3) business days notice,
inspect, audit, check, and make extracts from the books, records, journals,
orders, receipts, correspondence, and other data relating to acceptable accounts
receivables.
f. Borrower will not grant a security interest in any raw
material, goods in process, finished goods, or inventory without Lender's prior
permission.
g. The Borrower shall, as its own expense, promptly adjust all
disputes with its customers.
9. Default. The occurrence of any one or more of the following events
shall constitute a default by Borrower hereunder:
a. Borrower fails to pay all Amounts Owed on all Loans made
hereunder by December 31, 1998, or fails to pay the accrued interest thereon
when due.
b. Borrower fails to comply with any provision of this
Agreement.
c. Any representation, warranty, or certificate made or
furnished by Borrower to Lender as set forth in this Agreement, or otherwise
made in connection therewith, is materially false.
d. Borrower makes an assignment of an acceptable accounts
receivable for the benefit of its creditors.
e. Proceedings in bankruptcy, for reorganization of Borrower,
or for the readjustment of any of its debts under the U.S. Bankruptcy Code or
any other existing or future federal or state law for the relief of debtors, are
commenced by or against Borrower.
f. A receiver or trustee is appointed for Borrower or for any
substantial part of its assets; or any proceedings are instituted for the
dissolution, or the full or partial liquidation, of Borrower, and such
proceeding has not been dismissed within ninety (90) days.
10. Remedies. If Borrower is in default under this Agreement, Lender
shall have such rights with respect to any then outstanding notes evidencing
Loans made hereunder, all acceptable accounts receivable in which Lender has a
security interest, as well as those remedies provided by law. Borrower shall
also, upon default, transfer to Lender complete ownership of all accounts
receivable used to collateralize any then outstanding Amount Owed.
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<PAGE>
11. Term. The term of this Agreement shall commence on the date first
above written and shall terminate on December 31, 1998, unless this Agreement is
renewed or extended in writing and with the mutual consent of both parties.
12. Notices. All notices under this Agreement shall be in writing and
delivered personally or mailed by certified mail, postage prepaid, to the
parties at their addresses listed at the end hereof.
13. Modification and Waiver. Neither this Agreement nor any of the
terms or conditions hereof may be waived, amended or modified except by means of
a written instrument duly executed by both parties hereto. Any waiver or
amendment shall only be applicable in the specific instance, and shall not
constitute or be construed as a waiver or amendment in any other or subsequent
instance. No failure or delay on the part of either party in respect of any
enforcement of obligations hereunder shall in any manner affect such party's
right to seek or effect enforcement at any other time or in respect of any other
required performance.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, and to the exclusion of the
law of any other forum, without regard to the jurisdiction in which any action
or special proceeding may be instituted. The obligations set forth in this
Agreement shall survive any expiration or termination of this Agreement. Each
party hereto agrees to submit to the personal jurisdiction and venue of the
state and/or federal courts located in Orange County, Florida, for resolution of
all disputes arising out of, in connection with, or by reason of the
interpretation, construction, and enforcement of this Agreement, and hereby
waives the claim or defense therein that such courts constitute an inconvenient
forum.
16. Entire Agreement. This instrument contains and represents the
entire and complete understanding and agreement between the parties hereto. The
parties hereto agree that no prior statements, representations, promises,
agreements, instructions, or understandings, written or oral, pertaining to this
Agreement, other than those specifically set forth and stated herein, shall be
of any force or effect.
17. Construction. No legal or other presumption against the party
drafting this Agreement concerning its construction, interpretation or otherwise
accrue to the benefit of any party to this Agreement and each party expressly
waives the right to assert such a presumption in any proceedings or disputes
connected with, arising out of, or involving this Agreement.
18. Headings. The titles to the numbered paragraphs in this Agreement
are solely for the convenience of the parties and shall not be used to explain,
modify, simplify, or aid in the interpretation of said covenants or provisions
set forth therein.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
APOLLO INTERNATIONAL OF DELAWARE, INC.
6542 U.S. Highway 41, Suite 215
Apollo Beach, Florida 33572
By: /S/ Steven Smith
-------------------------------------------------
Its: Executive Vice President
-------------------------------------------------
QUEENSBURY, INC.
4900 Woodway, Suite 650
Houston, Texas 77056
By: /S/ Brenda Heartfield
-------------------------------------------------
Its: President
-------------------------------------------------
6
<PAGE>
Exhibit 10.16
AMENDED AND RESTATED
LICENSE AGREEMENT
THIS AMENDED AND RESTATED LICENSE AGREEMENT (this "Agreement") is made and
entered into as of the 16th day of December, 1996 by and between APOLLO
INTERNATIONAL of DELAWARE, INC., a Delaware corporation ("Licensee"), and
MATHIAS E. LUKENS, Jr. d/b/a/ WHR PARTNERS ("Licensor").
R E C I T A L S:
WHEREAS, this Agreement amends, restates and supersedes in its entirety
that certain License Agreement entered into by and between Licensee and Licensor
dated December 16, 1996 (the "Original").
WHEREAS, this Agreement sets forth the terms and conditions under which
Licensor grants to Licensee, its successors and assigns, certain rights and
licenses in and to the Licensed Work (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Licensor and Licensee agree as
follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the following meanings:
"CODE" shall mean computer programming code in both Object Code and
Source Code.
" CUSTODIAN" shall mean a person or entity selected from time to time
by Licensee to act as its agent and under its instruction with respect to the
custody of some or all of the Licensed Work.
"DERIVATIVE WORK" shall mean a work which is based upon one or more
preexisting works, such as a revision, enhancement, modification, translation,
abridgment, condensation, expansion, or any other form in which such preexisting
works may be recast, transformed, or adapted, and which, if prepared without
authorization of the owner of the copyright in such preexisting work, would
constitute a copyright infringement. For purposes hereof, a Derivative Work
shall also include any compilation that incorporates such a preexisting work.
"DEVELOPMENT ENVIRONMENT" shall mean any device, programming,
documentation, media, and other materials, including compilers, "workbenches,"
tools, and higher-level or "proprietary" languages, used by Licensor or required
by Licensee for the development, maintenance, or implementation of any portion
of the Licensed Work.
<PAGE>
"DOCUMENTATION" shall mean user manuals and other written materials
that relate to particular Code, including materials useful for design (e.g.,
logic manuals, flow charts, and principles of operation), and machine-readable
text or graphic files subject to display or printout.
"INTELLECTUAL PROPERTY" shall mean the intangible legal rights or
interests evidenced by or embodied in (1) any idea, design, concept, technique,
invention, discovery, or improvement, whether or not patentable, but including
patents, patent applications, trade secrets, and know-how, (2) any work of
authorship, whether or not copyrightable, but including copyrights and any moral
rights recognized by law, and (3) any other similar rights, in each case on a
worldwide basis.
"LICENSED WORK" shall mean (1) the Code and Documentation described
in ATTACHMENT 1 hereto, (2) all Updates that Licensor offers generally to its
customers from time to time
"OBJECT CODE" shall mean the machine-readable form of the Code.
"SOURCE CODE" shall mean the human-readable form of the Code and
related system documentation, including all comments and any procedural code
such as job control language.
"SUBSIDIARY" shall mean a corporation, company, or other entity more
than fifty percent (50%) of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority),
are, or which does not have outstanding shares or securities, as may be the case
in a partnership, joint venture, or unincorporated association, but more than
fifty percent (50%) of the ownership interest representing the right to make the
decisions for such corporation, company, or other entity is, now or hereafter,
owned or controlled, directly or indirectly, by a party hereto, but such
corporation, company, or other entity shall be deemed to be a Subsidiary only so
long as such ownership or control exists.
"THIRD-PARTY WORK" shall mean any Code or Documentation in which any
person or entity other than Licensor owns any pertinent Intellectual Property
rights and which either is incorporated in the Licensed Work or represents a
preexisting work of which the Licensed Work is a Derivative Work.
"UPDATES" shall mean all changes or additions, including all
modifications, revisions, or enhancements, to any portion of the Licensed Work
that correct errors, problems, or defects, or that provide corrections, or that
improve functions, add new functions, or improve performance by changes in or
additions to system design or coding.
2
<PAGE>
2. GRANT OF LICENSE.
a. SCOPE. Licensor hereby grants to Licensee, its successors and
assigns, a worldwide, irrevocable, nonexclusive right and license to use,
execute, reproduce, display, perform, incorporate into products, distribute
internally and externally, and to prepare Derivative Works of, the Licensed
Work.
b. PICTORIAL, GRAPHIC, AND AUDIOVISUAL WORKS. The rights and
licenses granted hereunder shall include the right and license to copy, display,
and perform pictorial, graphic, or audio/visual works, including icons, screens
and characters, created as a result of execution of the Licensed Work or any
Derivative Work thereof, whether such pictorial, graphic works are created by
use of the Licensed Work or with other programming or through other means.
c. INFORMATION AND DOCUMENTS. Licensor further grants to Licensee,
its successors and assigns, a worldwide, irrevocable, nonexclusive right and
license to use, copy, and distribute, and prepare Derivative Works of, any
information or documents that Licensor may provide to Licensee, its successors
and assigns, in connection with the use of the Licensed Work.
d. INTELLECTUAL PROPERTY AND MORAL RIGHTS. The rights and licenses
granted hereunder shall include the right and license in and to any Intellectual
Property to the extent required for Licensee to exercise the other rights and
licenses granted hereunder. Licensor hereby waives any and all moral rights,
including any right to identification of authorship, rights of approval of
modifications, or limitation on subsequent modification that Licensor has or may
have in the Licensed Work.
e. FURTHER ASSISTANCE. Promptly upon request by Licensee, Licensor
shall give Licensee all assistance reasonably required to evidence more fully
and otherwise give full and proper effect to the aforementioned grant of rights
and licenses.
f. THIRD-PARTY WORKS. Licensor shall at all times assure that the
Licensed Work, in executable form, is free from Third-Party Works.
g. IRREVOCABILITY. Except as expressly provided herein, this
Agreement and the rights and licenses granted hereunder shall not be impaired or
diminished by the occurrence or continuance of any breach of any other agreement
between the parties, any lack of capacity or authority, any reorganization,
liquidation, dissolution, merger, or consolidation, or any other change of
circumstances of Licensor or Licensee.
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<PAGE>
3. PAYMENTS. Licensee shall pay Licensor for the license and other
rights granted Licensee herein as follows:
a. CASH. One Hundred Twenty Five Thousand ($125,000) Dollars in
lawful money as follows:
(i) Licensee shall repay up to one-half (1/2) of the above
amount on the earlier of (a) September 1, 1998; or (b) the last day of the first
(1st) fiscal quarter that Licensee's gross revenue exceeds Five Hundred
Thousand ($500,000) dollars, subject to the determination by the Licensee's
President that there will be sufficient funds available to meet Licensee's
expenses.
(ii) Licensee shall repay one-half (1/2), or more, of the then
outstanding balance of the above amount on the last day of each subsequent
fiscal quarter that Licensee's gross revenue exceeds Five Hundred Thousand
($500,000) dollars, subject to the determination by the Licensee's President
that there will be sufficient funds available to meet Licensee's expenses.
b. STOCK. One Hundred Twenty Five Thousand ($125,000) Dollars in
the form of common stock of Licensee at $3.00 per share. The total payment
shall be Forty One Thousand Six Hundred Sixty-Six and 6666/10000 (41,666.6666)
shares (the "Shares") of Licensee's common stock. The first payment in stock of
20,833.3333 shares shall be made on the date the software licensed hereunder is
successfully run on any of Licensee's product. The second payment in stock of
20,833.3333 Shares shall be made when the first successful beta trial is
concluded prior to the first full commercial shipment. The transfer of the
shares shall be in accordance with a stock purchase agreement to be entered into
concurrently herewith, the form of which is appended hereto as ATTACHMENT 2.
For purposes of this Agreement, the terms "beta trial" shall mean testing the
product at a customer's site under normal operating conditions.
4. DELIVERIES. Licensor has delivered a complete set of the Source
Code for the Licensed Work to Licensee. Licensee and its designees shall at all
times be entitled to at least one full set of all media and other tangible
property representing or containing the Licensed Work, which shall promptly be
delivered to Licensee upon Licensee's request to the extent it at any time does
not have possession of any part thereof. In addition, in such event, if it so
elects, Licensee or its designee may enter Licensor's premises, in as
nondisruptive a manner as possible, and collect, copy, and retain one full set
of all such items. Licensee shall reimburse Licensor for reasonable
out-of-pocket costs of media, copy charges, or supplies incurred as a result of
such retrieval.
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<PAGE>
5. TREATMENT OF SOURCE CODE. Licensee agrees to treat (or instruct a
Custodian to treat) the Source Code version of the Licensed Work, including
related development documentation, with the same care and discretion with which
it treats the similar Source Code versions of other programming products under
similar circumstances, for a period of five (5) years after the date of receipt
of such Source Code. If Licensee decides to license some or all of the Source
Code to its customers, such license shall be subject to protective terms
equivalent to the terms Licensee uses to protect other similar Source Code. The
foregoing obligations shall not apply to any aspect of the Source Code that is
(1) publicly available or becomes so in the future without restriction, (2)
rightfully received by Licensee from a third party and not accompanied by
confidentiality obligations, (3) already in Licensee's possession and lawfully
received from sources other than Licensor, (4) independently developed by
Licensee, or (5) approved in writing for release or disclosure without
restriction by Licensor.
6. PROTECTION. Licensor shall, at Licensor's expense, take such action
from time to time as may be necessary or prudent, in its reasonable judgment, to
protect and preserve its title and interest in the Intellectual Property
represented by the Licensed Work, including by compliance with applicable laws
and regulations respecting the continued registration of any registered
copyrights and by seeking to enjoin any infringement of the Intellectual
Property represented by the Licensed Works by third parties.
7. REPRESENTATIONS AND WARRANTIES OF LICENSOR REGARDING LICENSE OF
SOFTWARE. Licensor makes the following representations and warranties for the
benefit of Licensee:
a. NO CONFLICT. Licensor represents and warrants that it is under
no obligation or restriction, nor will it assume any such obligation or
restriction, that does or would in any way interfere or conflict with, or that
does or would present a conflict of interest concerning, the performance to be
rendered by Licensor hereunder or the rights and licenses granted to Licensee
hereunder.
b. OWNERSHIP AND AUTHORITY. Licensor represents and warrants that
(1) it is the owner of the Licensed Work, free from all Third-Party Works; (2)
Licensor has full and sufficient right to grant the rights and/or licenses
granted to Licensee hereunder; (3) the Licensed Work has not been published
under circumstances which have caused a loss of copyright therein; and (4) the
Licensed Work does not infringe any Intellectual Property rights of any third
party, nor has any claim (whether or not embodied in an action, past or present)
of such infringement been threatened or asserted, and no such claim is pending,
against Licensor or (insofar as Licensor is aware) against any entity from which
Licensor has obtained such rights.
c. CONFORMITY OF LICENSED WORK. Licensor represents and warrants
that the Licensed Work (1) has been prepared by Licensor (or its assignors or
predecessors-in-interest) with professional diligence and skill, (2) will
function on the machines and with operating systems for which it is designed,
and (3) will conform to the specifications and requirements set forth.
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<PAGE>
d. NO EXTRINSIC ASSURANCES. Licensor represents and warrants that,
in entering into this Agreement, it does not and will not rely on any promises,
inducements, or representations made by Licensee with respect to the subject
matter of this Agreement, nor on the expectation of any other business dealings
with Licensee, now or in the future, except as specifically provided herein.
e. FREE FROM DEFECTS. Licensor warrants that the Licensed work is
free from all errors or defects and will function in accordance with the
expectations of Licensee. Licensor shall repair any errors or defects free of
charge, including both labor and materials, reported to it by Licensee for a
period of one (1) year from the date of the last payment of common stock under
Section 3 hereof. Any errors or defects Licensor is requested to repair after
One (1) year from the above referenced date, will be done on a time and
materials basis at Licensor's usual and customary rates or by separate contract.
8. TERM AND TERMINATION.
a. TERM OF AGREEMENT. This Agreement shall become effective
commencing on the date first set forth above. Unless terminated hereunder, this
Agreement shall remain in force through the expiration of all copyrights and
other Intellectual Property rights in the Licensed Work.
b. TERMINATION. Licensor shall have the right to terminate this
Agreement, including the rights and licenses granted under Section 2 hereof, if
and only if one of the following occurs:
(i) An involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(x) relief in respect of Licensee or any Subsidiary of Licensee, or of a
substantial part of the property or assets of Licensee or any Subsidiary of
Licensee under Title 11 of the United States Bankruptcy Code, as now constituted
or hereafter amended, or any other federal or state bankruptcy, insolvency,
receivership, or similar law; (y) the appointment of a receiver, trustee,
custodian, sequestrator, conservator, or similar official for Licensee or any
Subsidiary of Licensee or any substantial part of the property or assets of
Licensee or a Subsidiary of Licensee; or (z) the winding-up or liquidation of
Licensee or any Subsidiary of Licensee; and such proceeding or petition shall
continue undismissed for ninety (90) days or an order or decree approving or
ordering any of the foregoing shall be entered; or
(ii) Licensee or any Subsidiary of Licensee shall (u) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code, as now constituted or hereafter amended, or any other
federal or state bankruptcy, insolvency, receivership, or similar law; (v)
consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in subsection
8.b.i. above; (w) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator, or similar official for Licensee
or any Subsidiary of Licensee or for a substantial part of the property or
assets of
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<PAGE>
Licensee or any Subsidiary of Licensee; (x) file an answer admitting the
material allegations of a petition filed against it in any such proceeding; (y)
make a general assignment for the benefit of creditors; or (z) become unable or
admit in writing its inability, to pay its debts as they become due.
Provided that such conditions have been satisfied, Licensor may effect such
termination by sending Licensee notice to that effect. Promptly following
receipt of such notice, Licensee (and any Custodian then in possession of any
portion of the Licensed Work) shall return or destroy any copies of the Licensed
Work then in its possession. Any other termination shall be wrongful and beyond
the scope of this Agreement, and shall in no way terminate or abate the rights
and licenses granted under Section 2 hereof, which shall remain in full force
and effect.
c. SURVIVAL. The termination of this Agreement shall not terminate
or abate the continued applicability of Sections 7, 8 and 9 hereof, which shall
remain in full force and effect with respect to the subject matter of this
Agreement.
d. RESERVATION OF RIGHTS. In the event of termination of this
Agreement, Licensee, its Subsidiaries, and customers shall, in addition, have
all rights which it or they would have had if Licensee had never entered into
this Agreement and which the public has at the time of termination.
e. RESIDUALS. It is mutually acknowledged that, during the normal
course of its dealings with Licensor and the Licensed Work under this Agreement,
Licensee or its agents may become acquainted with ideas, concepts, know-how,
methods, techniques, processes, skills, concepts, and adaptations pertaining to
the Licensed Work, including those which Licensor considers to be proprietary or
secret. Notwithstanding anything in this Agreement to the contrary, and
regardless of any termination of this Agreement under this Section 8, Licensee
shall be entitled to use, disclose, and otherwise employ any ideas, concepts,
know-how, methods, techniques, processes, and skills, concepts, and adaptations,
including generalized features of the sequence, structure, and organization of
any works of authorship, in conducting its business, and Licensor shall not
assert against Licensee or its personnel any prohibition or restraint from so
doing; provided, however, that prior to termination of this Agreement under this
Section 8, the foregoing provision shall apply only to information known to and
remembered by such party or its personnel without the use of or reliance on any
materials or other tangible objects containing the information of Licensor.
9. LIMITATIONS OF LIABILITIES.
a. EXCLUSION OF INDIRECT DAMAGES, ETC. Neither party shall be
entitled to indirect, incidental, or consequential damages, including lost
profits based on any breach or default of this Agreement by the other party.
This limitation shall not apply to any liabilities of Licensor to Licensee under
Sections 2 and 7 hereof.
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b. MAXIMUM LIABILITY. In no event shall Licensee be liable to
Licensor, its successors and assigns, for damages exceeding the payment
amounts specified in Section 3 hereof.
10. GENERAL.
a. NOTICE OR PAYMENTS. Any notice or payment required or permitted
to be made or given by either party hereto pursuant to this Agreement will be
sufficiently made or given on the date of issuance if sent by such party to the
other party by mail, telecopy, commercial courier, personal delivery, or a
similar reliable delivery method, addressed as set forth below or to such other
address as a party shall designate by written notice given to the other party.
In the case of Licensee: Apollo International of Delaware, Inc.
Attention: David Clarke
6542 North U.S. Highway 41
Suite 215
Apollo Beach, Florida 33572
In the case of Licensor: WHR Partners
Attention: Matt Lukens
P.O. Box 262
East Greenwich R.I. 02818
b. INDEPENDENT CONTRACTOR. Licensor is and shall remain an
independent contractor with respect to all performance rendered pursuant to this
Agreement. Neither Licensor nor any of its employees shall be considered an
employee or agent of Licensee for any purpose.
c. COMPLIANCE WITH LAWS AND REGULATIONS. Licensor shall, at its own
expense, comply with any governmental law, statute, ordinance, administrative
order, rule, or regulation relating to its duties under this Agreement and shall
procure all licenses and pay all fees and other charges required thereby.
d. TAXES. Licensor shall have sole responsibility for the payment
of all taxes and duties imposed by all governmental entities, as they pertain to
its duties, obligations, and performance under this Agreement.
e. TRADEMARKS. Licensee may, at its option, identify the Licensed
Works prepared by Licensor as having been developed by Licensor.
f. TIME OF THE ESSENCE. Unless otherwise specified in this
Agreement, time shall be of the essence with respect to the duties, obligations,
and performance of Licensor under this Agreement.
