<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
----- For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22365
APOLLO INTERNATIONAL OF DELAWARE, INC.
------------------
(Exact name of Small Business Issuer specified in its charter)
Delaware 59-3285246
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6542 U.S. Highway 41, Suite 215
Apollo Beach, Florida 33572
-----------------
(Address of principal executive offices)
(813-645-7677)
--------
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares of the Registrant's common stock outstanding at
July 31, 1997 was 3,304,794.
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PART I--FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
APOLLO INTERNATIONAL OF DELAWARE, INC.
BALANCE SHEET
(UNAUDITED)
ASSETS
DECEMBER 31, JUNE 30,
1997 1997
------------ -----------
CURRENT ASSETS
Cash.............................................. $ 34,099 $ 2,336
Accounts receivable............................... 7,734 363,799
Unbilled accounts receivable...................... 20,000 20,000
Inventory......................................... 228,157 277,929
Other current assets.............................. 8,077 2,150
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TOTAL CURRENT ASSETS............................. 298,067 666,214
DEFERRED SOFTWARE COSTS............................ 658,820 730,377
FIXED ASSETS....................................... 111,102 125,969
DEFERRED COSTS OF PROPOSED PUBLIC OFFERING......... 73,650 261,210
DEFERRED FINANCING COSTS........................... 69,230 51,922
OTHER ASSETS....................................... 3,132 2,927
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TOTAL ASSETS..................................... $ 1,214,001 $ 1,838,619
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----------- -----------
(CONTINUED)
2
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APOLLO INTERNATIONAL OF DELAWARE, INC.
BALANCE SHEET
(UNAUDITED)
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
CURRENT LIABILITIES
Trade notes and accounts payable and
accrued expenses................................ $ 575,034 $ 1,078,443
Payroll taxes payable............................. 101,924 207,679
Loans payable--stockholders....................... 142,468 68,247
Note payable--line of credit...................... 257,241
Loans payable--others............................. 183,700
Deferred income................................... 20,000 20,000
---------- ----------
TOTAL CURRENT LIABILITIES........................ 839,426 1,815,310
ACCOUNTS PAYABLE--NONCURRENT....................... 125,000 125,000
NONCURRENT LOANS PAYABLE--STOCKHOLDERS............. 70,916 644,012
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TOTAL LIABILITIES................................ 1,035,342 2,584,322
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STOCKHOLDERS' EQUITY (DEFICIT)
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: 2,811,434
as of December 31, 1996 and 2,504,794
as of June 30, 1997.............................. 21,280 18,214
Additional paid-in capital........................ 2,325,404 2,328,470
Deficit........................................... (2,153,025) (3,080,720)
Less prepaid rent................................. (15,000) (11,667)
------------ ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)............. 178,659 (745,703)
------------ ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)................. $ 1,214,001 $ 1,838,619
------------ ----------
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3
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APOLLO INTERNATIONAL OF DELAWARE, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- -----------------------
1996 1997 1996 1997
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SALES......................................................... $ 69,677 $ 5,460 $ 196,512 $ 443,259
COST OF SALES................................................. (67,279) (4,734) (92,001) (239,259)
---------- ---------- ---------- -----------
GROSS PROFIT................................................ 2,398 726 104,511 204,000
---------- ---------- ---------- -----------
EXPENSES
Research and development..................................... (5,114) (94,830) (113,837) (201,196)
General and administrative................................... (384,197) (442,947) (523,339) (837,407)
---------- ---------- ---------- -----------
TOTAL EXPENSES.............................................. (389,311) (537,777) (637,176) (1,038,603)
---------- ---------- ---------- -----------
LOSS FROM OPERATIONS........................................ (386,913) (537,051) (532,665) (834,603)
INTEREST EXPENSE AND AMORTIZATION OF DISCOUNT AND DEFERRED
FINANCING COSTS.............................................. (15,966) (44,306) (24,328) (93,092)
---------- ---------- ---------- -----------
LOSS BEFORE INCOME TAXES.................................... (402,879) (581,357) (556,993) (927,695)
DEFERRED INCOME TAXES......................................... 40,000
---------- ---------- ---------- -----------
NET LOSS $(402,879) $(581,357) $(516,993) $(927,695)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................... 1,915,810 2,811,434 1,835,809 2,811,434
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
LOSS PER COMMON SHARE......................................... $ (.21) $ (.21) $ (.28) $ (.33)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
4
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APOLLO INTERNATIONAL OF DELAWARE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
----------------------
1996 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(516,993) $(927,695)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of discount and deferred financing costs................................... 42 17,308
Amortization of deferred software costs................................................. 40,462 85,646
Depreciation and amortization........................................................... 10,780 15,549
Amortization of prepaid rent............................................................ 1,667 3,333
Capitalization of software costs........................................................ (119,403) (157,203)
Deferred income taxes................................................................... (40,000)
Increase (decrease) in cash from
Accounts receivable................................................................... (70,672) (356,065)
Inventory............................................................................. (126,766) (49,772)
Other current assets.................................................................. 4,071 5,927
Other assets.......................................................................... (410)
Trade notes and accounts payable and accrued expenses................................. 382,178 503,409
Payroll taxes payable................................................................. 7,738 105,755
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NET CASH USED IN OPERATING ACTIVITIES............................................... (427,306) (753,808)
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CASH FLOWS FROM FINANCING ACTIVITIES
Purchases of fixed assets................................................................. (50,205) (30,211)
(CONTINUED)
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APOLLO INTERNATIONAL OF DELAWARE INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
SIX MONTHS
ENDED JUNE 30,
----------------------