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g. ASSIGNMENT. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises, and agreements by or on
behalf of Licensor or Licensee that are contained in this Agreement shall bind
and inure to the benefit of their respective successors and assigns. Because it
is the intent of the parties that the rights, duties, and obligations of
Licensor under this Agreement shall be recognized to consist in large part of
personal services of a unique, specialized, and individual nature, Licensor
shall not assign or delegate this Agreement or any of its rights, duties, or
obligations to any person or entity without Licensee's prior written approval.
h. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the internal, substantive laws of the State of Florida,
without giving effect to the conflicts of law principals thereof.
i. AMENDMENT AND WAIVER. No amendment or modification of this
Agreement shall be effective unless set forth in a writing executed by
authorized representatives of both parties. No waiver of any provision of this
Agreement shall be effective unless it is set forth in a writing which refers to
the provisions so waived and the instrument in which such provision is contained
and is executed by an authorized representative of the party waiving its rights.
No failure or delay by either party in exercising any right, power, or remedy
will operate as a waiver of any such right, power, or remedy.
j. FREEDOM OF ACTION. This Agreement shall not be construed to
limit Licensee's right to obtain services or software programs from other
sources, to prohibit or restrict Licensee from independently developing or
acquiring competitive materials, or to restrict Licensee from making, having
made, using, leasing, licensing, selling, or otherwise disposing of any products
or services whatsoever, nor is either party's right to deal with any other
licensors, suppliers, contractors, or customers limited hereby.
k. ENTIRE AGREEMENT. This Agreement and its Attachments, by their
terms, constitute and express the entire agreement and understanding of the
Licensee and Licensor and supersede all prior agreements, oral or written, and
all other communications relating to the subject matter hereof.
l. INVALIDITY OF PROVISIONS. If any provisions of this Agreement
shall be determined by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.
m. HEADINGS. The headings in this Agreement are for purposes of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any of the provisions of this Agreement.
n. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
executed by their respective authorized representatives.
MATHIAS E. LUKENS d/b/a WHR
PARTNERS
By: /s/ Mathias E. Lukens
---------------------------------
Mathias E. Lukens
APOLLO INTERNATIONAL OF DELAWARE, INC.
BY: /s/ David W. Clarke
----------------------------------
David W. Clarke, President
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Exhibit 10.17
ATTACHMENT 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 16th day of December, 1996 by and between APOLLO INTERNATIONAL of
DELAWARE, INC., a Delaware corporation ("Corporation"), and MATHIAS E. LUKENS,
Jr. d/b/a WHR PARTNERS ("Subscriber").
R E C I T A L S :
WHEREAS, Subscriber and the Corporation have entered into an Amended and
Restated License Agreement dated as of and effective December 16, 1997 (the
"License Agreement") pursuant to which Subscriber is to receive cash and common
stock of the Corporation for the granting of a certain license and other rights
to the Corporation thereunder.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Corporation and Subscriber agree
as follows:
1. PAYMENT OF SHARES. As partial consideration for the rights granted
the Corporation under the License Agreement, Subscriber shall receive
41,666.6666 shares of the Corporation is Common Stock (the "Shares") issuable
under the terms of the License Agreement as follows:
(i) 20,833.3333 Shares on the date that the software licensed under
the License Agreement is successfully run on any of the Corporation's product;
and
(ii) 20,833.3333 shares when the first successful beta trial is
concluded prior to the first full commercial shipment.
2. REPRESENTATIONS AND WARRANTIES. Subscriber hereby represents,
warrants and covenants to the Corporation that in connection herewith:
a. REVIEW AND EVALUATION OF INFORMATION REGARDING THE CORPORATION:
Subscriber has had an opportunity to examine the governing instruments and the
material documents and records of the Corporation, to ask questions and receive
answers from the representatives of the Corporation concerning the Corporation's
financial condition and business, and to obtain such other information that he
has deemed necessary to make a fully informed decision.
b. PURCHASER'S FINANCIAL EXPERIENCE. Subscriber is sufficiently
experienced in financial and business matters to be capable of evaluating the
merits and risks of the investment in the Shares. Subscriber is familiar with
the nature and risks attending investments
<PAGE>
in privately offered securities, and he has determined that a purchase of Shares
is consistent with his forecasted income and investment objectives.
c. SUITABILITY OF INVESTMENT. Subscriber understands that the
Shares are speculative investments and involve a high degree of risk.
Subscriber has evaluated the merits and risks of Subscriber's proposed
investment in the Shares, including those risks particular to Subscriber's
personal situation, and he has determined that this investment is suitable for
Subscriber. Subscriber had adequate financial resources for an investment of
this character, and at this time Subscriber could bear a complete loss of his
investment. Further Subscriber will continue to have, after making his
investment in the Shares adequate means of providing for his current needs, the
needs of those dependent on him, and possible personal contingencies.
d. INVESTMENT INTENT. Subscriber is purchasing the Shares for
investment purposes only and for his own account, and has no present commitment,
agreement or intention to sell, distribute or otherwise dispose of any of them
or enter into any such commitment or agreement.
e. UNREGISTERED SECURITIES; LIMITATIONS ON DISPOSITION. Subscriber
understands that the Shares are being sold without registration under federal or
any state securities laws ("Securities Laws") by reason of specific exemptions
from registration and that the Corporation is relying on the information given
herein in its determination of whether such specific exemptions are available.
Subscriber understands that because the Shares have not been and will not be
registered under the Securities Laws, they cannot be sold unless and until they
are subsequently registered or an exemption from registration is available.
Subscriber may have to bear the economic risk of holding the Shares for an
indefinite period of time since there is no public market for the Shares and
none is likely to develop. Subscriber represents that he can afford to hold the
Shares for an indefinite period of time.
f. NON-RELIANCE. Subscriber is not relying on the Corporation or
any representation contained herein with respect to the tax effect of his
investment in the Corporation.
g. ACCREDITED INVESTOR. Subscriber is a director of the Corporation
and as such is an accredited investor as that term is defined in Section 501(a)
of Regulation D as promulgated under the Securities Act of 1933, as amended.
h. RESIDENCY. Subscriber is a bona fide resident of the State of
Rhode Island, or if an entity, its principal place of business is located in
Rhode Island.
3. INDEMNIFICATION. Subscriber shall indemnify and hold harmless the
Corporation and its agents and counsel against any and all loss, damage,
liability or expense (including attorney's fees and costs) which may be suffered
by reason of any breach of his representations, warranties or covenants
contained in Section 2 hereof.
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<PAGE>
4. REGISTRATION RIGHTS.
a. "PIGGYBACK" REGISTRATION.
(i) If the Corporation at any time after June 1, 1998 and
subsequent to an initial public offering ("Secondary Offering") proposes to
register any of its securities under the Securities Act (other than in
connection with a merger or pursuant to Form S-8 or other comparable form not
available for registering the Shares (sometimes hereinafter referred to as
"Registrable Shares") for sale to the public), the Corporation shall, at least
sixty (60) days prior to such filing, give written notice of such proposed
filing to the Subscriber at the address set forth herein and shall offer to
include in such registration statement any of the Registrable Shares which
Subscriber may own on the proposed date of filing of such registration
statement. Upon receipt by the Company, not less than fifteen (15) days prior
to the proposed filing date, of a request for inclusion of any such shares, the
Company shall include such Shares in such registration statement, subject to any
lock-up or other limitations that may be imposed by an underwriter if such
offering is an underwritten public offering.
(i) The Corporation shall not be required to include any of
the Subscriber's Registrable Shares in the registration statement relating to an
underwritten offering of the Corporation's securities unless the Subscriber
accepts the terms of the underwriting as agreed upon between the Corporation and
the underwriters selected by it (provided such terms are usual and customary for
selling stockholders) and the Subscriber agrees to execute and/or deliver such
documents in connection with such registration as the Corporation or the
managing underwriter may reasonably request.
(ii) If the managing underwriter shall restrict the amount
of the Subscriber's Registrable Shares which can be included in a Secondary
Offering, then the balance of such Registrable Shares shall continue to be fully
subject to the terms and rights of this Agreement, which specifically includes
piggyback rights in any subsequent Secondary Offering, until all such
Registrable Shares have been registered.
(iii) The Corporation may, in its sole discretion and
without the consent of the Subscriber, withdraw such registration statement and
abandon the proposed Secondary Offering in which the Subscriber had requested to
participate, but such abandonment shall not preclude subsequent request for
registration pursuant to this Section 4.
b. EXPIRATION OF REGISTRATION RIGHTS. The obligations of the Corporation
to register shares of the Registrable Shares under Sections 4 of this Agreement,
shall terminate five (5) years after the date hereof, unless such obligations
terminate earlier in accordance with the terms of this Agreement.
c. COOPERATION WITH CORPORATION. The Subscriber will cooperate with the
Corporation in all respects in connection with this Agreement, including,
without limitation, timely supplying all information reasonably requested by the
Corporation and executing and
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<PAGE>
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Shares
d. EXPENSES.
(i) All expenses incurred by the Corporation in complying with the
provisions of this Section 4, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of Corporation
counsel and independent public accountants for the Corporation, fees and
expenses (including counsel fees) incurred in connection with complying with
state securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars
and costs of insurance, but excluding any Selling Expenses and expenses of
counsel for the Subscriber, are called "Registration Expenses". All
underwriting discounts, selling commissions and underwriter expense
reimbursement allowances applicable to the sale of Registrable Shares, as well
as all fees and expenses of counsel for the Subscriber, are called "Selling
Expenses".
(ii) The Corporation will pay all Registration Expenses in connection
with each registration of Registrable Shares pursuant to the provisions of this
Agreement. All Selling Expenses in connection with each such registration
statement shall be borne by the Subscriber.
5. GENERAL.
a. SUCCESSORS AND ASSIGNS. The rights of the Subscriber granted
under this Agreement, including the rights to cause the Corporation to register
the Registrable Shares, may not be assigned without the prior written consent of
the Corporation. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors and
permitted assigns of the Corporation and the Subscriber.
b. ENTIRE AGREEMENT. This Agreement expresses the entire
understanding of the Corporation and the Subscriber with respect to the subject
matter of this Agreement. Nothing in this Agreement shall alter, amend, modify,
delete, rescind or otherwise waive any terms or conditions to which the
Subscriber, or the securities held by such Subscriber, may be subject.
c. NOTICES. Any notice or payment required or permitted to be made
or given by either party hereto pursuant to this Agreement will be sufficiently
made or given on the date of issuance if sent by such party to the other party
by mail, telecopy, commercial courier, personal delivery, or a similar reliable
delivery method, addressed as set forth below or to such other address as a
party shall designate by written notice given to the other party.
In the case of Corporation: Apollo International of Delaware, Inc.
Attention: David Clarke
6542 North U.S. Highway 41
Suite 215
Apollo Beach, Florida 33572
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<PAGE>
In the case of Subscriber: WHR Partners
Attention: Matt Lukens
P.O. Box 262
East Greenwich R.I. 02818
d. AMENDMENT AND WAIVER. No amendment or modification of this
Agreement shall be effective unless set forth in a writing executed by
authorized representatives of both parties. No waiver of any provision of this
Agreement shall be effective unless it is set forth in a writing which refers to
the provisions so waived and the instrument in which such provision is contained
and is executed by an authorized representative of the party waiving its rights.
No failure or delay by either party in exercising any right, power, or remedy
will operate as a waiver of any such right, power, or remedy.
e. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the internal, substantive laws of the State of Florida,
without giving effect to the conflicts of law principles thereof.
f. INVALIDITY OF PROVISIONS. If any provisions of this Agreement
shall be determined by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.
g. HEADINGS. The headings in this Agreement are for purposes of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any of the provisions of this Agreement.
h. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Shares Purchase
Agreement as of the date and year first written above.
MATHIAS E. LUKENS d/b/a WHR
PARTNERS
By: /s/ Mathias E. Lukens
------------------------------
Mathias E. Lukens
[SIGNATURES CONTINUED ON NEXT PAGE]
5
<PAGE>
APOLLO INTERNATIONAL OF DELAWARE,
INC.
By: /s/ David W. Clarke
-------------------------------
David W. Clarke, President
6
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is effective as
of June 1, 1996, by and between APOLLO INTERNATIONAL OF DELAWARE, INC., a
Delaware corporation ("Company"), and DAVID W. CLARKE ("Executive") currently
holding the position of President and Chief Executive Officer.
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Executive is essential to the Company's growth and
success; and
WHEREAS, the Company desires to employ Executive as its Chief Executive
Officer and President, and Executive desires to accept such employment, all on
the terms and conditions as hereinafter provided; and
WHEREAS, Executive is currently receiving compensation for services
rendered to the Company and/or its subsidiaries.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Term. Subject to the provisions for termination as hereinafter
provided, the term of this Employment Agreement shall begin on June 1, 1996 (the
"Commencement Date") and shall continue for the five (5) year period thereafter.
Such term automatically shall be extended for one (1) additional Contract Year
(as hereinafter defined) as of each anniversary of the Commencement Date in each
year beginning with the fifth anniversary of the Commencement Date and
thereafter unless (i) this Agreement is terminated as provided in Section 8
hereof, or (ii) either the Executive or the Company deliver written notice to
the other for the termination of this Agreement ninety (90) days prior to the
Agreement's Expiration Date (as hereinafter defined). The term "Expiration Date"
as used in this Agreement shall mean the date that is five years from the date
of this Agreement, unless this Agreement is extended as provided herein, in
which event the Expiration Date shall mean the date that is the last day of such
Contract Year.
A. For the purposes of this Agreement the term "Contract Year"
shall mean the 365 day (or 366 day, in the case of a leap year) period
commencing with the Commencement Date and each 365 (or 366) day period
thereafter.
2. Duties.
A. In connection with his duties and responsibilities as chief
executive officer and president of the Company, Executive by virtue of such
office shall be the most senior officer of such corporation, and all other
officers and agents of such corporations shall be subject to his
1
<PAGE>
direction. As such chief executive officer, Executive shall be responsible for
interpretation and required implementation of the policies of such corporation
as determined and specified from time to time by the board of director of such
corporation, and he shall be responsible for the general management and
direction of the business and affairs of such corporation. As chief executive
officer, Executive shall have plenary authority and power, including general
executive powers, the authority to delegate, and assign duties, responsibilities
and authorities, and, in the name of such corporation and on their behalf, to
negotiate and make any agreements, waivers or commitments which do not require
the express approval of the board of directors. As chief executive officer of
the Company, Executive shall also have all the powers ordinarily and customarily
exercised by the chief operating officer of a corporation of like type and size
as the Company.
B. Company further hereby agrees to cause Executive to be
named and be re-elected during the Term of this Agreement as a director of the
Company.
C. If the Company materially and adversely changes Executive's
duties and responsibilities (as set forth above) without his consent, Executive
shall have the right to terminate his employment with the Company, but such
termination shall not be considered a voluntary resignation or termination of
such employment or of this Agreement but rather a discharge of Executive by the
Company without cause. Executive shall be deemed not to have consented to any
written proposal calling for a material adverse change in his duties and
responsibilities unless he shall give written notice of his consent thereto to
the board of directors of the Company within fifteen (15) days after receipt of
such written proposal. If Executive shall not have given such consent, the
Company shall have the opportunity to withdraw such proposed material change by
written notice to Executive given within ten (10) days after the end of said
fifteen (15) day period.
D. Executive shall not be required, without his written
consent, to locate his office more than twenty (20) miles distance by public
highway from Apollo Beach, Florida, or to be absent from the metropolitan Apollo
Beach, Florida area on business more than seventy-five (75) working days in any
one year or more than fourteen (14) consecutive days at any one time.
3. Base Salary.
A. As full compensation for services rendered under this
Agreement, the Company shall pay Executive, during the term of this Agreement, a
base salary of ONE HUNDRED FIFTY THOUSAND AND NO/100ths ($150,000.00) per year
(the "Base Salary"), payable in accordance with the normal payroll practices of
the Company. In addition to the Base Salary, the Company shall pay Executive
bonuses from time to time as set forth below.
B. On each January 1, during the term of this Agreement, the
base salary shall be increased to reflect the change in the cost of living,
based upon the change, from the proceeding January 1, in the Consumer Price
Index for All Urban Consumers, as published by the U.S. Bureau of Labor
Statistics (reference base 1982-1984 = 100). On each January 1, and at any time
that there is a change in the financial condition or character of the business
of the Company during the term of this Agreement, a committee comprised of
independent members of the Board
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<PAGE>
of Directors shall review the base salary amount to determine whether or not to
grant additional increases in the base salary amount.
C. Once the Company's annual gross sales, as calculated in
accordance with Generally Accepted Accounting Principles ("GAPP") exceed
$10,000,000 for a fiscal year, Executive's Base Salary shall increase by $5,000
(the "Raise") in each subsequent Contract Year for each additional $1,000,000 in
annual gross sales that the Company achieves during the preceding fiscal year,
up to and including the $30,000,000 annual gross sales milestone, as calculated
in accordance with GAPP. The Raise shall not be effective until January 1st
immediately following the end of the aforementioned fiscal year; provided,
however, that the Executive shall only be entitled to receive the Raise if
during the same fiscal year applicable above, the Company's earnings before
interest and taxes are at least 10% of the annual gross sales.
4. Stock Options. During the term of his employment, Executive will be
provided with stock options under the Company's stock option plan(s) as
determined by the Company's Board of Directors and/or a committee appointed by
the Board of Directors in accordance with the Company's stock option plan.
5. Bonus Compensation. Based upon Executive's performance and the
Company's operating results, and such other factors as the Board of Directors of
the Company shall determine to be appropriate, Executive may receive from time
to time such bonus compensation as a committee comprised of independent members
of the Board of Directors, in its sole discretion, shall authorize or agree to
pay, payable on such terms and conditions as it shall determine ("Bonus").
6. Fringe Benefits. Executive shall be entitled to vacations, health
care benefits, fringe benefits and reimbursement for reasonable out-of-pocket
expense, including but not limited to those hereinafter detailed, in accordance
with the Company's practices covering executive personnel. The Company shall use
reasonable efforts to seek waivers of waiting periods, if any, applicable to
particular benefits. Such benefits shall include:
A. coverage for Executive and his family, under any major
medical and dental insurance programs and plans, and under any short-term,
long-term or permanent disability programs and plans, which are or may become
generally available to management employees of the Company;
B. retirement benefits at such time and on such amounts as are
paid to executives by the Company at such time as the Company institutes a
retirement plan;
C. reimbursement of all properly approved travel and business
related expenses normally paid by the Company for the benefit of its executives.
All expense reports must be approved by the Chief Financial Officer of the
Company prior to reimbursement;
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D. paid vacation per calendar year as is usual and customary
for a chief executive officer of a company similar to Company, at any time or
times selected by Executive taking into account the convenience of the Company.
Executive shall give the Board of Directors reasonable prior notice of selected
vacation times of one week or more. Unused vacation time will be cumulative from
year to year;
E. days of annual sick leave as is usual and customary for a
chief executive officer of a company similar to Company;
F. a holiday on the following days with full pay: New Year's
Day, President's Day, Easter, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and such other holidays as the Company may
declare; and
G. paid leave and reimbursement of all travel, tuition and
related expenses in attending trade conferences and/or seminars and/or college
or other high level courses acceptable to the Board of Directors in its
reasonable discretion.
7. Termination and Payment in the Event of Death or Permanent
Disability.
A. Death. In the event of Executive's death during the term of
this Agreement, Executive's employment with the Company shall be deemed to be
terminated as of the date of death. Upon such termination of employment, the
Executive's estate or other legal representative shall be entitled to receive:
(i) any salary installments and vacation due and
unpaid during the calendar year in which termination of employment occurs,
payable in one lump sum;
(ii) any unpaid Bonus, if any, as may have been
awarded Executive prior to his death under Section 5 hereof, payable in one lump
sum; and
(iii) an amount equal to Executive's then effective
annual Base Salary, as determined under Section 3 of this Agreement, payable in
twelve (12) equal monthly installments on the first day of each calendar month
following the termination of employment under this Section 9.A.
B. Disability. The Company may terminate Executive's
employment hereunder as a result of Executive's "permanent disability" (as
defined below) upon providing notice of such termination to Executive. For
purposes of this Agreement, Executive's "permanent disability" shall be deemed
to have occurred after one hundred twenty (120) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive days,
during which one hundred twenty (120) or ninety (90) days, as the case may be,
Executive, by reason of his physical or mental disability or illness, shall have
been unable to discharge fully his duties under this Agreement. The date of
permanent disability shall be the one hundred twentieth (120th) or ninetieth
(90th) day, as the case may be. In the event Executive, after receipt of notice
from the Company, shall dispute that his permanent disability shall have
occurred, he shall promptly submit
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<PAGE>
to a physical examination by the Chief of Medicine of any major accredited
hospital in the metropolitan area, Orlando, Florida, and, unless such physician
shall issue his written statement to the effect that in his opinion, based on
his diagnosis, Executive is capable of resuming his employment and devoting his
full time and energy to discharging his duties within ten (10) days after the
date of such statement, such permanent disability shall be deemed to have
occurred without further dispute by Executive or Company.
In the event of Executive's permanent disability, Executive
shall be entitled to receive a sum equal to three (3) times Executive's then
effective annual Base Salary, as determined under Section 3 of this Agreement,
and any unpaid Bonus as may have been awarded Executive under Section 5 hereof
prior to his permanent disability, which sum shall be payable in thirty-six (36)
equal monthly installments on the first day of each calendar month following
Executive's permanent disability. The Company shall also provide Executive with
all the insurance and other benefits set forth in Section 6.A., hereof, for the
thirty-six (36) month period immediately following Executive's permanent
disability (provided, however, to the extent that the benefits in Section 6.A.
cannot in fact be paid due to the fact that Executive is not in fact employed
hereunder, the Company promptly shall pay Executive the indubitable monetary,
after-tax equivalent thereof in U.S. dollars, without any present value
adjustment).
Whenever compensation is payable to the Executive hereunder
during a time when he is permanently disabled and such disability (except for
the provisions hereof) would entitle him to disability income or to salary
continuation payments from the Company according to the terms of any plan now or
hereafter provided by the Company or according to any Company policy in effect
at the time of such disability, the compensation payable to Executive hereunder
shall be inclusive of any such disability income or salary continuation and
shall not be in addition thereto. If disability income is payable directly to
the Executive by an insurance company under an insurance policy paid for by the
Company, the amounts paid to him by said insurance company shall be considered
to be part of the payments to be made by the Company to him pursuant to this
Section 9.B., and shall not be in addition thereto.
8. Termination by the Company for Cause.
A. The Company may, at its option, terminate this Agreement by
giving written notice of termination to Executive without prejudice to any other
remedy to which the Company may be entitled, either at law or in equity, under
this Agreement, in the event that:
(i) Executive is convicted of (and such conviction is
sustained on final appeal) or, pleads guilty to, or pleads nolo contendere to a
felony crime involving moral turpitude;
(ii) Executive is found by a court of law to be
guilty (which guilty verdict is sustained on final appeal) of or pleads guilty
to or no contest to fraud, conversion, embezzlement, intentionally falsifying
records or reports, or a similar felony involving the Company's property; or
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(iii) Executive continues to willfully breach a
material provision of this Agreement after having received written notice of
such breach and a thirty (30) days opportunity thereafter to cure such breach.
B. In the event of a termination claimed by the Company to be
for "cause" pursuant to clauses (i), (ii) or (iii) of this Section 8, Executive
shall have the right to have the justification for said termination determined
by arbitration. In such event, Executive shall serve on the Company within
thirty (30) days of termination, a written request for arbitration. The Company
immediately shall request the appointment of an arbitrator by the American
Arbitration Association and thereafter the issues shall be determined under the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on both parties. The parties shall use all reasonable
efforts to facilitate and expedite the arbitration, and shall act to cause the
arbitration to be completed as promptly as possible. During the pendency of the
arbitration Executive shall continue to receive all compensation and benefits to
which he is entitled hereunder. Expenses of the arbitration shall be borne by
the Company pending a final determination of this matter at which time such
expenses shall be borne equally by the parties.
C. In the event of termination for any of the reasons set
forth in subsection A. of this Section 8, except as otherwise provided in
Section 3 of this Agreement, Executive shall be entitled to no further
compensation, Base Salary or other benefits under this Agreement, except as to
that portion of any unpaid Base Salary, Bonus or other benefits accrued and
earned by him hereunder up to and including the final, non-appealable
determination by arbitration as to the justification for such termination for
"cause", if arbitration is invoked. If arbitration is not invoked Base Salary,
Bonus and unpaid benefits shall be accrued and earned up to and including the
effective date of such termination.
D. Anything herein to the contrary notwithstanding, the
employment of the Executive shall not be terminable by the Company for "cause"
if the grounds for such terminations are: (i) the result of bad judgment or poor
economic results on the part of Executive, (ii) any act or any omission believed
by Executive in good faith to have been in or not opposed to the interests of
Company, (iii) any act or omission in respect of which a determination could
properly be made that Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of expenses under the
charter or bylaws of the Company or the laws of the State of Delaware or the
directors' and officers' liability insurance of the Company, in each case as in
effect at the time of such act or omission, or (iv) as the result of an act or
omission which occurred more than twelve (12) calendar months prior to the
Executive's having been given notice of the termination of his employment for
such act or omission unless the commission of such act could not at the time of
such commission or omission have been known to a member of the board of
directors of the Company (other than Executive, if he is then a member of the
board of directors), in which case more than twelve (12) calendar months prior
to the date that the commission of such act or such omission was or could
reasonably have been so known, or (v) as a result of the continuing course of
action which commenced and was or could reasonably have been known to a member
of the board of directors of Company (other than Executive) more than twelve
(12) calendar months prior to notice having been given to Executive of the
termination of his employment.
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9. Termination by the Company or Company's Election Not to Extend
Agreement.
A. If the Company terminates Executive "without cause", which
shall mean for any reason other than as set forth in Section 8, Executive shall:
(i) be entitled to receive the full compensation to which he would otherwise be
entitled under this Agreement (just as if Executive had not been so terminated
and was continuing to serve as an employee hereunder for the full term of this
Agreement) payable in a single lump sum distribution (without any present value
adjustment) on the date of such termination, and (ii) be provided, for a
twenty-four (24) month period, with all the insurance and other benefits set
forth in Section 6.A. hereof (provided, however, to the extent that the benefits
in Section 6.A. cannot in fact be paid due to the fact that Executive is not in
fact employed hereunder, the Company promptly shall pay Executive the
indubitable monetary, after-tax equivalent thereof in U.S. Dollars, without any
present value adjustment).
B. If the Company elects to not extend this Agreement under
Section 1 hereof, Executive shall be entitled to receive an amount equal to
Executive's then effective annual Base Salary, payable in twelve (12) equal
monthly installments commencing on the first day of the calendar month following
the Expiration Date; provided however, if Executive is terminated "without
cause" during the twelve (12) months immediately preceding any Expiration Date,
Executive shall receive all of the compensation and benefits to which he would
be entitled under Section 9.A. hereof (payable in accordance with Section 9.A.),
in addition to the compensation provided in this Section 9.B.
10. Change in Control. In the event Executive's employment with the
Company is terminated by the Company within nine (9) months following a "Change
in Control" of the Company (as defined below), then the Company shall pay to
Executive on the date of such termination a single lump sum distribution
(without any present value adjustment) equal to his Base Salary (at the
then-existing rate as determined in accordance with Section 3), for the
remaining term of this Agreement; provided such payment shall be based upon a
minimum period of three (3) years following the date of such termination,
regardless of whether such three (3) year period extends beyond the term of this
Agreement. The payments provided by this Section shall be in addition to any
benefits payable pursuant to Sections 7, 8, 9 and/or 11.
The term "Change of Control" shall mean any of the following events:
(A) the reorganization or consolidation of the Company, with
one or more other companies, other than a transaction following which at least
fifty-one percent (51%) of the ownership interests of the Company resulting from
such transaction are owned by persons who, prior to such transaction, owned at
least fifty-one percent (51%) of the outstanding voting shares of the Company;
or
(B) the acquisition of substantially all of the assets of the
Company or of more than fifty-one percent (51%) of the voting shares of the
Company by any person or entity or by any persons or entities acting in concert.
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11. Termination by Executive. Executive may, at his option, after
complying with this Section, terminate this Agreement in the event of a material
breach of the terms of this Agreement by the Company. Executive shall be
required to give written notice to the Company setting forth with particularity
the nature of the material breach. The Company shall have thirty (30) days
following its receipt of Executive's written notice in which to cure its breach
before Executive's termination of this Agreement shall be effective. In the
event Executive's termination shall be effective under this Section 11,
Executive shall: (i) be entitled to receive the full compensation to which he
would otherwise be entitled under this Agreement (just as if Executive had not
so terminated his employment and was continuing to serve as an employee
hereunder for the full term of this Agreement) payable in a single sum
distribution (without any present value adjustment) on the date of such
termination, and (ii) be provided, for a thirty-six (36) month period, with all
the insurance and other benefits set forth in Section 6 A. hereof (provided,
however, to the extent that the benefits in Section 6 A. cannot in fact be paid
due to the fact that Executive is not in fact employed hereunder, the Company
promptly shall pay Executive the indubitable, after-tax monetary equivalent
thereof in U.S. Dollars, without any present value adjustment). If Executive
terminates this Agreement for any reason other than pursuant to this Section 11,
except as otherwise provided in Section 7 of this Agreement, Executive shall be
entitled to no further compensation or other benefits under this Agreement,
except as to that portion of any unpaid salary and other benefits accrued and
earned by him hereunder up to and including the effective date of such
termination.
12. Confidential Information. Executive recognizes and acknowledges
that the Company has, through the expenditure of substantial time, effort and
money, developed and acquired certain confidential information and trade secrets
which have become of great value to the Company in its operations. Executive
further acknowledges and understands that in the course of performing his duties
for the Company, Executive has received and will receive special training and
experience, and has had and will have access to the trade secrets and
confidential information of the Company. Executive agrees that during the course
of his employment and at any time after the termination or expiration thereof he
will not make any independent use of, publish or disclose, or authorize anyone
to publish or disclose, to any other person or organization, any of the
Company's trade secrets and confidential information, except as required in the
course of his employment with the Company or by law. Upon request of the Company
and, in any event upon the cessation of Executive's employment with the Company,
whether with or without cause, Executive will promptly return all tangible
expressions of trade secrets and confidential information in his possession and
control and all copies thereof. As used herein, the term "trade secrets and
confidential information" shall mean client lists, applicant lists, and other
related client and applicant data, computerized compilation of such data,
training materials and information, policy and procedure manuals, video and
audio recordings of training and operation methods, sales, services, support and
marketing practices and operations, advertising themes, formats of advertising
and other business methods, and techniques, processes and financial information
of the Company, all of which are not generally known to the trade or industry
and which will be of competitive use by them. "Trade secrets and confidential
information" shall not include intangible information which is generally known
and used by persons with training and
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experience comparable to Executive as of the date of this Agreement and all
intangible information which is common knowledge in the industry or otherwise
legally in the public domain.
Executive further agrees that the restrictions set forth in
this Section 12 are in addition to, and not in lieu of, any other restrictions
or obligations placed upon him, and/or any rights or remedies available to the
Company, by any statute or at common law.
13. Covenant not to Compete. Executive covenants and agrees that, in
order to protect the Company's legitimate interest in its trade secrets and
confidential information, special training, and business during the term of his
employment, for a period of five (5) years following the expiration or
termination of this Agreement or any renewal of the Agreement, however the same
shall occur, whether voluntary or involuntary, Executive will not, without the
prior written consent of the Company, directly or indirectly,
A. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures which manufacture, market or distribute products which are competitive
with any of the "Company's Products" (as hereinafter defined) anywhere in the
world; or
B. become interested, directly or indirectly, whether as
principal, owner, stockholder, partner, agent, officer, director, employee,
salesman, joint venturer, consultant, advisor, independent contractor or
otherwise, in any person, firm, partnership, association, venture, corporation
or entity engaging directly or indirectly in any of the activities described in
Subsection 13A above; or
C. knowingly solicit the employment of any of the Company's
personnel (as hereinafter defined).
For purposes of this Agreement:
(i) the term "Company Personnel" shall mean any
person employed by the Company at any time through the end of the term of this
Agreement, but excluding any person who has left such employment for a
continuous period exceeding one (1) year;
(ii) the term "Company" shall include any successor
in interest whether by sale, merger, liquidation or the like, and any of the
Company's subsidiaries and affiliates;
(iii) the term "Company's Products" shall mean any
present or future (future being limited to the term of this Agreement and any
and all extensions thereof) product (i) being sold by the Company or (ii) any
product designed, engineered, manufactured, assembled, or enhanced (whether or
not sold) by the Company.
D. None of the foregoing shall prevent Executive from holding
up to two percent (2%) in the aggregate of any class of securities of any entity
engaged in the prohibited
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activities described above, provided that, such securities are listed on a
national securities exchange or registered under Section 12(g) of the Securities
and Exchange Act of 1934.
E. If any of the provisions contained in this Section 13 are
held to be unenforceable because of the duration of such provision, the
geographical area covered thereby, and/or the range of the Company's products
protected, the parties agree that the court of competent jurisdiction making
such determination shall have the power to reduce or otherwise modify the
duration, the geographical area of such provision, and/or the range of the
Company's products protected, and, in its reduced or modified form, such
provisions shall then be enforceable.
14. Remedies in Event of Breach.
A. Injunctive Relief. The parties acknowledge that each would
be irreparably harmed by any breach of the covenants contained in Sections 12
and 13 of this Agreement, and that either party's remedy at law for any breach
by the other party of their obligations under Sections 12 or 13 of this
Agreement would be inadequate, and would be impossible to ascertain and
therefore, in the event of the breach or threatened breach of any obligations
under Sections 12 and 13 of this Agreement, either party, in addition to any and
all other remedies at law or in equity, shall have the right to enjoin the other
party from any threatened or actual activities in violation thereof; and the
parties hereby consent and agree that temporary and permanent injunctive relief
may be granted in any proceedings which might be brought to enforce any such
covenants without the necessity of proof of actual damages and without the
necessity of posting bond. In the event either party does apply for such
injunction, the other party shall not raise as a defense thereto that such
applying party has an adequate remedy at law.
B. Damages; Accounting for Profits. In addition to any
injunctive relief that may be granted to the Company or Executive for breach of
this Agreement, the Company and Executive shall be entitled to recover all
damages, including reasonable attorneys' fees and costs (including paralegals'
fees), sustained or incurred by the Company or Executive by reason of a
violation or threatened violation of the terms of this Agreement, and to receive
such other remedy or remedies as the court determines is appropriate. Executive
covenants and agrees that, if he violates any of his covenants or agreements
under Sections 12 or 13 hereof, the Company shall be entitled to an accounting
and repayment of all profits, compensations, commissions, remunerations or
benefits which Executive directly or indirectly has realized or may realize as a
result of, growing out of, or in connection with, any such violation; such
remedy shall be in addition to and not in limitation of any injunctive relief or
any other rights or remedies to which the Company is or may be entitled at law
or in equity or under this Agreement.
15. Reasonableness. Executive has carefully read and considered the
provisions of Sections 12 and 13 hereof and, having done so, agrees that the
restrictions set forth in such sections, including, but not limited to, the time
period of restriction, the geographical areas of restriction, and the definition
of Company Products set forth therein, are fair and reasonable and are
reasonably required for the protection of the interests of the Company, and
further that the
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geographical areas of restriction set forth therein accurately reflect the area
in which he will be actively engaged in the performance of services.
16. No Inconsistent Obligations. Executive represents and warrants that
no action required of him under this Agreement or any other agreements or
understandings, written or oral, entered into with the Company will conflict
with, breach or otherwise impair any previously existing agreements or
understandings, whether written or oral, into which Executive has entered with
other persons or entities, including agreements with respect to proprietary
information or non-competition.
17. Indemnification. The parties shall enter into a separate
indemnification agreement, in form and substance mutually agreeable to the
parties, within ninety (90) days from the execution of this Agreement.
18. Notices. Any notice to be given hereunder shall be deemed to be
given when delivered by hand or by overnight courier to the party for whom the
notice is intended, or three (3) days after notice is placed in the U.S. mail
properly addressed to the party for whom notice is intended, at the following
address:
If to the Company: Apollo International of Delaware, Inc.
6542 North U.S. Highway 41
Suite 215
Apollo Beach, Florida 33572
Attention: Chief Financial Officer
If to Executive: Mr. David W. Clarke
1018 Symphony Isles Boulevard
Apollo Beach, Florida 33572
19. Binding Effect and Governing Law. This Agreement supersedes all
prior understandings and agreements between the parties with respect to the
subject matter hereof. This Agreement shall be binding upon the legal
representatives, heirs, distributees, successors and assigns of the parties. The
Agreement contains the entire agreement of the parties, and may not be changed
orally but only in writing signed by the party against whom enforcement of any
such change is sought. It is agreed that a waiver by either party of a breach of
any provision of this Agreement shall not be operated or be construed as a
waiver of any subsequent breach by that same party. This Agreement shall be
governed by the laws of the State of Florida.
20. Severability. In the event that any terms or provisions of this
Agreement shall be held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remaining terms and provisions hereof.
21. Assignability. The rights or obligations contained in this
Agreement shall not be assigned, transferred, or divided in any manner by
Executive or Company, without the prior
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written consent of the other; provided however, that nothing in this Section 21
shall preclude Executive from designating a beneficiary to receive any benefits
hereunder upon his death, or the executors, administrator or other legal
representatives of Executive or his estate from assigning any rights hereunder
to the person(s) entitled thereto. Notwithstanding the foregoing, this Agreement
shall be binding on any entity which by purchase of assets, merger, or
otherwise, becomes a successor to the business of Company.
22. Headings. The headings of paragraph herein are included solely for
convenience of reference and shall not control the meaning or interpretation and
performance of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
COMPANY:
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /S/ David W. Clarke
-----------------------------------------
David W. Clarke
President
EXECUTIVE:
/S/ David W. Clarke
-----------------------------------------
DAVID W. CLARKE
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EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is effective as of
July 1, 1996, by and between APOLLO INTERNATIONAL OF DELAWARE, INC., a Delaware
corporation ("Company"), and CHRISTINE CLEWES ("Employee") currently holding the
position of Vice President of Marketing.
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Employee is essential to the Company's growth and success;
and
WHEREAS, the Company desires to employ Employee as its Vice President of
Marketing and Employee desires to accept such employment, all on the terms and
conditions as hereinafter provided; and
WHEREAS, Employee is currently receiving compensation for services rendered
to the Company and/or its subsidiaries.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby employs Employee and Employee hereby accepts
employment by the Company for a period of four (4) years beginning on the date
of this Agreement, subject to the terms and conditions hereafter contained. This
Agreement will be renewed automatically thereafter for successive periods of two
(2) years, unless not less than one hundred twenty (120) days prior to the end
of the initial four (4) year period, or one hundred twenty (120) days prior to
the end of any two (2) year renewal period, as the case may be, one of the
parties sends written notice to the other party of its intent to terminate this
Agreement at the end of such period.
2. Duties. The Company shall continue to employ Employee in an executive
capacity as Vice President of Marketing of the Company. Employee shall perform
such duties ordinarily and customarily performed by a similar employee of a
corporation of like type and size as the Company, and shall perform such other
reasonable duties as a senior Company officer of the Board of Directors may
assign to her from time to time.
3. Base Salary and Commission.
A. As full compensation for services rendered under this Agreement, the
Company shall pay Employee, during the term of this Agreement, a base salary of
One Hundred Thousand and NO/100ths ($100,000.00) per year (the "Base Salary"),
payable in accordance with
<PAGE>
the normal payroll practices of the Company. In addition to the Base Salary, the
Company may pay Employee bonuses from time to time as set forth below.
B. On each January 1, during the term of this Agreement, the base Salary
shall be increased to reflect the change in the cost of living, based upon the
change, from the proceeding January 1, in the Consumer Price Index for All Urban
Consumers, as published by the U.S. Bureau of Labor Statistics (reference base
1982-1984 = 100). On each January 1, and at any time that there is a change in
the financial condition or character of the business of the Company during the
term of this Agreement, the Board of Directors shall review the base salary
amount to determine whether or not to grant additional increases in the base
salary amount.
C. In addition to the Base Salary referenced above, Employee shall receive
a sales commission of one and one-half percent (1-1/2%) of the Net Sales
Proceeds (defined hereinbelow) on sales of the Company's products within the
United States (the "Commission"). For purposes of this Section C, the terms "Net
Sales Proceeds" is defined as the gross sales price of the Company's products,
less (a) any commissions paid to third parties by the Company with respect to
such products, (b) sales tax, if any, and (c) shipping and handling charges.
4. Stock Options. During the term of her employment, Employee will be
provided with stock options under the Company's stock option plan(s) as
determined by the Company's Board of Directors and/or Compensation Committee.
5. Performance Bonus. In addition to the annual Base Salary provided
hereunder, Employee may, at the discretion of the Board of Directors, be
entitled to additional incentive compensation ("Bonus").
6. Fringe Benefits. Employee shall be entitled to vacations, health care
benefits, fringe benefits and reimbursement for reasonable out-of-pocket
expense, including but not limited to those hereinafter detailed, in accordance
with the Company's practices covering Employee personnel. The Company shall use
reasonable efforts to seek waivers of waiting periods, if any, applicable to
particular benefits. Such benefits shall include:
A. coverage for Executive and her family, under any major medical and
dental insurance programs and plans, and under any short-term, long-term or
permanent disability programs and plans, which are or may become generally
available to management employees of the Company;
B. retirement benefits at such time and on such amounts as are paid to
Employee by the Company at such time as the Company institutes a retirement
plan;
C. reimbursement of all properly approved travel and business related
expenses normally paid by the Company for the benefit of its executives. All
expense reports must be approved by the Chief Financial Officer of the Company
prior to reimbursement;
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D. vacation selected by Employee in accordance with the Company's vacation
policy for executives, which vacation will be appropriately selected by Employee
taking into account the convenience of the Company. Employee shall give the
Board of Directors at least fourteen (14) calendar days' prior notice of
selected vacation times of one week or more;
E. such number of days as established by Company policy for its employees
generally;
F. a holiday on the following days with full pay: New Year's Day,
Presidents' Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day, and such other holidays as the Company may declare; and
G. paid leave and reimbursement of all travel, tuition and related expenses
in attending trade conferences and/or seminars and/or college or other high
level courses acceptable to the Board of Directors in its reasonable discretion.
7. Termination by the Company for Cause.
A. The Company may, at its option, terminate this Agreement by giving
written notice of termination to Employee without prejudice to any other remedy
to which the Company may be entitled, either at law or in equity, under this
Agreement, in the event that:
(i) Employee is convicted of (and such conviction is sustained on final
appeal) or, pleads guilty to, or pleads nolo contendere to a felony crime
involving moral turpitude;
(ii) Employee is found by a court of law to be guilty (which guilty verdict
is sustained on final appeal) of or pleads guilty to or no contest to fraud,
conversion, embezzlement, intentionally falsifying records or reports, or a
similar felony involving the Company's property; or
(iii) Employee continues to willfully breach a material provision of this
Agreement after having received written notice of such breach and a thirty (30)
days' opportunity thereafter to cure such breach.
B. In the event of a termination claimed by the Company to be for "cause"
pursuant to clauses (i), (ii) or (iii) of this Section 7, Employee shall have
the right to have the justification for said termination determined by
arbitration. In such event, Employee shall serve on the Company within thirty
(30) days of termination, a written request for arbitration. The Company
immediately shall request the appointment of an arbitrator by the American
Arbitration Association and thereafter the issues shall be determined under the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on both parties. The parties shall use all reasonable
efforts to facilitate and expedite the arbitration, and shall act to cause the
arbitration to be completed as promptly as possible. During the pendency of the
arbitration Employee shall continue to receive all compensation and benefits to
which she is
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<PAGE>
entitled hereunder. Expenses of the arbitration shall be borne by the Company
pending a final determination of this matter at which time such expenses shall
be borne by the parties.
C. In the event of termination for any of the reasons set forth in
subsection A. of this Section 7, except as otherwise provided in Section 3 of
this Agreement, Employee shall be entitled to no further compensation, Base
Salary, Commission, Bonus or other benefits under this Agreement, except as to
that portion of any unpaid Base Salary, Commission, Bonus or other benefits
accrued and earned by her hereunder up to and including the final,
non-appealable determination by arbitration as to the justification for such
termination for "cause", if arbitration is invoked. If arbitration is not
invoked Base Salary, Commission or Bonus and unpaid benefits shall be accrued
and earned up to and including the effective date of such termination.
D. Anything herein to the contrary notwithstanding, the employment of the
Employee shall not be terminable by the Company for "cause" if the grounds for
such terminations are: (i) the result of bad judgment or poor economic results
on the part of Employee, (ii) any act or any omission believed by Employee in
good faith to have been in or not opposed to the interests of the Company, (iii)
any act or omission in respect of which a determination could properly be made
that Employee met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the charter or
by-laws of the Company, or the laws of the State of Delaware, or the directors'
and officers' liability insurance if the Company, in each case as in effect at
the time of such act or omission, or (iv) as a result of an act or omission
which occurred more than twelve (12) calendar months prior to the Employee's
having been given notice of the termination of her employment for such act or
omission unless the commission of such act could not at the time of such
commission or omission have been known to a member of the Board of Directors of
the Company (other than Employee, if she is then a member of the board of
directors), in which case more than twelve (12) calendar months prior to the
date that the commission of such act or such omission was or could reasonably
have been so known, or (v) as a result of the continuing course of action which
commenced and was or could reasonably have been known to a member of the board
of directors of the Company (other than Employee) more than twelve (12) calendar
months prior to notice having been given to Employee of the termination of her
employment.
8. Termination by the Company; Death; or Permanent Disability.
A. If the Company terminates Employee "without cause" which shall mean for
any reason other than as set forth in Section 7 hereof, or in the event of
Employee's death or "permanent disability" (as defined below), Employee shall:
(i) be entitled to receive an amount equal to the full compensation to which she
would otherwise be entitled under this Agreement (just as if Employee had not
been so terminated and was continuing to serve as an employee hereunder for the
full term of this agreement) for a six (6) month period from the effective date
of such termination, death, or permanent disability (the "Severance Payment").
Such Severance Payment shall be payable in a single lump sum distribution
(without any present value adjustment) to Employee or her estate, as the case
may be, no later than ninety (90) days from the effective date of such
termination, and (ii) be provided, for a six (6) month period, with all the
insurance
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and other benefits set forth in Section 6.A. hereof (provided, however, to the
extent that the benefits in Section 6.A. cannot in fact be paid due to the fact
that Employee is not in fact employed hereunder, the Company promptly shall pay
Employee the indubitable monetary, after tax equivalent thereof in U.S. Dollars,
without any present value adjustment).
B. Payment in the Event of Permanent Disability. For purposes of this
Agreement, Employee's "permanent disability" shall be deemed to have occurred
after one hundred twenty (120) days in the aggregate during any consecutive
twelve (12) month period, or after ninety (90) consecutive days, during which
one hundred twenty (120) or ninety (90) days, as the case may be, Employee, by
reason of her physical or mental disability or illness, shall have been unable
to discharge fully her duties under this Agreement. The date of permanent
disability shall be the one hundred twentieth (120th) or ninetieth (90th) day,
as the case may be. In the event Employee, after receipt of notice from the
Company, shall dispute that her permanent disability shall have occurred, she
shall promptly submit to a physical examination by the Chief of Medicine of any
major accredited hospital in the metropolitan area, Tampa, Florida, and, unless
such physician shall issue her written statement to the effect that in her
opinion, based on her diagnosis, Employee is capable of resuming her employment
and devoting her full time and energy to discharging her duties within ten (10)
days after the date of such statement, such permanent disability shall be deemed
to have occurred without further dispute by Employee or Company.
9. Termination by Employee. Employee may, at her option, after complying
with this Section 9, terminate this Agreement in the event of a material breach
of the terms of this Agreement by the Company. Employee shall be required to
give written notice to the Company setting forth with particularity the nature
of the material breach. The Company shall have thirty (30) days following its
receipt of Employee's written notice in which to cure its breach before
Employee's termination of this Agreement shall be effective. In the event
Employee's termination shall be effective under this Section 9, Employee shall:
(i) be entitled to receive the full compensation to which she would otherwise be
entitled under this Agreement (just as if Employee had not so terminated her
employment and was continuing to serve as an employee hereunder for the full
term of this Agreement (the "Continuation Period")) payable in a single sum
distribution (without any present value adjustment) on the date of such
termination, and (ii) be provided, for the Continuation Period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed hereunder, the Company
promptly shall pay Employee the indubitable, after-tax monetary equivalent
thereof in U.S. Dollars, without any present value adjustment). If Employee
terminates this Agreement for any reason other than pursuant to this Section 9,
except as otherwise provided in Section 8 of this Agreement as it relates to the
death of Employee, Employee shall be entitled to no further compensation or
other benefits under this Agreement, except as to that portion of any unpaid
salary and other benefits accrued and earned by her hereunder up to and
including the effective date of such termination.
10. Confidential Information. Employee recognizes and acknowledges that the
Company has, through the expenditure of substantial time, effort and money,
developed and acquired certain confidential information and trade secrets which
have become of great value to
5
<PAGE>
the Company in its operations. Employee further acknowledges and understands
that in the course of performing her duties for the Company, Employee has
received and will receive special training and experience, and has had and will
have access to the trade secrets and confidential information of the Company.
Employee agrees that during the course of her employment and at any time after
the termination or expiration thereof, she will not make any independent use of,
publish or disclose, or authorize anyone to publish or disclose, to any other
person or organization, any of the Company's trade secrets and confidential
information, except as required in the course of her employment with the Company
or by law. Upon request of the Company and, in any event upon the cessation of
Employee's employment with the Company, whether with or without cause, Employee
will promptly return all tangible expressions of trade secrets and confidential
information in her possession and control and all copies thereof. As used
herein, the term "trade secrets and confidential information" shall mean client
lists, applicant lists, and other related client and applicant data,
computerized compilation of such data, training materials and information,
policy and procedure manuals, video and audio recordings of training and
operation methods, sales, services, support and marketing practices and
operations, advertising themes, formats of advertising and other business
methods, and techniques, processes and financial information of the Company, all
of which are not generally known to the trade or industry and which will be of
competitive use by them. "Trade secrets and confidential information" shall not
include intangible information which is generally known and used by persons with
training and experience comparable to Employee as of the date of this Agreement
and all intangible information which is common knowledge in the industry or
otherwise legally in the public domain.
Employee further agrees that the restrictions set forth in this Section 10
are in addition to, and not in lieu of, any other restrictions or obligations
placed upon her, and/or any rights or remedies available to the Company, by any
statute or at common law.
11. Covenant not to Compete. Employee covenants and agrees that, in order
to protect the Company's legitimate interest in its trade secrets and
confidential information, special training, and business during the term of her
employment, for a period of two (2) years following the expiration or
termination of this Agreement or any renewal of the Agreement, however the same
shall occur, whether voluntary or involuntary, Employee will not, without the
prior written consent of the Company, directly or indirectly:
A. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures which manufacture, market or distribute products which are competitive
with any of the "Company's Products" (as hereinafter defined) anywhere in the
United States; or
B. become interested, directly or indirectly, whether as principal, owner,
stockholder, partner, agent, officer, director, employee, salesman, joint
venturer, consultant, advisor, independent contractor or otherwise, in any
person, firm, partnership, association, venture, corporation or entity engaging
directly or indirectly in any of the activities described in Subsection 11.A.
above; or
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<PAGE>
C. knowingly solicit the employment of any of the Company Personnel (as
hereinafter defined).
For purposes of this Agreement:
(i) the term "Company Personnel" shall mean any person employed by the
Company at any time through the end of the term of this Agreement, but excluding
any person who has left such employment for a continuous period exceeding one
(1) year;
(ii) the term "Company" shall include any successor in interest whether by
sale, merger, liquidation or the like, and any of the Company's subsidiaries and
affiliates;
(iii) the term "Company's Products" shall mean any present or future
(future being limited to the term of this Agreement and any and all extensions
thereof) product (i) being sold by the Company or (ii) any product designed,
engineered, manufactured, assembled, or enhanced (whether or not sold) by the
Company.
D. None of the foregoing shall prevent Employee from holding up to two
percent (2%) in the aggregate of any class of securities of any entity engaged
in the prohibited activities described above, provided that, such securities are
listed on a national securities exchange or registered under Section 12(g) of
the Securities and Exchange Act of 1934.
E. If any of the provisions contained in this Section 11 are held to be
unenforceable because of the duration of such provision, the geographical area
covered thereby, and/or the range of the Company's Products protected, the
parties agree that the court of competent jurisdiction making such determination
shall have the power to reduce or otherwise modify the duration, the
geographical area of such provision, and/or the range of the Company's Products
protected, and, in its reduced or modified form, such provisions shall then be
enforceable.
12. Remedies in Event of Breach.
A. Injunctive Relief. The parties acknowledge that each would be
irreparably harmed by any breach of the covenants contained in Sections 10 and
11 of this Agreement, and that either party's remedy at law for any breach by
the other party of its obligations under Sections 10 or 11 of this Agreement
would be inadequate, and would be impossible to ascertain and therefore, in the
event of the breach or threatened breach of any obligations under Sections 10
and 11 of this Agreement, either party, in addition to any and all other
remedies at law or in equity, shall have the right to enjoin the other party
from any threatened or actual activities in violation thereof; and the parties
hereby consent and agree that temporary and permanent injunctive relief may be
granted in any proceedings which might be brought to enforce any such covenants
without the necessity of proof of actual damages and without the necessity of
posting bond. In the event either party does apply for such injunction, the
other party shall not raise as a defense thereto that such applying party has an
adequate remedy at law.
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<PAGE>
B. Damages; Accounting for Profits. In addition to any injunctive relief
that may be granted to the Company or Employee for breach of this Agreement, the
Company and Employee shall be entitled to recover all damages, including
reasonable attorneys' fees and costs (including paralegals' fees), sustained or
incurred by the Company or Employee by reason of a violation or threatened
violation of the terms of this Agreement, and to receive such other remedy or
remedies as the court determines is appropriate. Employee covenants and agrees
that, if she violates any of her covenants or agreements under Sections 10 or 11
hereof, the Company shall be entitled to an accounting and repayment of all
profits, compensations, commissions, remunerations or benefits which Employee
directly or indirectly has realized or may realize as a result of, growing out
of, or in connection with, any such violation; such remedy shall be in addition
to and not in limitation of any injunctive relief or any other rights or
remedies to which the Company is nor may be entitled at law or in equity or
under this Agreement.
13. Reasonableness. Employee has carefully read and considered the
provisions of Sections 10 and 11 hereof and, having done so, agrees that the
restrictions set forth in such sections, including, but not limited to, the time
period of restriction, the geographical areas of restriction, and the definition
of Company Products set forth therein, are fair and reasonable and are
reasonably required for the protection of the interests of the Company, and
further that the geographical area of restriction set forth therein accurately
reflects the area in which she will be actively engaged in the performance of
services.
14. No Inconsistent Obligations. Employee represents and warrants that no
action required of her under this Agreement or any other agreements or
understandings, written or oral, entered into with the Company will conflict
with, breach or otherwise impair any previously existing agreements or
understandings, whether written or oral, into which Employee has entered with
other persons or entities, including agreements with respect to proprietary
information or non-competition.
15. Indemnification. The parties shall enter into a separate
indemnification agreement, in form and substance mutually agreeable to the
parties, within ninety (90) days from the execution of this Agreement.
16. Notices. Any notice to be given hereunder shall be deemed to be given
when delivered by hand or by overnight courier to the party for whom the notice
is intended, or three (3) days after notice is placed in the U.S. mail properly
addressed to the party for whom notice is intended, at the following address:
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If to the Company: APOLLO INTERNATIONAL OF DELAWARE, INC.
6542 North U.S. Highway 41 - Suite 215
Apollo Beach, Florida 33572
Attention: Chief Financial Officer
If to Employee: Christine Clewes
1018 Symphony Isles Boulevard
Apollo Beach, Florida 33572
17. Binding Effect and Governing Law. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties. The Agreement
contains the entire agreement of the parties, and may not be changed orally but
only in writing signed by the party against whom enforcement of any such change
is sought. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not be operated or be construed as a waiver of
any subsequent breach by that same party. This Agreement shall be governed by
the laws of the State of Florida.
18. Severability. In the event that any terms or provisions of this
Agreement shall be held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remaining terms and provisions hereof.
19. Assignability. The rights or obligations contained in this Agreement
shall not be assigned, transferred, or divided in any manner by Employee or
Company, without the prior written consent of the other; provided, however, that
nothing in this Section 19 shall preclude Employee from designating a
beneficiary to receive any benefits hereunder upon her death, or the executors,
administrator or other legal representatives of Employee or her estate from
assigning any rights hereunder to the person(s) entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding on any entity
which by purchase of assets, merger, or otherwise, becomes a successor to the
business of the Company.
20. Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation and
performance of any of the provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
COMPANY:
APOLLO INTERNATIONAL OF DELAWARE,
INC., a Delaware corporation
By: /s/ David W. Clarke, President
------------------------------
David W. Clarke, President
EMPLOYEE:
By: /s/ Christine Clewes
----------------------
Christine Clewes
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<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is effective as
of July 1, 1996, by and between APOLLO INTERNATIONAL OF DELAWARE, INC., a
Delaware corporation ("Company"), and Donald Paul Louw ("Employee") currently
holding the position of Vice President International Sales.
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Employee is essential to the Company's growth and success;
and
WHEREAS, the Company desires to employ Employee as its Vice President
International Sales and Employee desires to accept such employment, all on the
terms and conditions as hereinafter provided; and
WHEREAS, Employee is currently receiving compensation for services
rendered to the Company and/or its subsidiaries.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Term. The Company hereby employs Employee and Employee hereby accepts
employment by the Company for a period of four (4) years beginning on the date
of this Agreement, subject to the terms and conditions hereafter contained. This
Agreement will be renewed automatically thereafter for successive periods of two
(2) years, unless not less than one hundred twenty (120) days prior to the end
of the initial four (4) year period, or one hundred twenty (120) days prior to
the end of any two (2) year renewal period, as the case may be, one of the
parties sends written notice to the other party of its intent to terminate this
Agreement at the end of such period.
2. Duties. The Company shall continue to employ Employee in an executive
capacity as Vice President of Operations of the Company. Employee shall perform
such duties ordinarily and customarily performed by a similar employee of a
corporation of like type and size as the Company, and shall perform such other
reasonable duties as a senior Company officer of the Board of Directors may
assign to him from time to time.
3. Base Salary
(A) As full compensation for services rendered under this Agreement, the Company
shall pay Employee, during the term of this Agreement, a base salary of Eighty
Thousand Dollars and No/100 ($80,000) per year (the "Base Salary"), payable in
accordance with the normal payroll practices of the Company. In addition to the
Base Salary, the Company will pay Employee three percent (3%) commission on all
sales outside of North America. In addition to
<PAGE>
the Base Salary and commission, the Company may pay Employee bonuses from time
to time as set forth below.
(B) On each January 1, during the term of this Agreement, the base Salary
shall be increased to reflect the change in the cost of living, based upon the
change, fromthe proceeding January 1, in the Consumer Price Index for All Urban
Consumers, as published by the U.S. Bureau of Labor Statistics (reference base
1982-1984 = 100). On each January 1, and at any time that there is a change in
the financial condition or character of the business of the Company during the
term of this Agreement, the Board of Directors shall review the base salary
amount to determine whether or not to grant additional increases in the base
salary amount.
4. Stock Options. During the term of his employment, Employee will be provided
with stock options under the Company's stock option plan(s) as determined by the
Company's Board of Directors and/or Compensation Committee.
5. Performance Bonus. In addition to the annual Base Salary provided hereunder,
Employee may, at the discretion of the Board of Directors, be entitled to
additional incentive compensation ("Bonus").
6. Fringe Benefits. Employee shall be entitled to vacations, health care
benefits, fringe benefits and reimbursement for reasonable out-of-pocket
expense, including but not limited to those hereinafter detailed, in accordance
with the Company's practices covering Employee personnel. The Company shall use
reasonable efforts to seek waivers of waiting periods, if any, applicable to
particular benefits. Such benefits shall include:
A. coverage for Executive and his family, under any major medical and
dental insurance programs and plans, and under any short-term, long-term or
permanent disability programs and plans, which are or may become generally
available to management employees of the Company;
B. retirement benefits at such time and on such amounts as are paid to
Employee by the Company at such time as the Company institutes a retirement
plan;
C. reimbursement of all properly approved travel and business related
expenses normally paid by the Company for the benefit of its executives. All
expense reports must be approved by the Chief Financial Officer of the Company
prior to reimbursement;
D. three (3) weeks of paid vacation per calendar year at any time or times
selected by Employee taking into account the convenience of the Company.
Employee shall give the Board of Directors at least fourteen (14) calendar days'
prior notice of selected vacation times of one week or more. Unused vacation
will be cumulative from year to year.
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<PAGE>
E. six days of sick leave annually;
F. a holiday on the following days with full pay: New Year's Day,
Presidents' Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day, and such other holidays as the Company may declare; and
G. paid leave and reimbursement of all travel, tuition and related expenses
in attending trade conferences and/or seminars and/or college or other high
level courses acceptable to the Board of Directors in its reasonable discretion.
7. Termination by the Company for Cause.
A. The Company may, at its option, terminate this Agreement by giving
written notice of termination to Employee without prejudice to any other remedy
to which the Company may be entitled, either at law or in equity, under this
Agreement, in the event that:
(i) Employee is convicted of (and such conviction is sustained on final
appeal) or, pleads guilty to, or pleads nolo contendere to a felony crime
involving moral turpitude;
(ii) Employee is found by a court of law to be guilty (which guilty verdict
is sustained on final appeal) of or pleads guilty to or no contest to fraud,
conversion, embezzlement, intentionally falsifying records or reports, or a
similar felony involving the Company's property; or
(iii) Employee continues to willfully breach a material provision of this
Agreement after having received written notice of such breach and a thirty (30)
days' opportunity thereafter to cure such breach.
B. In the event of a termination claimed by the Company to be for "cause"
pursuant to clauses (i), (ii) or (iii) of this Section 7, Employee shall have
the right to have the justification for said termination determined by
arbitration. In such event, Employee shall serve on the Company within thirty
(30) days of termination, a written request for arbitration. The Company
immediately shall request the appointment of an arbitrator by the American
Arbitration Association and thereafter the issues shall be determined under the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on both parties. The parties shall use all reasonable
efforts to facilitate and expedite the arbitration, and shall act to cause the
arbitration to be completed as promptly as possible. During the pendency of the
arbitration Employee shall continue to receive all compensation and benefits to
which he is entitled hereunder. Expenses of the arbitration shall be borne by
the Company pending a final determination of this matter at which time such
expenses shall be borne by the parties.
3
<PAGE>
C. In the event of termination for any of the reasons set forth in
subsection A. of this Section 7, except as otherwise provided in Section 3 of
this Agreement, Employee shall be entitled to no further compensation, Base
Salary, Bonus or other benefits under this Agreement, except as to that portion
of any unpaid Base Salary, Bonus or other benefits accrued and earned by his
hereunder up to and including the final, non-appealable determination by
arbitration as to the justification for such termination for "cause", if
arbitration is invoked. If arbitration is not invoked Base Salary or Bonus and
unpaid benefits shall be accrued and earned up to and including the effective
date of such termination.
D. Anything herein to the contrary notwithstanding, the employment of the
Employee shall not be terminable by the Company for "cause" if the grounds for
such terminations are: (i) the result of bad judgment or poor economic results
on the part of Employee, (ii) any act or any omission believed by Employee in
good faith to have been in or not opposed to the interests of the Company, (iii)
any act or omission in respect of which a determination could properly be made
that Employee met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the charter or
by-laws of the Company, or the laws of the State of Delaware, or the directors'
and officers' liability insurance if the Company, in each case as in effect at
the time of such act or omission, or (iv) as a result of an act or omission
which occurred more than twelve (12) calendar months prior to the Employee's
having been given notice of the termination of his employment for such act or
omission unless the commission of such act could not at the time of such
commission or omission have been known to a member of the Board of Directors of
the Company (other than Employee, if he is then a member of the board of
directors), in which case more than twelve (12) calendar months prior to the
date that the commission of such act or such omission was or could reasonably
have been so known, or (v) as a result of the continuing course of action which
commenced and was or could reasonably have been known to a member of the board
of directors of the Company (other than Employee) more than twelve (12) calendar
months prior to notice having been given to Employee of the termination of his
employment.
8. Termination by the Company; Death; or Permanent Disability.
A. If the Company terminates Employee "without cause" which shall mean for
any reason other than as set forth in Section 7 hereof, or in the event of
Employee's death or "permanent disability" (as defined below), Employee shall:
(i) be entitled to receive an amount equal to the full compensation to which he
would otherwise be entitled under this Agreement (just as if Employee had not
been so terminated and was continuing to serve as an employee hereunder for the
full term of this agreement) for a six (6) month period from the effective date
of such termination, death, or permanent disability (the "Severance Payment").
Such Severance Payment shall be payable in a single lump sum distribution
(without any present value adjustment) to Employee or his estate, as the case
may be, no later than ninety (90) days from the effective date of such
termination, and (ii) be provided, for a six (6) month period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed
4
<PAGE>
hereunder, the Company promptly shall pay Employee the indubitable monetary,
after tax equivalent thereof in U.S. Dollars, without any present value
adjustment).
B. Payment in the Event of Permanent Disability. For purposes of this
Agreement, Employee's "permanent disability" shall be deemed to have occurred
after one hundred twenty (120) days in the aggregate during any consecutive
twelve (12) month period, or after ninety (90) consecutive days, during which
one hundred twenty (120) or ninety (90) days, as the case may be, Employee, by
reason of his physical or mental disability or illness, shall have been unable
to discharge fully his duties under this Agreement. The date of permanent
disability shall be the one hundred twentieth (120th) or ninetieth (90th) day,
as the case may be. In the event Employee, after receipt of notice from the
Company, shall dispute that his permanent disability shall have occurred, he
shall promptly submit to a physical examination by the Chief of Medicine of any
major accredited hospital in the metropolitan area, Tampa, Florida, and, unless
such physician shall issue his written statement to the effect that in his
opinion, based on his diagnosis, Employee is capable of resuming his employment
and devoting his full time and energy to discharging his duties within ten (10)
days after the date of such statement, such permanent disability shall be deemed
to have occurred without further dispute by Employee or Company.
9. Termination by Employee. Employee may, at his option, after complying with
this Section, terminate this Agreement in the event of a material breach of the
terms of this Agreement by the Company. Employee shall be required to give
written notice to the Company setting forth with particularity the nature of the
material breach. The Company shall have thirty (30) days following its receipt
of Employee's written notice in which to cure its breach before Employee's
termination of this Agreement shall be effective. In the event Employee's
termination shall be effective under this Section 9, Employee shall: (i) be
entitled to receive the full compensation to which he would otherwise be
entitled under this Agreement (just as if Employee had not so terminated his
employment and was continuing to serve as an employee hereunder for the full
term of this Agreement (the "Continuation Period")) payable in a single sum
distribution (without any present value adjustment) on the date of such
termination, and (ii) be provided, for the Continuation Period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed hereunder, the Company
promptly shall pay Employee the indubitable, after-tax monetary equivalent
thereof in U.S. Dollars, without any present value adjustment). If Employee
terminates this Agreement for any reason other than pursuant to this Section 9,
except as otherwise provided in Section 8 of this Agreement as it relates to the
death of Employee, Employee shall be entitled to no further compensation or
other benefits under this Agreement, except as to that portion of any unpaid
salary and other benefits accrued and earned by his hereunder up to and
including the effective date of such termination.
10. Confidential Information. Employee recognizes and acknowledges that the
Company has, through the expenditure of substantial time, effort and money,
developed and acquired certain confidential information and trade secrets which
have become of great value to the Company in its operations. Employee further
acknowledges and understands that in the course of performing his duties for the
Company, Employee has received and will receive special training and experience,
5
<PAGE>
and has had and will have access to the trade secrets and confidential
information of the Company. Employee agrees that during the course of his
employment and at any time after the termination or expiration thereof, he will
not make any independent use of, publish or disclose, or authorize anyone to
publish or disclose, to any other person or organization, any of the Company's
trade secrets and confidential information, except as required in the course of
his employment with the Company or by law. Upon request of the Company and, in
any event upon the cessation of Employee's employment with the Company, whether
with or without cause, Employee will promptly return all tangible expressions of
trade secrets and confidential information in his possession and control and all
copies thereof. As used herein, the term "trade secrets and confidential
information" shall mean client lists, applicant lists, and other related client
and applicant data, computerized compilation of such data, training materials
and information, policy and procedure manuals, video and audio recordings of
training and operation methods, sales, services, support and marketing practices
and operations, advertising themes, formats of advertising and other business
methods, and techniques, processes and financial information of the Company, all
of which are not generally known to the trade or industry and which will be of
competitive use by them. "Trade secrets and confidential information" shall not
include intangible information which is generally known and used by persons with
training and experience comparable to Employee as of the date of this Agreement
and all intangible information which is common knowledge in the industry or
otherwise legally in the public domain.
Employee further agrees that the restrictions set forth in this Section 10
are in addition to, and not in lieu of, any other restrictions or obligations
placed upon his, and/or any rights or remedies available to the Company, by any
statute or at common law.
11. Covenant not to Compete. Employee covenants and agrees that, in order to
protect the Company's legitimate interest in its trade secrets and confidential
information, special training, and business during the term of his employment,
for a period of two (2) years following the expiration or termination of this
Agreement or any renewal of the Agreement, however the same shall occur, whether
voluntary or involuntary, Employee will not, without the prior written consent
of the Company, directly or indirectly:
A. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures which manufacture, market or distribute products which are competitive
with any of the "Company's Products" (as hereinafter defined) anywhere in the
United States; or
B. become interested, directly or indirectly, whether as principal, owner,
stockholder, partner, agent, officer, director, employee, salesman, joint
venturer, consultant, advisor, independent contractor or otherwise, in any
person, firm, partnership, association, venture, corporation or entity engaging
directly or indirectly in any of the activities described in Subsection 11.A.
above; or
C. knowingly solicit the employment of any of the Company Personnel (as
hereinafter defined).
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<PAGE>
For purposes of this Agreement:
(i) the term "Company Personnel" shall mean any person employed by the
Company at any time through the end of the term of this Agreement, but excluding
any person who has left such employment for a continuous period exceeding one
(1) year;
(ii) the term "Company" shall include any successor in interest whether by
sale, merger, liquidation or the like, and any of the Company's subsidiaries and
affiliates;
(iii) the term "Company's Products" shall mean any present or future
(future being limited to the term of this Agreement and any and all extensions
thereof) product (i) being sold by the Company or (ii) any product designed,
engineered, manufactured, assembled, or enhanced (whether or not sold) by the
Company.
D. None of the foregoing shall prevent Employee from holding up to two
percent (2%) in the aggregate of any class of securities of any entity engaged
in the prohibited activities described above, provided that, such securities are
listed on a national securities exchange or registered under Section 12(g) of
the Securities and Exchange Act of 1934.
E. If any of the provisions contained in this Section 11 are held to be
unenforceable because of the duration of such provision, the geographical area
covered thereby, and/or the range of the Company's Products protected, the
parties agree that the court of competent jurisdiction making such determination
shall have the power to reduce or otherwise modify the duration, the
geographical area of such provision, and/or the range of the Company's Products
protected, and, in its reduced or modified form, such provisions shall then be
enforceable.
12. Remedies in Event of Breach.
A. Injunctive Relief. The parties acknowledge that each would be
irreparably harmed by any breach of the covenants contained in Sections 10 and
11 of this Agreement, and that either party's remedy at law for any breach by
the other party of its obligations under Sections 10 or 11 of this Agreement
would be inadequate, and would be impossible to ascertain and therefore, in the
event of the breach or threatened breach of any obligations under Sections 10
and 11 of this Agreement, either party, in addition to any and all other
remedies at law or in equity, shall have the right to enjoin the other party
from any threatened or actual activities in violation thereof; and the parties
hereby consent and agree that temporary and permanent injunctive relief may be
granted in any proceedings which might be brought to enforce any such covenants
without the necessity of proof of actual damages and without the necessity of
posting bond. In the event either party does apply for such injunction, the
other party shall not raise as a defense thereto that such applying party has an
adequate remedy at law.
B. Damages; Accounting for Profits. In addition to any injunctive relief
that may be granted to the Company or Employee for breach of this Agreement, the
Company and Employee
7
<PAGE>
shall be entitled to recover all damages, including reasonable attorneys' fees
and costs (including paralegals' fees), sustained or incurred by the Company or
Employee by reason of a violation or threatened violation of the terms of this
Agreement, and to receive such other remedy or remedies as the court determines
is appropriate. Employee covenants and agrees that, if he violates any of his
covenants or agreements under Sections 10 or 11 hereof, the Company shall be
entitled to an accounting and repayment of all profits, compensations,
commissions, remunerations or benefits which Employee directly or indirectly has
realized or may realize as a result of, growing out of, or in connection with,
any such violation; such remedy shall be in addition to and not in limitation of
any injunctive relief or any other rights or remedies to which the Company is
nor may be entitled at law or in equity or under this Agreement.
13. Reasonableness. Employee has carefully read and considered the provisions of
Sections 10 and 11 hereof and, having done so, agrees that the restrictions set
forth in such sections, including, but not limited to, the time period of
restriction, the geographical areas of restriction, and the definition of
Company Products set forth therein, are fair and reasonable and are reasonably
required for the protection of the interests of the Company, and further that
the geographical area of restriction set forth therein accurately reflects the
area in which he will be actively engaged in the performance of services.
14. No Inconsistent Obligations. Employee represents and warrants that no action
required of his under this Agreement or any other agreements or understandings,
written or oral, entered into with the Company will conflict with, breach or
otherwise impair any previously existing agreements or understandings, whether
written or oral, into which Employee has entered with other persons or entities,
including agreements with respect to proprietary information or non-competition.
15. Indemnification. The parties shall enter into a separate indemnification
agreement, in form and substance mutually agreeable to the parties, within
ninety (90) days from the execution of this Agreement.
16. Notices. Any notice to be given hereunder shall be deemed to be given when
delivered by hand or by overnight courier to the party for whom the notice is
intended, or three (3) days after notice is placed in the U.S. mail properly
addressed to the party for whom notice is intended, at the following address:
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<PAGE>
If to the Company: APOLLO INTERNATIONAL OF DELAWARE, INC.
6542 North U.S. Highway 41 - Suite 215
Apollo Beach, Florida 33572
Attention: Chief Financial Officer
If to Employee: ____________________________
____________________________
17. Binding Effect and Governing Law. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties. The Agreement
contains the entire agreement of the parties, and may not be changed orally but
only in writing signed by the party against whom enforcement of any such change
is sought. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not be operated or be construed as a waiver of
any subsequent breach by that same party. This Agreement shall be governed by
the laws of the State of Florida.
18. Severability. In the event that any terms or provisions of this Agreement
shall be held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remaining terms and provisions hereof.
19. Assignability. The rights or obligations contained in this Agreement shall
not be assigned, transferred, or divided in any manner by Employee or Company,
without the prior written consent of the other; provided, however, that nothing
in this Section 19 shall preclude Employee from designating a beneficiary to
receive any benefits hereunder upon his death, or the executors, administrator
or other legal representatives of Employee or his estate from assigning any
rights hereunder to the person(s) entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding on any entity which by purchase of
assets, merger, or otherwise, becomes a successor to the business of the
Company.
20. Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation and
performance of any of the provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
COMPANY:
APOLLO INTERNATIONAL OF DELAWARE,
INC., a Delaware corporation
By: /s/ David W. Clarke,President
-----------------------------
EMPLOYEE:
Donald Paul Louw
/s/ Donald P. Louw
------------------
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EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is effective as of
July 1, 1996, by and between APOLLO INTERNATIONAL OF DELAWARE, INC., a Delaware
corporation ("Company"), and STEVEN D. SMITH ("Employee") currently holding the
position of Vice President of Operations.
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Employee is essential to the Company's growth and success;
and
WHEREAS, the Company desires to employ Employee as its Vice President of
Operations and Employee desires to accept such employment, all on the terms and
conditions as hereinafter provided; and
WHEREAS, Employee is currently receiving compensation for services rendered
to the Company and/or its subsidiaries.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby employs Employee and Employee hereby accepts
employment by the Company for a period of four (4) years beginning on the date
of this Agreement, subject to the terms and conditions hereafter contained. This
Agreement will be renewed automatically thereafter for successive periods of two
(2) years, unless not less than one hundred twenty (120) days prior to the end
of the initial four (4) year period, or one hundred twenty (120) days prior to
the end of any two (2) year renewal period, as the case may be, one of the
parties sends written notice to the other party of its intent to terminate this
Agreement at the end of such period.
2. Duties. The Company shall continue to employ Employee in an executive
capacity as Vice President of Operations of the Company. Employee shall perform
such duties ordinarily and customarily performed by a similar employee of a
corporation of like type and size as the Company, and shall perform such other
reasonable duties as a senior Company officer of the Board of Directors may
assign to him from time to time.
3. Base Salary
A. As full compensation for services rendered under this Agreement, the
Company shall pay Employee, during the term of this Agreement, a base salary of
One Hundred and Twenty Thousand and NO/100ths ($120,000.00) per year (the "Base
Salary"), payable in
<PAGE>
accordance with the normal payroll practices of the Company. In addition to the
Base Salary, the Company may pay Employee bonuses from time to time as set forth
below.
B. On each January 1, during the term of this Agreement, the base Salary
shall be increased to reflect the change in the cost of living, based upon the
change, from the proceeding January 1, in the Consumer Price Index for All Urban
Consumers, as published by the U.S. Bureau of Labor Statistics (reference base
1982-1984 = 100). On each January 1, and at any time that there is a change in
the financial condition or character of the business of the Company during the
term of this Agreement, the Board of Directors shall review the base salary
amount to determine whether or not to grant additional increases in the base
salary amount.
4. Stock Options. During the term of his employment, Employee will be
provided with stock options under the Company's stock option plan(s) as
determined by the Company's Board of Directors and/or Compensation Committee.
5. Performance Bonus. In addition to the annual Base Salary provided
hereunder, Employee may, at the discretion of the Board of Directors, be
entitled to additional incentive compensation ("Bonus").
6. Fringe Benefits. Employee shall be entitled to vacations, health care
benefits, fringe benefits and reimbursement for reasonable out-of-pocket
expense, including but not limited to those hereinafter detailed, in accordance
with the Company's practices covering Employee personnel. The Company shall use
reasonable efforts to seek waivers of waiting periods, if any, applicable to
particular benefits. Such benefits shall include:
A. coverage for Executive and his family, under any major medical and
dental insurance programs and plans, and under any short-term, long-term or
permanent disability programs and plans, which are or may become generally
available to management employees of the Company;
B. retirement benefits at such time and on such amounts as are paid to
Employee by the Company at such time as the Company institutes a retirement
plan;
C. reimbursement of all properly approved travel and business related
expenses normally paid by the Company for the benefit of its executives. All
expense reports must be approved by the Chief Financial Officer of the Company
prior to reimbursement;
D. vacation selected by Employee in accordance with the Company's vacation
policy for executives, which vacation will be appropriately selected by Employee
taking into account the convenience of the Company. Employee shall give the
Board of Directors at least fourteen (14) calendar days' prior notice of
selected vacation times of one week or more;
E. such number of days as established by Company policy for its employees
generally;
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<PAGE>
F. a holiday on the following days with full pay: New Year's Day,
Presidents' Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day, and such other holidays as the Company may declare; and
G. paid leave and reimbursement of all travel, tuition and related expenses
in attending trade conferences and/or seminars and/or college or other high
level courses acceptable to the Board of Directors in its reasonable discretion.
7. Termination by the Company for Cause.
A. The Company may, at its option, terminate this Agreement by giving
written notice of termination to Employee without prejudice to any other remedy
to which the Company may be entitled, either at law or in equity, under this
Agreement, in the event that:
(i) Employee is convicted of (and such conviction is sustained on
final appeal) or, pleads guilty to, or pleads nolo contendere to a felony
crime involving moral turpitude;
(ii) Employee is found by a court of law to be guilty (which guilty
verdict is sustained on final appeal) of or pleads guilty to or no contest
to fraud, conversion, embezzlement, intentionally falsifying records or
reports, or a similar felony involving the Company's property; or
(iii) Employee continues to willfully breach a material provision of
this Agreement after having received written notice of such breach and a
thirty (30) days' opportunity thereafter to cure such breach.
B. In the event of a termination claimed by the Company to be for "cause"
pursuant to clauses (i), (ii) or (iii) of this Section 7, Employee shall have
the right to have the justification for said termination determined by
arbitration. In such event, Employee shall serve on the Company within thirty
(30) days of termination, a written request for arbitration. The Company
immediately shall request the appointment of an arbitrator by the American
Arbitration Association and thereafter the issues shall be determined under the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on both parties. The parties shall use all reasonable
efforts to facilitate and expedite the arbitration, and shall act to cause the
arbitration to be completed as promptly as possible. During the pendency of the
arbitration Employee shall continue to receive all compensation and benefits to
which he is entitled hereunder. Expenses of the arbitration shall be borne by
the Company pending a final determination of this matter at which time such
expenses shall be borne by the parties.
C. In the event of termination for any of the reasons set forth in
subsection A. of this Section 7, except as otherwise provided in Section 3 of
this Agreement, Employee shall be entitled to no further compensation, Base
Salary, Bonus or other benefits under this Agreement, except as to that portion
of any unpaid Base Salary, Bonus or other benefits accrued and earned
3
<PAGE>
by his hereunder up to and including the final, non-appealable determination by
arbitration as to the justification for such termination for "cause", if
arbitration is invoked. If arbitration is not invoked Base Salary or Bonus and
unpaid benefits shall be accrued and earned up to and including the effective
date of such termination.
D. Anything herein to the contrary notwithstanding, the employment of the
Employee shall not be terminable by the Company for "cause" if the grounds for
such terminations are: (i) the result of bad judgment or poor economic results
on the part of Employee, (ii) any act or any omission believed by Employee in
good faith to have been in or not opposed to the interests of the Company, (iii)
any act or omission in respect of which a determination could properly be made
that Employee met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the charter or
by-laws of the Company, or the laws of the State of Delaware, or the directors'
and officers' liability insurance if the Company, in each case as in effect at
the time of such act or omission, or (iv) as a result of an act or omission
which occurred more than twelve (12) calendar months prior to the Employee's
having been given notice of the termination of his employment for such act or
omission unless the commission of such act could not at the time of such
commission or omission have been known to a member of the Board of Directors of
the Company (other than Employee, if he is then a member of the board of
directors), in which case more than twelve (12) calendar months prior to the
date that the commission of such act or such omission was or could reasonably
have been so known, or (v) as a result of the continuing course of action which
commenced and was or could reasonably have been known to a member of the board
of directors of the Company (other than Employee) more than twelve (12) calendar
months prior to notice having been given to Employee of the termination of his
employment.
8. Termination by the Company; Death; or Permanent Disability.
A. If the Company terminates Employee "without cause" which shall mean for
any reason other than as set forth in Section 7 hereof, or in the event of
Employee's death or "permanent disability" (as defined below), Employee shall:
(i) be entitled to receive an amount equal to the full compensation to which he
would otherwise be entitled under this Agreement (just as if Employee had not
been so terminated and was continuing to serve as an employee hereunder for the
full term of this agreement) for a six (6) month period from the effective date
of such termination, death, or permanent disability (the "Severance Payment").
Such Severance Payment shall be payable in a single lump sum distribution
(without any present value adjustment) to Employee or his estate, as the case
may be, no later than ninety (90) days from the effective date of such
termination, and (ii) be provided, for a six (6) month period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed hereunder, the Company
promptly shall pay Employee the indubitable monetary, after tax equivalent
thereof in U.S. Dollars, without any present value adjustment).
B. Payment in the Event of Permanent Disability. For purposes of this
Agreement, Employee's "permanent disability" shall be deemed to have occurred
after one
4
<PAGE>
hundred twenty (120) days in the aggregate during any consecutive twelve (12)
month period, or after ninety (90) consecutive days, during which one hundred
twenty (120) or ninety (90) days, as the case may be, Employee, by reason of his
physical or mental disability or illness, shall have been unable to discharge
fully his duties under this Agreement. The date of permanent disability shall be
the one hundred twentieth (120th) or ninetieth (90th) day, as the case may be.
In the event Employee, after receipt of notice from the Company, shall dispute
that his permanent disability shall have occurred, he shall promptly submit to a
physical examination by the Chief of Medicine of any major accredited hospital
in the metropolitan area, Tampa, Florida, and, unless such physician shall issue
his written statement to the effect that in his opinion, based on his diagnosis,
Employee is capable of resuming his employment and devoting his full time and
energy to discharging his duties within ten (10) days after the date of such
statement, such permanent disability shall be deemed to have occurred without
further dispute by Employee or Company.
9. Termination by Employee. Employee may, at his option, after complying
with this Section 9, terminate this Agreement in the event of a material breach
of the terms of this Agreement by the Company. Employee shall be required to
give written notice to the Company setting forth with particularity the nature
of the material breach. The Company shall have thirty (30) days following its
receipt of Employee's written notice in which to cure its breach before
Employee's termination of this Agreement shall be effective. In the event
Employee's termination shall be effective under this Section 9, Employee shall:
(i) be entitled to receive the full compensation to which he would otherwise be
entitled under this Agreement (just as if Employee had not so terminated his
employment and was continuing to serve as an employee hereunder for the full
term of this Agreement (the "Continuation Period")) payable in a single sum
distribution (without any present value adjustment) on the date of such
termination, and (ii) be provided, for the Continuation Period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed hereunder, the Company
promptly shall pay Employee the indubitable, after-tax monetary equivalent
thereof in U.S. Dollars, without any present value adjustment). If Employee
terminates this Agreement for any reason other than pursuant to this Section 9,
except as otherwise provided in Section 8 of this Agreement as it relates to the
death of Employee, Employee shall be entitled to no further compensation or
other benefits under this Agreement, except as to that portion of any unpaid
salary and other benefits accrued and earned by his hereunder up to and
including the effective date of such termination.
10. Confidential Information. Employee recognizes and acknowledges that the
Company has, through the expenditure of substantial time, effort and money,
developed and acquired certain confidential information and trade secrets which
have become of great value to the Company in its operations. Employee further
acknowledges and understands that in the course of performing his duties for the
Company, Employee has received and will receive special training and experience,
and has had and will have access to the trade secrets and confidential
information of the Company. Employee agrees that during the course of his
employment and at any time after the termination or expiration thereof, he will
not make any independent use of, publish or disclose, or authorize anyone to
publish or disclose, to any other person or organization, any of the Company's
trade secrets and confidential information, except as required
5
<PAGE>
in the course of his employment with the Company or by law. Upon request of the
Company and, in any event upon the cessation of Employee's employment with the
Company, whether with or without cause, Employee will promptly return all
tangible expressions of trade secrets and confidential information in his
possession and control and all copies thereof. As used herein, the term "trade
secrets and confidential information" shall mean client lists, applicant lists,
and other related client and applicant data, computerized compilation of such
data, training materials and information, policy and procedure manuals, video
and audio recordings of training and operation methods, sales, services, support
and marketing practices and operations, advertising themes, formats of
advertising and other business methods, and techniques, processes and financial
information of the Company, all of which are not generally known to the trade or
industry and which will be of competitive use by them. "Trade secrets and
confidential information" shall not include intangible information which is
generally known and used by persons with training and experience comparable to
Employee as of the date of this Agreement and all intangible information which
is common knowledge in the industry or otherwise legally in the public domain.
Employee further agrees that the restrictions set forth in this Section 10
are in addition to, and not in lieu of, any other restrictions or obligations
placed upon his, and/or any rights or remedies available to the Company, by any
statute or at common law.
11. Covenant not to Compete. Employee covenants and agrees that, in order
to protect the Company's legitimate interest in its trade secrets and
confidential information, special training, and business during the term of his
employment, for a period of two (2) years following the expiration or
termination of this Agreement or any renewal of the Agreement, however the same
shall occur, whether voluntary or involuntary, Employee will not, without the
prior written consent of the Company, directly or indirectly:
A. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures which manufacture, market or distribute products which are competitive
with any of the "Company's Products" (as hereinafter defined) anywhere in the
United States; or
B. become interested, directly or indirectly, whether as principal, owner,
stockholder, partner, agent, officer, director, employee, salesman, joint
venturer, consultant, advisor, independent contractor or otherwise, in any
person, firm, partnership, association, venture, corporation or entity engaging
directly or indirectly in any of the activities described in Subsection 11.A.
above; or
C. knowingly solicit the employment of any of the Company Personnel (as
hereinafter defined).
For purposes of this Agreement:
6
<PAGE>
(i) the term "Company Personnel" shall mean any person employed by the
Company at any time through the end of the term of this Agreement, but excluding
any person who has left such employment for a continuous period exceeding one
(1) year;
(ii) the term "Company" shall include any successor in interest whether by
sale, merger, liquidation or the like, and any of the Company's subsidiaries and
affiliates;
(iii) the term "Company's Products" shall mean any present or future
(future being limited to the term of this Agreement and any and all extensions
thereof) product (i) being sold by the Company or (ii) any product designed,
engineered, manufactured, assembled, or enhanced (whether or not sold) by the
Company.
D. None of the foregoing shall prevent Employee from holding up to two
percent (2%) in the aggregate of any class of securities of any entity engaged
in the prohibited activities described above, provided that, such securities are
listed on a national securities exchange or registered under Section 12(g) of
the Securities and Exchange Act of 1934.
E. If any of the provisions contained in this Section 11 are held to be
unenforceable because of the duration of such provision, the geographical area
covered thereby, and/or the range of the Company's Products protected, the
parties agree that the court of competent jurisdiction making such determination
shall have the power to reduce or otherwise modify the duration, the
geographical area of such provision, and/or the range of the Company's Products
protected, and, in its reduced or modified form, such provisions shall then be
enforceable.
12. Remedies in Event of Breach.
A. Injunctive Relief. The parties acknowledge that each would be
irreparably harmed by any breach of the covenants contained in Sections 10 and
11 of this Agreement, and that either party's remedy at law for any breach by
the other party of its obligations under Sections 10 or 11 of this Agreement
would be inadequate, and would be impossible to ascertain and therefore, in the
event of the breach or threatened breach of any obligations under Sections 10
and 11 of this Agreement, either party, in addition to any and all other
remedies at law or in equity, shall have the right to enjoin the other party
from any threatened or actual activities in violation thereof; and the parties
hereby consent and agree that temporary and permanent injunctive relief may be
granted in any proceedings which might be brought to enforce any such covenants
without the necessity of proof of actual damages and without the necessity of
posting bond. In the event either party does apply for such injunction, the
other party shall not raise as a defense thereto that such applying party has an
adequate remedy at law.
B. Damages; Accounting for Profits. In addition to any injunctive relief
that may be granted to the Company or Employee for breach of this Agreement, the
Company and Employee shall be entitled to recover all damages, including
reasonable attorneys' fees and costs (including paralegals' fees), sustained or
incurred by the Company or Employee by reason of a
7
<PAGE>
violation or threatened violation of the terms of this Agreement, and to receive
such other remedy or remedies as the court determines is appropriate. Employee
covenants and agrees that, if he violates any of his covenants or agreements
under Sections 10 or 11 hereof, the Company shall be entitled to an accounting
and repayment of all profits, compensations, commissions, remunerations or
benefits which Employee directly or indirectly has realized or may realize as a
result of, growing out of, or in connection with, any such violation; such
remedy shall be in addition to and not in limitation of any injunctive relief or
any other rights or remedies to which the Company is nor may be entitled at law
or in equity or under this Agreement.
13. Reasonableness. Employee has carefully read and considered the
provisions of Sections 10 and 11 hereof and, having done so, agrees that the
restrictions set forth in such sections, including, but not limited to, the time
period of restriction, the geographical areas of restriction, and the definition
of Company Products set forth therein, are fair and reasonable and are
reasonably required for the protection of the interests of the Company, and
further that the geographical area of restriction set forth therein accurately
reflects the area in which he will be actively engaged in the performance of
services.
14. No Inconsistent Obligations. Employee represents and warrants that no
action required of his under this Agreement or any other agreements or
understandings, written or oral, entered into with the Company will conflict
with, breach or otherwise impair any previously existing agreements or
understandings, whether written or oral, into which Employee has entered with
other persons or entities, including agreements with respect to proprietary
information or non-competition.
15. Indemnification. The parties shall enter into a separate
indemnification agreement, in form and substance mutually agreeable to the
parties, within ninety (90) days from the execution of this Agreement.
16. Notices. Any notice to be given hereunder shall be deemed to be given
when delivered by hand or by overnight courier to the party for whom the notice
is intended, or three (3) days after notice is placed in the U.S. mail properly
addressed to the party for whom notice is intended, at the following address:
8
<PAGE>
If to the Company: APOLLO INTERNATIONAL OF DELAWARE, INC.
6542 North U.S. Highway 41 - Suite 215
Apollo Beach, Florida 33572
Attention: Chief Financial Officer
If to Employee: Steven D. Smith
1030 Casa Palarmo
Apt. #_____
Riverview, FL 33569
17. Binding Effect and Governing Law. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties. The Agreement
contains the entire agreement of the parties, and may not be changed orally but
only in writing signed by the party against whom enforcement of any such change
is sought. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not be operated or be construed as a waiver of
any subsequent breach by that same party. This Agreement shall be governed by
the laws of the State of Florida.
18. Severability. In the event that any terms or provisions of this
Agreement shall be held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remaining terms and provisions hereof.
19. Assignability. The rights or obligations contained in this Agreement
shall not be assigned, transferred, or divided in any manner by Employee or
Company, without the prior written consent of the other; provided, however, that
nothing in this Section 19 shall preclude Employee from designating a
beneficiary to receive any benefits hereunder upon his death, or the executors,
administrator or other legal representatives of Employee or his estate from
assigning any rights hereunder to the person(s) entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding on any entity
which by purchase of assets, merger, or otherwise, becomes a successor to the
business of the Company.
20. Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation and
performance of any of the provisions of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
COMPANY:
APOLLO INTERNATIONAL OF DELAWARE,
INC., a Delaware corporation
By: /S/ David W. Clarke, President
------------------------------
David W. Clarke, President
EMPLOYEE:
By: /S/ Steven D. Smith
-------------------
Steven D. Smith
10
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is effective as of
November 1, 1996 by and between APOLLO INTERNATIONAL OF DELAWARE, INC., a
Delaware corporation ("Company"), and ROBERT SWATLAND ("Employee").
W I T N E S S E T H:
WHEREAS, the Company believes that the attraction and retention of key
employees such as the Employee is essential to the Company's growth and success;
and
WHEREAS, the Company desires to employ Employee as its Vice President of
Sales and Employee desires to accept such employment, all on the terms and
conditions as hereinafter provided.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby employs Employee and Employee hereby accepts
employment by the Company for a period of four (4) years beginning on the date
of this Agreement, subject to the terms and conditions hereafter contained. This
Agreement will be renewed automatically thereafter for successive periods of two
(2) years, unless not less than one hundred twenty (120) days prior to the end
of the initial four (4) year period, or one hundred twenty (120) days prior to
the end of any two (2) year renewal period, as the case may be, one of the
parties sends written notice to the other party of its intent to terminate this
Agreement at the end of such period.
2. Duties. The Company shall continue to employ Employee in an executive
capacity as Vice President of Sales of the Company. Employee shall perform such
duties ordinarily and customarily performed by a similar employee of a
corporation of like type and size as the Company, and shall perform such other
reasonable duties as a senior Company officer of the Board of Directors may
assign to him from time to time.
3. Base Salary
A. As full compensation for services rendered under this Agreement, the
Company shall pay Employee, during the term of this Agreement, a base salary of
Eighty Thousand and NO/100ths ($80,000.00) per year (the "Base Salary"), payable
in accordance with the normal payroll practices of the Company. In addition to
the Base Salary, the Company may pay Employee bonuses from time to time as set
forth below.
B. On each January 1, during the term of this Agreement, the base Salary
shall be increased to reflect the change in the cost of living, based upon the
change, from the
<PAGE>
proceeding January 1, in the Consumer Price Index for All Urban Consumers, as
published by the U.S. Bureau of Labor Statistics (reference base 1982-1984 =
100). On each January 1, and at any time that there is a change in the financial
condition or character of the business of the Company during the term of this
Agreement, the Board of Directors shall review the base salary amount to
determine whether or not to grant additional increases in the base salary
amount.
4. Stock Options. During the term of his employment, Employee will be
provided with stock options under the Company's stock option plan(s) as
determined by the Company's Board of Directors and/or Compensation Committee.
5. Performance Bonus. In addition to the annual Base Salary provided
hereunder, Employee may, at the discretion of the Board of Directors, be
entitled to additional incentive compensation ("Bonus").
6. Fringe Benefits. Employee shall be entitled to vacations, health care
benefits, fringe benefits and reimbursement for reasonable out-of-pocket
expense, including but not limited to those hereinafter detailed, in accordance
with the Company's practices covering Employee personnel. The Company shall use
reasonable efforts to seek waivers of waiting periods, if any, applicable to
particular benefits. Such benefits shall include:
A. coverage for Executive and his family, under any major medical and
dental insurance programs and plans, and under any short-term, long-term or
permanent disability programs and plans, which are or may become generally
available to management employees of the Company;
B. retirement benefits at such time and on such amounts as are paid to
Employee by the Company at such time as the Company institutes a retirement
plan;
C. reimbursement of all properly approved travel and business related
expenses normally paid by the Company for the benefit of its executives. All
expense reports must be approved by the Chief Financial Officer of the Company
prior to reimbursement;
D. vacation selected by Employee in accordance with the Company's vacation
policy for executives, which vacation will be appropriately selected by Employee
taking into account the convenience of the Company. Employee shall give the
Board of Directors at least fourteen (14) calendar days' prior notice of
selected vacation times of one week or more;
E. such number of days as established by Company policy for its employees
generally;
F. a holiday on the following days with full pay: New Year's Day,
Presidents' Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day, and such other holidays as the Company may declare; and
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G. paid leave and reimbursement of all travel, tuition and related expenses
in attending trade conferences and/or seminars and/or college or other high
level courses acceptable to the Board of Directors in its reasonable discretion.
7. Termination by the Company for Cause.
A. The Company may, at its option, terminate this Agreement by giving
written notice of termination to Employee without prejudice to any other remedy
to which the Company may be entitled, either at law or in equity, under this
Agreement, in the event that:
(i) Employee is convicted of (and such conviction is sustained on final
appeal) or, pleads guilty to, or pleads nolo contendere to a felony crime
involving moral turpitude;
(ii) Employee is found by a court of law to be guilty (which guilty verdict
is sustained on final appeal) of or pleads guilty to or no contest to fraud,
conversion, embezzlement, intentionally falsifying records or reports, or a
similar felony involving the Company's property; or
(iii) Employee continues to willfully breach a material provision of this
Agreement after having received written notice of such breach and a thirty (30)
days' opportunity thereafter to cure such breach.
B. In the event of a termination claimed by the Company to be for "cause"
pursuant to clauses (i), (ii) or (iii) of this Section 7, Employee shall have
the right to have the justification for said termination determined by
arbitration. In such event, Employee shall serve on the Company within thirty
(30) days of termination, a written request for arbitration. The Company
immediately shall request the appointment of an arbitrator by the American
Arbitration Association and thereafter the issues shall be determined under the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on both parties. The parties shall use all reasonable
efforts to facilitate and expedite the arbitration, and shall act to cause the
arbitration to be completed as promptly as possible. During the pendency of the
arbitration Employee shall continue to receive all compensation and benefits to
which he is entitled hereunder. Expenses of the arbitration shall be borne by
the Company pending a final determination of this matter at which time such
expenses shall be borne by the parties.
C. In the event of termination for any of the reasons set forth in
subsection A. of this Section 7, except as otherwise provided in Section 3 of
this Agreement, Employee shall be entitled to no further compensation, Base
Salary, Bonus or other benefits under this Agreement, except as to that portion
of any unpaid Base Salary, Bonus or other benefits accrued and earned by his
hereunder up to and including the final, non-appealable determination by
arbitration as to the justification for such termination for "cause", if
arbitration is invoked. If arbitration is not invoked Base Salary or Bonus and
unpaid benefits shall be accrued and earned up to and including the effective
date of such termination.
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D. Anything herein to the contrary notwithstanding, the employment of the
Employee shall not be terminable by the Company for "cause" if the grounds for
such terminations are: (i) the result of bad judgment or poor economic results
on the part of Employee, (ii) any act or any omission believed by Employee in
good faith to have been in or not opposed to the interests of the Company, (iii)
any act or omission in respect of which a determination could properly be made
that Employee met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the charter or
by-laws of the Company, or the laws of the State of Delaware, or the directors'
and officers' liability insurance if the Company, in each case as in effect at
the time of such act or omission, or (iv) as a result of an act or omission
which occurred more than twelve (12) calendar months prior to the Employee's
having been given notice of the termination of his employment for such act or
omission unless the commission of such act could not at the time of such
commission or omission have been known to a member of the Board of Directors of
the Company (other than Employee, if he is then a member of the board of
directors), in which case more than twelve (12) calendar months prior to the
date that the commission of such act or such omission was or could reasonably
have been so known, or (v) as a result of the continuing course of action which
commenced and was or could reasonably have been known to a member of the board
of directors of the Company (other than Employee) more than twelve (12) calendar
months prior to notice having been given to Employee of the termination of his
employment.
8. Termination by the Company; Death; or Permanent Disability.
A. If the Company terminates Employee "without cause" which shall mean for
any reason other than as set forth in Section 7 hereof, or in the event of
Employee's death or "permanent disability" (as defined below), Employee shall:
(i) be entitled to receive an amount equal to the full compensation to which he
would otherwise be entitled under this Agreement (just as if Employee had not
been so terminated and was continuing to serve as an employee hereunder for the
full term of this agreement) for a six (6) month period from the effective date
of such termination, death, or permanent disability (the "Severance Payment").
Such Severance Payment shall be payable in a single lump sum distribution
(without any present value adjustment) to Employee or his estate, as the case
may be, no later than ninety (90) days from the effective date of such
termination, and (ii) be provided, for a six (6) month period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed hereunder, the Company
promptly shall pay Employee the indubitable monetary, after tax equivalent
thereof in U.S. Dollars, without any present value adjustment).
B. Payment in the Event of Permanent Disability. For purposes of this
Agreement, Employee's "permanent disability" shall be deemed to have occurred
after one hundred twenty (120) days in the aggregate during any consecutive
twelve (12) month period, or after ninety (90) consecutive days, during which
one hundred twenty (120) or ninety (90) days, as the case may be, Employee, by
reason of his physical or mental disability or illness, shall have been unable
to discharge fully his duties under this Agreement. The date of permanent
disability shall be the one hundred twentieth (120th) or ninetieth (90th) day,
as the case may be. In the event
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Employee, after receipt of notice from the Company, shall dispute that his
permanent disability shall have occurred, he shall promptly submit to a physical
examination by the Chief of Medicine of any major accredited hospital in the
metropolitan area, Tampa, Florida, and, unless such physician shall issue his
written statement to the effect that in his opinion, based on his diagnosis,
Employee is capable of resuming his employment and devoting his full time and
energy to discharging his duties within ten (10) days after the date of such
statement, such permanent disability shall be deemed to have occurred without
further dispute by Employee or Company.
9. Termination by Employee. Employee may, at his option, after complying
with this Section 9, terminate this Agreement in the event of a material breach
of the terms of this Agreement by the Company. Employee shall be required to
give written notice to the Company setting forth with particularity the nature
of the material breach. The Company shall have thirty (30) days following its
receipt of Employee's written notice in which to cure its breach before
Employee's termination of this Agreement shall be effective. In the event
Employee's termination shall be effective under this Section 9, Employee shall:
(i) be entitled to receive the full compensation to which he would otherwise be
entitled under this Agreement (just as if Employee had not so terminated his
employment and was continuing to serve as an employee hereunder for the full
term of this Agreement (the "Continuation Period")) payable in a single sum
distribution (without any present value adjustment) on the date of such
termination, and (ii) be provided, for the Continuation Period, with all the
insurance and other benefits set forth in Section 6.A. hereof (provided,
however, to the extent that the benefits in Section 6.A. cannot in fact be paid
due to the fact that Employee is not in fact employed hereunder, the Company
promptly shall pay Employee the indubitable, after-tax monetary equivalent
thereof in U.S. Dollars, without any present value adjustment). If Employee
terminates this Agreement for any reason other than pursuant to this Section 9,
except as otherwise provided in Section 8 of this Agreement as it relates to the
death of Employee, Employee shall be entitled to no further compensation or
other benefits under this Agreement, except as to that portion of any unpaid
salary and other benefits accrued and earned by his hereunder up to and
including the effective date of such termination.
10. Confidential Information. Employee recognizes and acknowledges that the
Company has, through the expenditure of substantial time, effort and money,
developed and acquired certain confidential information and trade secrets which
have become of great value to the Company in its operations. Employee further
acknowledges and understands that in the course of performing his duties for the
Company, Employee has received and will receive special training and experience,
and has had and will have access to the trade secrets and confidential
information of the Company. Employee agrees that during the course of his
employment and at any time after the termination or expiration thereof, he will
not make any independent use of, publish or disclose, or authorize anyone to
publish or disclose, to any other person or organization, any of the Company's
trade secrets and confidential information, except as required in the course of
his employment with the Company or by law. Upon request of the Company and, in
any event upon the cessation of Employee's employment with the Company, whether
with or without cause, Employee will promptly return all tangible expressions of
trade secrets and confidential information in his possession and control and all
copies thereof. As used herein, the term "trade secrets and confidential
information" shall mean client lists, applicant lists, and other
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<PAGE>
related client and applicant data, computerized compilation of such data,
training materials and information, policy and procedure manuals, video and
audio recordings of training and operation methods, sales, services, support and
marketing practices and operations, advertising themes, formats of advertising
and other business methods, and techniques, processes and financial information
of the Company, all of which are not generally known to the trade or industry
and which will be of competitive use by them. "Trade secrets and confidential
information" shall not include intangible information which is generally known
and used by persons with training and experience comparable to Employee as of
the date of this Agreement and all intangible information which is common
knowledge in the industry or otherwise legally in the public domain.
Employee further agrees that the restrictions set forth in this Section 10
are in addition to, and not in lieu of, any other restrictions or obligations
placed upon his, and/or any rights or remedies available to the Company, by any
statute or at common law.
11. Covenant not to Compete. Employee covenants and agrees that, in order
to protect the Company's legitimate interest in its trade secrets and
confidential information, special training, goodwill, and substantial
relationships with prospective or existing customers or suppliers during the
term of his employment, for a period of two (2) years following the expiration
or termination of this Agreement or any renewal of the Agreement, however the
same shall occur, whether voluntary or involuntary, Employee will not, without
the prior written consent of the Company, directly or indirectly:
A. engage, whether by virtue of stock ownership, management
responsibilities or otherwise, in companies, businesses, organizations and/or
ventures which manufacture, market or distribute products which are competitive
with any of the "Company's Products" (as hereinafter defined) anywhere in the
United States; or
B. become interested, directly or indirectly, whether as principal, owner,
stockholder, partner, agent, officer, director, employee, salesman, joint
venturer, consultant, advisor, independent contractor or otherwise, in any
person, firm, partnership, association, venture, corporation or entity engaging
directly or indirectly in any of the activities described in Subsection 11.A.
above; or
C. knowingly solicit the employment of any of the Company Personnel (as
hereinafter defined).
For purposes of this Agreement:
(i) the term "Company Personnel" shall mean any person employed by the
Company at any time through the end of the term of this Agreement, but excluding
any person who has left such employment for a continuous period exceeding one
(1) year;
(ii) the term "Company" shall include any successor in interest whether by
sale, merger, liquidation or the like, and any of the Company's subsidiaries and
affiliates;
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<PAGE>
(iii) the term "Company's Products" shall mean any present or future
(future being limited to the term of this Agreement and any and all extensions
thereof) product (i) being sold by the Company or (ii) any product designed,
engineered, manufactured, assembled, or enhanced (whether or not sold) by the
Company.
D. None of the foregoing shall prevent Employee from holding up to two
percent (2%) in the aggregate of any class of securities of any entity engaged
in the prohibited activities described above, provided that, such securities are
listed on a national securities exchange or registered under Section 12(g) of
the Securities and Exchange Act of 1934.
E. The Employee acknowledges that the covenant not to compete contained
herein is reasonably necessary to protect the legitimate business interests of
the Company. Employee's employment by the Company is expressly conditioned upon
Employee's knowing and voluntary agreement to the terms and conditions of the
covenant not to compete contained herein. If any of the provisions contained in
this Section 11 are held to be unenforceable because of the duration of such
provision, the geographical area covered thereby, and/or the range of the
Company's Products protected, the parties agree that the court of competent
jurisdiction making such determination shall have the power to reduce or
otherwise modify the duration, the geographical area of such provision, and/or
the range of the Company's Products protected, and, in its reduced or modified
form, such provisions shall then be enforceable.
12. Remedies in Event of Breach.
A. Injunctive Relief. The parties acknowledge that each would be
irreparably harmed by any breach of the covenants contained in Sections 10 and
11 of this Agreement, and that either party's remedy at law for any breach by
the other party of its obligations under Sections 10 or 11 of this Agreement
would be inadequate, and would be impossible to ascertain and therefore, in the
event of the breach or threatened breach of any obligations under Sections 10
and 11 of this Agreement, either party, in addition to any and all other
remedies at law or in equity, shall have the right to enjoin the other party
from any threatened or actual activities in violation thereof; and the parties
hereby consent and agree that temporary and permanent injunctive relief may be
granted in any proceedings which might be brought to enforce any such covenants
without the necessity of proof of actual damages and without the necessity of
posting bond. In the event either party does apply for such injunction, the
other party shall not raise as a defense thereto that such applying party has an
adequate remedy at law.
B. Damages; Accounting for Profits. In addition to any injunctive relief
that may be granted to the Company or Employee for breach of this Agreement, the
Company and Employee shall be entitled to recover all damages, including
reasonable attorneys' fees and costs (including paralegals' fees), sustained or
incurred by the Company or Employee by reason of a violation or threatened
violation of the terms of this Agreement, and to receive such other remedy or
remedies as the court determines is appropriate. Employee covenants and agrees
that, if he violates any of his covenants or agreements under Sections 10 or 11
hereof, the Company shall be
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entitled to an accounting and repayment of all profits, compensations,
commissions, remunerations or benefits which Employee directly or indirectly has
realized or may realize as a result of, growing out of, or in connection with,
any such violation; such remedy shall be in addition to and not in limitation of
any injunctive relief or any other rights or remedies to which the Company is
nor may be entitled at law or in equity or under this Agreement.
13. Reasonableness. Employee has carefully read and considered the
provisions of Sections 10 and 11 hereof and, having done so, agrees that the
restrictions set forth in such sections, including, but not limited to, the time
period of restriction, the geographical areas of restriction, and the definition
of Company Products set forth therein, are fair and reasonable and are
reasonably required for the protection of the interests of the Company, and
further that the geographical area of restriction set forth therein accurately
reflects the area in which he will be actively engaged in the performance of
services.
14. No Inconsistent Obligations. Employee represents and warrants that no
action required of his under this Agreement or any other agreements or
understandings, written or oral, entered into with the Company will conflict
with, breach or otherwise impair any previously existing agreements or
understandings, whether written or oral, into which Employee has entered with
other persons or entities, including agreements with respect to proprietary
information or non-competition.
15. Indemnification. The parties shall enter into a separate
indemnification agreement, in form and substance mutually agreeable to the
parties, within ninety (90) days from the execution of this Agreement.
16. Notices. Any notice to be given hereunder shall be deemed to be given
when delivered by hand or by overnight courier to the party for whom the notice
is intended, or three (3) days after notice is placed in the U.S. mail properly
addressed to the party for whom notice is intended, at the following address:
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If to the Company: APOLLO INTERNATIONAL OF DELAWARE, INC.
6542 North U.S. Highway 41 - Suite 215
Apollo Beach, Florida 33572
Attention: Chief Financial Officer
If to Employee: Robert Swatland
-------------------
___________________
17. Binding Effect and Governing Law. This Agreement supersedes all prior
understandings and agreements between the parties with respect to the subject
matter hereof. This Agreement shall be binding upon the legal representatives,
heirs, distributees, successors and assigns of the parties. The Agreement
contains the entire agreement of the parties, and may not be changed orally but
only in writing signed by the party against whom enforcement of any such change
is sought. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not be operated or be construed as a waiver of
any subsequent breach by that same party. This Agreement shall be governed by
the laws of the State of Florida.
18. Severability. In the event that any terms or provisions of this
Agreement shall be held to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remaining terms and provisions hereof.
19. Assignability. The rights or obligations contained in this Agreement
shall not be assigned, transferred, or divided in any manner by Employee or
Company, without the prior written consent of the other; provided, however, that
nothing in this Section 19 shall preclude Employee from designating a
beneficiary to receive any benefits hereunder upon his death, or the executors,
administrator or other legal representatives of Employee or his estate from
assigning any rights hereunder to the person(s) entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding on any entity
which by purchase of assets, merger, or otherwise, becomes a successor to the
business of the Company.
20. Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation and
performance of any of the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
COMPANY:
APOLLO INTERNATIONAL OF DELAWARE,
INC., a Delaware corporation
By: /s/ David W. Clarke
--------------------------------
David W. Clarke, President
EMPLOYEE:
By: /s/ Robert Swatland
-------------------------------
Robert Swatland
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FORM OF FINANCIAL ADVISORY AND INVESTMENT BANKING AGREEMENT
This Agreement is made and entered into as of the day of , 1997 by and
between May Davis Group, Inc. ("May Davis"), and Apollo International of
Delaware, Inc. ("Company").
In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Purpose: The Company hereby engages May Davis for the term
specified in Paragraph 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters upon the terms and
conditions set forth herein.
2. Term: Except as otherwise specified in Paragraph 4 hereof, this
Agreement shall be effective for a three (3) year period commencing , 1997 and
ending to , 2000.
3. Duties of May Davis: During the term of this Agreement, May Davis
shall seek out Transactions (as hereinafter defined) on behalf of the Company
and shall furnish advice to the Company in connection with any such
Transactions.
4. Compensation: In consideration for the services rendered by May
Davis to the Company pursuant to this Agreement (and in addition to the expenses
provided for in Paragraph 5 hereof), the Company shall compensate May Davis as
follows:
(a) The Company shall pay May Davis a fee of $2,187.50 per month for the
term of this Agreement. The aggregate sum of $78,750 shall be due and payable
upon the execution of this Agreement.
(b) In the event that any Transaction occurs during the term of this
Agreement or to the extent provided herein, one year thereafter, the Company
shall pay fees to May Davis as follows:
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Consideration Fee
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$ - 0 - to $ 500,000 Minimum Fee of $25,000
$ 500,000 to $5,000,000 5% of Consideration
$5,000,000 or more $250,000 plus 1% of the
Consideration in excess of
$5,000,000
For the purposes of this Agreement, "Consideration" shall mean the total
market value on the day of the closing of stock, cash, assets and all other
property (real or personal) exchanged or received, directly or indirectly by the
Company or any of its security holders in connection with any Transaction. Any
co-broker retained by May Davis shall be paid by May Davis.
(c) For the purposes of the Agreement, a "Transaction" shall mean (i) any
transaction originated by May Davis, other than in the ordinary course of trade
or business of the Company, whereby, directly or indirectly, control of, or a
material interest in, the Company or any of its businesses or any of their
respective assets, is transferred for Consideration, or (ii) any transaction
originated by May Davis whereby the Company acquires any other company or the
assets of any other company or an interest in any other company (an
"Acquisition").
In the event May Davis originates a line of credit with a lender or a
corporate partner, the Company and May Davis will mutually agree on a
satisfactory fee and the terms of payment of such fee. In the event May Davis
introduces the Company to a joint venture partner or customer and sales develop
as a result of the introduction, the Company agrees to pay a fee of five percent
(5%) of total sales generated directly from this introduction during the first
two years following the date of the first sale. Total sales shall mean gross
receipts less any applicable refunds, returns, allowances, credits, taxes and
shipping charges and monies paid by the Company by way of settlement or judgment
arising out of claims made by or threatened against the Company. Commission
payments shall be paid on the 15th day of each third month following the receipt
of customers' payments. In the event any adjustments are made to the total sales
after the
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commission has been paid, the Company shall be entitled to an appropriate refund
or credit against future payments under this Agreement.
(d) All fees to be paid pursuant to this Agreement, except as otherwise
specified, are due and payable to May Davis in cash or company check at the
closing or closings of any Transaction specified in Paragraph 4. In the event
that this Agreement shall not be renewed or if terminated for any reason,
notwithstanding any such non-renewal or termination, May Davis shall be entitled
to a full fee as provided under Paragraphs 4 and 5 hereof, for any Transaction
for which the discussions were initiated during the term of this Agreement and
which is consummated within a period of twelve months after non-renewal or
termination of this Agreement. Nothing herein shall impose any obligation on the
part of the Company to enter into any Transaction.
5. Expenses of May Davis: In addition to the fees payable hereunder
and regardless of whether any Transaction set forth in Paragraph 4 hereof is
proposed or consummated, the Company shall reimburse May Davis for the
reasonable fees and disbursements of May Davis's counsel and May Davis's
reasonable travel and out-of-pocket expenses incurred in connection with the
services performed by May Davis pursuant to this Agreement and at the request of
the Company, including without limitation, hotels, food and associated expenses
and long-distance telephone calls, except that individual expenses exceeding
$500 must be pre-approved in writing by the Company and that total non
pre-approved expenses may not exceed $10,000.
6. Liability of May Davis: The Company acknowledges that all opinions
and advice (written or oral) given by May Davis to the Company in connection
with May Davis's engagement are intended solely for the benefit and use of the
Company in considering the Transaction to which they relate, and the Company
agrees that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of May Davis to be given hereunder, and no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor may the Company make any public references to May Davis, or use May
Davis's name in any annual reports or any other reports or releases of the
Company without May Davis's prior written consent.
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The Company acknowledges that May Davis makes no commitment
whatsoever as to making a market in the Company's securities or to recommending
or advising its clients to purchase the Company's securities. Research reports
or corporate finance reports that may be prepared by May Davis will, when and if
prepared, be done solely on the merits or judgment of analysis of May Davis or
any senior corporate finance personnel of May Davis.
7. May Davis's Services to Others: The Company acknowledges that May
Davis or its affiliates are in the business of providing financial services and
consulting advice to others. Nothing herein contained shall be construed to
limit or restrict May Davis in conducting such business with respect to others,
or in rendering such advice to others, except that May Davis will not provide
services to others when such services may materially and adversely affect the
Company.
8. Company Information:
(a) The Company recognizes and confirms that, in advising the Company and
in fulfilling its engagement hereunder, May Davis will use and rely on data,
material and other information furnished to May Davis by the Company. The
Company acknowledges and agrees that in performing its services under this
engagement, May Davis may rely upon the data, material and other information
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same.
(b) Except as contemplated by the terms hereof or as required by applicable
law, May Davis shall keep confidential all non-public information provided to it
by the Company, and shall not disclose such information to any third party
without the Company's prior written consent, other than such of its employees
and advisors as May Davis reasonably determines to have a need to know.
9. Indemnification:
(a) The Company shall indemnify and hold May Davis harmless against any and
all liabilities, claims, lawsuits, including any and all awards and/or judgments
to which it may become subject under the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "Act") or any
other federal or state statute, at common law or otherwise, insofar as said
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<PAGE>
liabilities, claims and lawsuits (including costs, expenses, awards and/or
judgments) arise out of or are in connection with the services rendered by May
Davis or any transactions in connection with this Agreement, except for any
liabilities, claims and lawsuits (including awards and/or judgments), arising
out of acts or omissions of May Davis. In addition, the Company shall also
indemnify and hold May Davis harmless against any and all costs and expenses,
including reasonable counsel fees, incurred relating to the foregoing.
May Davis shall give the Company prompt notice of any such liability,
claim or lawsuit which May Davis contends is the subject matter of the Company's
indemnification and the Company thereupon shall be granted the right to take any
and all necessary and proper action, at its sole cost and expense, with respect
to such liability, claim and lawsuit, including the right to settle, compromise
and dispose of such liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or authorities.
May Davis shall indemnify and hold the Company harmless against any
and all liabilities, claims and lawsuits, including any and all awards and/or
judgments to which it may become subject under the 1933 Act, the Act or any
other federal or state statute, at common law or otherwise, insofar as said
liabilities, claims and lawsuits (including costs, expenses, awards and/or
judgments) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact required to be stated or necessary to make the
statement therein, not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Company by or on behalf of
May Davis for inclusion in any registration statement or prospectus or any
amendment or supplement thereto or in connection with any Transaction to which
this Agreement applies or which otherwise arises. In addition, May Davis shall
also indemnify and hold the Company harmless against any and all costs and
expenses, including reasonable counsel fees, incurred relating to the foregoing.
The Company shall give May Davis prompt notice of any such liability,
claim or lawsuit which the Company contends is the subject matter of May Davis's
indemnification and May Davis thereupon shall be granted the right to take any
and all necessary and proper action, at its sole cost and expense, with respect
to such liability, claim and
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<PAGE>
lawsuit, including the right to settle, compromise or dispose of such liability,
claim or lawsuit, excepting therefrom any and all proceedings or hearings before
any regulatory bodies and/or authorities.
(b) In order to provide for just and equitable contribution under the Act
in any case in which (i) any person entitled to indemnification under this
Paragraph 9 makes claim for indemnification pursuant hereto but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 9 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Paragraph 9, then, and in each such case, the Company and May Davis shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party from the
transactions undertaken in connection with this Agreement (taking into account
the portion of the proceeds realized by each), the parties' relative knowledge
and access to information concerning the matter with respect to which the claim
was assessed, the opportunity to correct and prevent any statement or omission
and other equitable considerations appropriate under the circumstances; and
provided, that, in any such case, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "Contributing Party"), notify
the Contributing Party of the commencement thereof, but the omission so to
notify the Contributing Party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies a Contributing Party or his or its representative of the commencement
thereof within the aforesaid fifteen (15) days, the Contributing Party will be
entitled to
-6-
<PAGE>
participate therein with the notifying party and any other Contributing Party
similarly notified. Any such Contributing Party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of the Contributing Party, which consent shall not be unreasonably
withheld. The indemnification provisions contained in this Paragraph 9 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
10. May Davis an Independent Contractor: May Davis shall perform its
services hereunder as an independent contractor and not as an employee of the
Company or an affiliate thereof. The parties hereto expressly understand and
agree that May Davis shall have no authority to act for, represent or bind the
Company or any affiliate thereof in any manner, except as may be agreed to
expressly by the Company in writing from time to time.
11. Miscellaneous:
(a) This Agreement between the Company and May Davis constitutes the entire
agreement and understanding of the parties hereto, and supersedes any and all
previous agreements and understandings, whether oral or written, between the
parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder shall be in
writing and shall be deemed sufficiently given if hand-delivered (i) five
calendar days after being sent postage prepaid by registered mail, return
receipt requested, or (ii) one business day after being sent by facsimile with
confirmatory notice by U.S. mail, to the respective parties as set forth below,
or to such other address as either party may notify the other in writing:
If to the Company, to: Apollo International of Delaware, Inc.
with a copy to:
If to May Davis, to: May Davis Group, Inc.
-7-
<PAGE>
20 Exchange Place
New York, New York
with a copy to: Jay M. Kaplowitz, Esq.
Gersten, Savage, Kaplowitz
Fredericks & Curtin
101 East 52nd. Street
New York, New York 10022
Telecopy No.: (212) 980-5192
(c) This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and their respective successors, legal representatives and
assigns.
(d) This Agreement may be executed in any number of counterparts, each of
which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(a) This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, without giving effect to its conflict of law
principles. The parties hereby agree that any dispute which may arise
between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in New York City, and they hereby submit
to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York and of the federal courts in the Southern
District of New York with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Agreement, and
consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of
the address set forth in Paragraph 11(b) hereof.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
MAY DAVIS GROUP, INC.
By:________________________________
Name:
Title:
APOLLO INTERNATIONAL OF DELAWARE, INC.
By:________________________________
, President
-9-
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent the use in this Registration Statement on Form SB-2 of our
report dated February 6, 1997 and February 10, 1997, as to Note 9, relating to
the financial statements of Apollo International of Delaware, Inc. and the
reference to our Firm under the caption "Experts" in the prospectus.
/s/ Most Horowitz & Company, LLP
New York, New York
March 5, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 34,099
<SECURITIES> 0
<RECEIVABLES> 27,734
<ALLOWANCES> 0
<INVENTORY> 228,157
<CURRENT-ASSETS> 298,067
<PP&E> 130,046
<DEPRECIATION> 18,944
<TOTAL-ASSETS> 1,214,001
<CURRENT-LIABILITIES> 839,426
<BONDS> 0
0
0
<COMMON> 21,280
<OTHER-SE> 157,379
<TOTAL-LIABILITY-AND-EQUITY> 1,214,001
<SALES> 294,734
<TOTAL-REVENUES> 294,734
<CGS> 197,803
<TOTAL-COSTS> 1,253,031
<OTHER-EXPENSES> 334,750<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,882
<INCOME-PRETAX> (1,680,732)
<INCOME-TAX> (40,000)
<INCOME-CONTINUING> (1,640,732)
<DISCONTINUED> 0
<EXTRAORDINARY> 75,028<F2>
<CHANGES> 0
<NET-INCOME> (1,565,704)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> 0
<FN>
<F1>Research and development expenses
<F2>Forgiveness of indebtedness
</FN>
</TABLE>
<PAGE>
Exhibit 99.3
FORM OF DOMESTIC DISTRIBUTION AGREEMENT
APOLLO INTERNATIONAL OF DELAWARE
AGREEMENT made the ___ day of _________, 199_ between Apollo International
of Delaware (herein called "Apollo") having its principal place of business at
6544 North US Highway 41, Suite 208, Apollo Beach, Florida 33572 and
__________________________ (herein called "Representative"), having its
principal place of business at ______________________________, _______________.
1. PURPOSE:
The purpose of this agreement is to develop and maintain a satisfactory
volume of sales of designated products in the assigned exclusive territory. The
Representative shall use his best efforts to achieve said purpose.
2. TERRITORY:
The areas to be serviced by the Representative are the following: The
States of -----------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
This listing may change from time to time as mutually agreed upon in
writing by Apollo and the Representative.
3. PRODUCTS:
The products to be sold by the Representative are Motor Protection
Relays.
4. COMMISSION RATES AND COMPUTATION:
The Representative's commissions shall be subject to the conditions
set forth in Exhibit "A".
a) The payment of commissions on all sums collected from or
remitted by customers or on their behalf shall be made to the Representative
monthly on or about the 15th of the month following the month in which sums have
been received, with adjustments made for returned items, credit allowances and
bad debts.
b) The Representative shall not be entitled to any compensation
or reimbursement for any expenses or disbursements made by it or its employees.
c) Notwithstanding Section 7(b), in the event an order is
canceled for any reason and cancellation charges are received by Apollo from the
customer, the
<PAGE>
commission rate will be applied to the dollar amount of the cancellation
charge. In the event there is a non-charge cancellation or where a settlement
entails a financial loss to Apollo, no commission will be paid to the
Representative.
5. TERMINATION:
Either party may terminate this Agreement for any reason after giving
60 days written notice. If not terminated, this Agreement will be automatically
renewed for a successive one year period.
6. PAYMENT RIGHTS UPON TERMINATION:
a) In the event of termination, all commissions earned as the
result of orders booked prior to such termination date shall be payable in
accordance with the schedule set forth at Section 4.
b) Upon termination of this Agreement, Representative shall
promptly surrender and deliver to Apollo, at his expense, all materials relating
to Apollo and the product.
c) Upon termination, Apollo shall have the right to withhold
one-half of the amount of all commissions due to the Representative for a period
of 90 days to cover subsequent credits due to customers on orders booked by the
Representative.
7. ORDERS AND INVOICES:
a) All orders or products booked by the Representative shall be
subject to approval and acceptance by Apollo. Apollo shall have absolute right
to refuse to accept any orders solicited by the Representative for any reason
whatsoever.
b) All invoices sent in connection with orders booked by the
Representative shall be mailed directly to the customer by Apollo.
8. SALES POLICIES:
a) Apollo shall have the absolute right to establish the
prices, charges and terms governing the sale of the products. Apollo's sales
policies shall be those currently in effect, established from the time in its
proposals, bulletins and other authorized releases.
b) Whenever possible Apollo agrees to give the Representative
30 days written notice of any changes in sales policies in advance of such
change.
-2-
<PAGE>
9. INQUIRIES:
a) The Company shall promptly notify Representative of any
inquiries relating to the Products received from customers, together with copies
of any correspondence and quotations sent to customers by the Company in
response to such inquiries.
b) Representative agrees to handle all inquiries promptly and
to keep the Company informed as to quotations, contracts, customer requirements,
competition and results.
10. SELLING AIDS AND SUPPLIES:
a) During the term of this Agreement, the Company shall, at its
expense, promptly make available to Representative and, where appropriate, to
customers solicited by Representative copies of Company brochures, forms or
orders, contracts and other information requested by Representative and
reasonably needed by him in the performance of his obligations under this
Agreement.
11. NON-COMPETITION:
a) Representative agrees that during the term of this Agreement
that he will not sell Products which, in the opinion of the Company, compete
with the Products.
b) Noncompliance with this Section 11 is cause for immediate
termination of the Agreement and forfeiture of any and all commissions due.
12. CONFIDENTIAL INFORMATION:
a) During the term of this Agreement, or at any time
thereafter, Representative agrees not to disclose to any person, firm or
corporation any confidential information relating to the business affairs of
Apollo, including but not limited to, disclosure of customer lists, trade
secrets or other information concerning the Products.
13. STATUS OF REPRESENTATIVE:
a) The Company and Representative agree that Representative is
an independent contractor, shall have no right or authority to bind, obligate,
or make agreements for or on behalf of the Company without the prior written
consent of the Company.
b) Representative shall be solely responsible for all claims,
damages or lawsuits arising out of its employees and/or agents.
-3-
<PAGE>
14. BOOKS AND RECORDS:
a) The Company shall permit Representative and its agents, at
their expense, to have access to and to examine Company Books and records at any
reasonable time to verify orders and invoices covered by this Agreement.
15. MISCELLANEOUS:
a) Notice. Any notice required to be given under this
Agreement shall be deemed delivered when served personally upon the party for
whom it is intended or when sent by registered or certified mail three (3)
business days after mailing, to the addresses set forth below.
b) Successors and Assigns. The rights and obligations of
Apollo under this Agreement shall inure to the benefit of Apollo, its successors
and assigns. The Representative shall not assign any of his rights or
obligations under this Agreement without the prior written consent of Apollo.
c) Waiver. Failure to insist on compliance with any of the
terms or conditions contained herein shall not be deemed a waiver or
relinquishment of any right provided for hereunder.
d) Severability. In the event any provisions or any part of
any provision of this Agreement are held to be illegal, invalid or
unenforceable, such illegal, invalid or unenforceable of any other provisions or
parts thereof.
e) Effect of Headings. The headings used in the sections and
subsections of this Agreement are intended for convenience only and shall not
affect the construction or interpretation of any of the provisions or parts of
provision of this Agreement.
f) The Representative shall save and hold Apollo harmless from
and against all claims, losses and liability (including damages, cost,
attorneys' fees, and expenses) arising out of damage to property or injury to,
or death of, persons occasioned by, or in connection with, the acts or omissions
of the Representative or of its employees or the use of any equipment or
property in connection therewith; or arising out of any representations or
warranties with respect to products except as authorized in writing by Apollo;
provided, however, that Apollo shall defend, at its expense all claims and suits
asserted or brought against the Representative based on alleged defects of
material, workmanship or design of Apollo products sold under the terms of this
Agreement, and Apollo shall indemnify and hold the Representative harmless from
such claims, suits and judgments arising therefrom.
-4-
<PAGE>
16. This Agreement constitutes the whole of the understanding and
agreement between the parties and supersedes all prior agreements between the
parties. It shall not be modified, altered or varied, except in writing
executed by both parties.
17. This Agreement shall be construed under the laws of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first written.
APOLLO INTERNATIONAL OF DELAWARE, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Dated:
---------------------------------------
REPRESENTATIVE/______________________________
By:
----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Dated:
---------------------------------------
-5-
<PAGE>
EXHIBIT "A"
1. The Representative shall be entitled to the following commissions on the
net invoice price for the sale of Motor Protection Relays:
A. ____________ percent (__%) on all products EXCEPT as noted in B below
and in section 2 "Exclusions".
B. The commission rate may be adjusted by Apollo on the following:
a. Major items of purchased for sale equipment which form a part of
an order.
b. Orders for products sold at a lower than normal price.
c. Orders for special, "designed to order" or "engineered to order"
products
d. The commission rate applicable to orders for the above items
(a-c) will be communicated to the Representative at the time a
quotation is issued to the customer.
2. EXCLUSIONS:
a. Transportation charges, sales taxes, insurance, trade discounts
and the like
b. Orders for products and services destined for end-use outside the
United States. No commissions are paid on such "export" orders
regardless of order origin, unless written reports are submitted
prior to order placement demonstrating to Apollo's satisfaction,
the Representative's influence in having the item specified.
c. All new products added by internal development or by sales
agreements with other companies, or by acquisitions and or
mergers. The inclusion of exclusion of these new products and
the applicable commission rate shall be established by Apollo.
3. Commissions shall be apportioned as follows:
a. To the Representative who is the effective cause of the
sale.....one third (1/3) of the total commission. This credit
will ordinarily be allocated to the Representative who brings the
product to the attention of the customer; define the customer's
needs; and causes the customer to requisition the product,
request a quotation or otherwise initiates procurement.
A-1
<PAGE>
b. To the Representative from whose territory the order is
mailed.....one third (1/3) of the total commission. This credit
will ordinarily be allocated to the Representative from whose
territory the purchase order or confirming order is received
except for certain customers which merely clear orders for all
their plants at a single location on an informal basis, and are
not influenced by the Representative at that location. In
general, the postmark on the envelope that contains the purchase
order or confirming order shall be regarded as the basis for
"origin" credit.
c. To the Representative in the territory where the product is to be
utilized.....one third (1/3) of the total commission.
Destination credit is awarded to compensate the Representative in
the territory who may be called upon to service the equipment and
also to keep the company informed as to the customer's use of the
product, satisfaction with the product etc.
d. Exceptions to the above may be made at the discretion of Apollo
providing the file of the transaction clearly shows that two
territories equally share part "A" (in which case, commission
credit will be shared equally), or where purchasing formalities
of certain customers make part "B" of no consideration (in which
case, purchase order commission credit will be given to the
Representative in the territory receiving influence commission.)
4. Any questions or disagreements regarding commissions shall be resolved by
Apollo, whose decision shall be final.
A-2
<PAGE>
Exhibit 99.4
FORM OF INTERNATIONAL DISTRIBUTION AGREEMENT
AUTHORIZED EXCLUSIVE DISTRIBUTOR AGREEMENT
This Agreement is made and entered into on the date of execution hereof by
and between Apollo International of Delaware, Inc. (hereinafter referred to as
"Manufacturer"), a Delaware Corporation, having its principal office located at
6542 North US Highway 41, Suite 215, Apollo Beach, Florida 33572, USA, and
_______________________________________, having its principal office at
___________________ _______________________ (hereinafter referred to as
"Distributor").
IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS
HEREINAFTER SET FORTH, THE PARTIES AGREE AS FOLLOWS:
I. APPOINTMENT
Manufacturer appoint Distributor as an exclusive authorized Distributor to
handle products as listed in Exhibit "A".
II. TERM OF AGREEMENT
Unless otherwise terminated as provided hereafter, this Agreement shall be
in effect from the date hereof, for a period of one (1) year.
III. MANUFACTURER'S OBLIGATIONS
A. MANUALS. Manufacturer will provide the Distributor with one copy of
its equipment manuals. Additional manuals will be supplied for reasonable
requests.
B. TRAINING. Manufacturer will provide the Distributor with training and
technical assistance as Manufacturer deems necessary to aggressively pursue and
make sales in Distributor's territory.
C. DISCOUNT LEVEL. Manufacturer agrees to sell to Distributor products
listed in Exhibit "A" at Manufacturer's current list price less discount listed
in Exhibit "C", for the exclusive territory listed in Exhibit "B".
D. LICENSE OF PROPRIETARY MARKS AND SOFTWARE. Manufacturer grants to
distributor the nontransferable right to use Manufacturer's trademarks, trade
names and proprietary marks solely for the purposes of marketing and display of
the products. Title to all software and programs in any form, used with the
products shall remain with the Manufacturer.
IV. DISTRIBUTOR'S OBLIGATIONS
A. SHIPMENT SCHEDULE. Distributor will provide a purchase order
specifying quantities of products and desired delivery dates covering a 12 month
period.
B. BEST EFFORTS. Distributor shall use its best efforts to promote the
distribution of the products, including but not limited to the advertising of
the products in appropriate media, and informing of the customers and potential
customers regarding the products.
C. EMPLOYMENT OF QUALIFIED PERSONNEL. Distributor shall employ
sufficiently trained and qualified personnel to enable Distributor to perform
its obligations hereunder. Distributor's employees shall become familiar with
the technology and application of the products.
D. NOTICE OF DISPUTES. Distributor shall inform the Manufacturer of the
details and circumstances of any dispute which may become serious arising
between it and its customers and shall
<PAGE>
not, without prior written permission from an officer of the Manufacturer,
compromise or settle the dispute.
E. NOTICE TO MANUFACTURER. Distributor shall immediately advise
Manufacturer of any legal notice served on Distributor which might affect
Manufacturer; advise Manufacturer on market potential, trends, and forecasts,
the credit of present and prospective customers, competition, marketing
techniques, handle promptly all correspondence from Manufacturer, and assist and
cooperate with Manufacturer's engineers, service and sales personnel during
trips to the Distributor.
F. INTEREST IN PROPRIETARY MARKS. Distributor expressly acknowledges
Manufacturer's exclusive right, title and interest to the trademarks, trade
names and proprietary marks licensed to the Distributor under this Agreement,
and agrees not to represent in any manner that the Distributor has any ownership
in Manufacturer's proprietary marks. Distributor further agrees that his use of
the proprietary marks should not create in his favor any right, title or
interest in or to Manufacture's proprietary marks and that all such use shall
inure to the benefit of Manufacturer.
G. CONFIDENTIALITY. Distributor recognizes Manufacturer has developed
and is the owner of products which consist of certain algorithms, ideas,
inventions, processes and processing techniques that Manufacturer believes have
substantial monetary value and, in which Manufacturer considers TRADE SECRET,
PROPRIETARY AND/OR CONFIDENTIAL; Manufacturer is desirous of maintaining
rigorous control over the products whether or not they are patentable and
Distributor agrees that for the period of this Agreement, including any renewals
hereof, and for a period of three years following the termination of the
agreement, it will exercise the highest level of due care to prevent disclosure
of any proprietary and confidential specifications, documents and any other
information provided to Distributor by Manufacture. These measures shall
include, but not be limited to:
a. Distributor shall restrict access to all proprietary information
to only those employees of the Distributor who must have such access in order to
perform his or her specific obligations pursuant to the Distributor's business;
Distributor shall take all necessary and proper precautions to insure that
unnecessary and unauthorized access to the information by its employees does not
occur.
b. Distributor shall treat the ideas and the expressions thereof
contained in the specifications documents and other information provided to
Distributor by Manufacturer, as TRADE SECRET, PROPRIETARY AND/OR CONFIDENTIAL
and belonging solely to this Manufacturer and shall not without the prior
written permission of an officer of Manufacturer copy or duplicate or allow to
be copied or duplicated by a third party any physical embodiments of said
specifications, documents or other information.
c. Distributor shall maintain such confidential and proprietary
information in strict confidence, make no use or disclosure thereof except to
those users, and limited disclosures which are consistent with the objects and
spirit of this Agreement.
d. Distributor agrees to notify Manufacturer immediately of any
unauthorized possession, use or knowledge of the specifications, documents and
other information provided to Distributor by use or knowledge and shall assist
in preventing any recurrence thereof and shall cooperate with Manufacturer in
any litigation or other proceedings deemed necessary by Manufacturer to protect
Manufacturer's proprietary rights.
e. COPYRIGHT. Distributor will maintain any copyright protection of
Apollo International of Delaware, Inc., copyrighted material.
2
<PAGE>
V. ACCEPTANCE OF ORDERS
Written releases of orders by Distributor must be given at least sixty (60)
days in advance of shipping dates. Changes in delivery schedules (without
charge) must be made in writing at least fifteen (15) days prior to scheduled
delivery dates. If less than fifteen (15) days notice is given, a
reconfiguration charge of One Hundred Dollars ($100.00) per one thousand dollars
of purchase order volume determined by the list price, may be applied by
Manufacturer. The right to reject any order is reserved by Manufacturer, even
if a previous quotation has been made, without changing or prejudicing the
relationship between the Manufacture and the Distributor. An order is accepted
by Manufacturer when shipped or when it is acknowledged by Manufacturer,
whichever occurs first. Orders for shipment of products from inventory will be
accepted by Manufacturer only upon receipt of appropriate legal authorization
(letter, purchase order, etc.). Manufacturer assumes no liability and shall not
be liable to Distributor for any failure to fill or delay in filling orders
received from Distributor and accepted by Manufacturer. Manufacturer may
withhold shipment or products because of the conditions of Distributor's account
or if it determines that Distributor is not financially responsible. If the
foregoing conditions are not rectified to Manufacturer's reasonable
satisfaction, Manufacturer may terminate this Agreement pursuant to Section
XIII, Paragraph A(4). Distributor shall not be permitted to take any credit
against or set off any amounts due Manufacturer without prior written
authorization of Manufacturer. In no way shall this paragraph be deemed to
modify the mutually agreed upon release schedule set forth in Appendix D; the
purpose of the aforementioned releases shall be to specify product mix for that
release.
All orders and releases are to be addressed to: Apollo International
of Delaware Inc.
6542 North US 41
Suite 215
Apollo Beach,
Florida 33572, USA
Telephone:
(813) 645-7677
Fax: (813) 645-8611
Attention:
Vice President
Marketing
VI. DELIVERY
Delivery of Manufacturer's product purchased by Distributor hereunder
shall be made for and on behalf of Distributor and by a carrier selected by
Distributor. Manufacturer will package all equipment suitable for shipment by
air freight, F.O.B. shipping point. Distributor shall bear all risk of loss and
expense during shipment and until sale of products is finalized. Shipments will
be made to Distributor's main office as specified herein or to any Distributor's
established offices. Partial shipments will not be made unless specified by
Distributor in writing.
VII. TAXES, INSURANCE, TRANSPORTATION AND OTHER CHARGES
In addition to the prices for the products, Distributor shall pay all
sales, use, excise, or similar taxes, import/export fees, tariffs,
transportation, rigging, insurance charges and all other costs or charges
associated with the delivery of products to the destinations specified by
Distributor.
VIII. PAYMENT TERMS
Payment on Products will be made 100% of amount due by wire transfer or
irrevocable letter of credit to the account of Manufacturer's choice and payable
on presentation of shipping documents with each order by Distributor.
IX. PRICE ADJUSTMENTS
Manufacturer shall have the right at any time to adjust its prices by
giving Distributor written notice no less than sixty (60) days prior to the date
upon which the adjusted price or prices are to become effective. No adjustment
of price shall become effective for orders which are accepted by Manufacturer
during such sixty (60) day period.
3
<PAGE>
X. ACCEPTANCE AND RETURNS
Following the date of receipt of products, Distributor will have a
period of thirty (30) days in which to notify Manufacturer of shipment
discrepancies.
XI. WARRANTY, DISCLAIMER, AND LIMITATION OF LIBAILITY
Distributor shall be responsible to its customers for any and all
warranties which it makes relating to all items sold by Manufacturer and for
providing replacements or other adjustments as required by or in connection with
said warranties.
All items sold by Manufacturer are guaranteed against defects in
materials or workmanship for a period of two (2) years from the date of receipt
from Distributor during such period, provided that:
1. Distributor has obtained from Manufacturer a return authorization
number; and
2. The defective merchandise is returned to a location specified by
Manufacturer, accompanied by a report of findings indicating the basis for
rejection and with transportation charges prepaid by Distributor.
XII. PARTY RELATIONSHIP
This Agreement does not create an employer-employee relationship between
Manufacturer and Distributor, nor any agency, joint venture or partnership.
Distributor shall have no authority to act for or to bind Manufacturer in any
way, to alter any of the terms or conditions of Manufacturer's standard forms,
to warrant or to execute agreements on behalf of Manufacturer, or to represent
that Manufacturer is in any way responsible for the acts or omissions of
Distributor. Distributor shall be an independent contractor only. Distributor
agrees to hold harmless and to indemnify Manufacturer for violation of above
conditions.
XIII. TERMINATION
A. TERMINATION. This Agreement may also be terminated on occurrence
of the following events:
1. By either party at any time if the other party has
breached any provision contained in this Agreement
by written notice specifying the breach and the
other party does not remedy the breach within 30
days.
2. Immediately by the petitioning by either party for
reorganization under the Bankruptcy Act or having
been adjudicated as bankrupt, or by the
appointment for the benefit of creditors, or by an
involuntary bankruptcy petition brought against
either party which has not been discharged within
ninety (90) days of date of the petition.
3. Immediately by the assignment of this Agreement or
any of its rights hereunder by Distributor,
including without limiting the generality thereof,
the transfer of a majority or of a beneficial
interest in distributor's business whether a sole
proprietorship, corporation or partnership without
the prior written permission of manufacturer.
B. DELIVERIES AFTER TERMINATION. With the establishment of a date
of termination of this Agreement, Manufacturer shall be obligated to deliver and
Distributor shall be obligated to accept the products as Distributor shall have
ordered from Manufacturer prior to the date established for
4
<PAGE>
termination. Upon termination, Manufacturer, at its option, may prescribe terms
of payment other than the terms stated in this Agreement.
C. EFFECT OF TERMINATION. Distributor's rights upon termination of
this Agreement shall immediately terminate; however, such termination shall not
affect any of the obligations of Distributor which exist as of the date of
termination, or these obligations of Distributor which from the context of this
Agreement are intended to survive its termination.
D. REPURCHASE AFTER TERMINATION. In the event that the termination
of this Agreement is initiated by Distributor, Manufacturer shall have the
option to purchase and the Distributor shall, if the option is exercised, resell
to Manufacturer at the Distributor's net cost, less twenty five percent (25%),
all or any portion of the Distributor's Manufacturer inventory which is
determined, after inspection by Manufacturer, to be in good working order.
If, however, the termination of this Agreement is a result of the giving
of the notice, or as a result of termination by the Manufacturer, Manufacturer,
at its option, may within thirty (30) days after the termination, repurchase
products from the Distributor at the net price paid by the Distributor, less a
5% restocking charge, or at the then current Manufacturer net price to its
Distributor's generally, whichever is less.
E. RETURN OF PROPRIETARY INFORMATION. Upon termination of this
Agreement, Distributor shall immediately return to Manufacturer all physical
embodiments, all specifications, documents and other information provided to
Distributor by Manufacturer including, but not limited to all contracts and
correspondence required to be furnished to Manufacturer by the terms of this
Agreement or notices given pursuant to this Agreement, all promotional,
advertising, and all other tangible property. Upon termination Distributor
shall also discontinue the use of the Manufacturer's trade name, trademarks and
proprietary marks, except instruction and maintenance manuals normally supplied
by Manufacturer to allow Distributor to install and maintain the purchased
equipment.
XIV. PATENTS
A. PATENT INDEMNITY. The Manufacturer shall, at its expense, defend
and indemnify Distributor for costs and damages incurred in any suit, claim, or
proceeding brought against the Distributor alleging that the product(s) sold
pursuant to this Agreement infringes any patents, provided the Manufacturer is
promptly notified, given all assistance required, and permitted to direct the
defense. Further, the Manufacturer shall pay any judgment based on such
infringement rendered in such suit by final judgment of a court of last resort.
Alternatively, in the event that the Manufacturer desires to minimize its
liabilities hereunder, the Manufacturer shall, at its option, either substitute
a fully equivalent non-infringing item so that it no longer infringes but
remains fully equivalent, or obtain for Distributor or its customer, at its own
expense, the right to continue use of such item. If none of the foregoing is
feasible, the Manufacturer may take back such item and refund to Distributor or
its customer the purchase price.
The contrary above notwithstanding, Manufacturer shall have no responsibility to
defend or indemnify Distributor in the event that the infringement or alleged
infringement results from any modifications performed by or for Distributor.
The foregoing states the entire liability of the Manufacturer for patent
infringements.
XV. DISPUTES
A. ARBITRATION OF DISPUTES. The parties agree that if any dispute
or disagreement as to any matter shall arise hereunder, the same shall be
subject to determination by a Board of Arbitrators located in Tampa, Florida,
USA. The Board of Arbitrators shall consist of one member appointed by
Manufacturer and one member by Distributor, and in the event two arbitrators
cannot within ten (10) days of the appointment of the second arbitrator decide
the dispute, a third arbitrator shall be selected by the
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two arbitrators named. The party electing to invoke the arbitration proceeding
shall give written notice of the nomination of his arbitrator to the other party
at the address provided in this Agreement, and the recipient of such notice
shall have seven (7) days from the delivery of such notice in which to name his
arbitrator and advise the other party. Failure of the party receiving notice
within seven (7) days to name his arbitrator shall entitle the one giving notice
to name the second arbitrator.
The Board shall be governed in its procedure by the rules of the
American Arbitration Association then in force.
XVI. GENERAL TERMS
A. WAIVER. The failure of Manufacturer to require the performance
of any of the terms and conditions of this Agreement or the specific waiver by
Manufacturer to Distributor for any breach, shall not prevent the subsequent
enforcement of any of the terms or conditions of this Agreement.
B. NOTICES. All notices provided in this Agreement shall be sent by
registered or certified mail to the parties as listed herein, unless either
party changes the address by written notice to the other.
C. ENTIRE AGREEMENT AND UNDERSTANDING. This agreement, including
the exhibits hereto attached, sets forth the entire Agreement and understanding
between the parties as to the matter contained herein and supersedes any other
oral or written Agreement, and the terms and conditions contained herein shall
only be amended by subsequent writing signed by the party to be bound or held
responsible.
D. BINDING. This Agreement shall inure to the benefit of and bind
the parties hereto, their heirs, personal representatives, successors and
assigns.
E. CONSTRUCTION OF THE AGREEMENT. This Agreement shall be construed
under and by the laws of the State of Florida, United States of America.
F. INVALIDITY OF PROVISION. The invalidity of any provision of this
Agreement or the invalidity of the application of such provision to any person
or circumstance, shall not effect the validity of the remainder of this
agreement.
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IN WITNESS WHEREOF, Manufacturer has caused this document to be signed
by its President and attested to by its Secretary, all by authority of the Board
of Directors, the day and year below written, and Distributor has caused its
signature and seal to be placed on this Agreement, all by proper authority.
This the _____ day of ________________ 19___
Apollo International of Delaware Inc.
(Corporate Name) (Corporate Name)
By: By:
---------------------------- ---------------------------
President President
Attest: Attest:
------------------------ -----------------------
Secretary Secretary
Date: Date:
(Corporate Seal) (Corporate Seal)
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APPENDIX A
APOLLO INTERNATIONAL OF DELAWARE INC.
PRICE LIST
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APPENDIX B
TERRITORY
The exclusive territory granted under this Agreement is defined as
follows:
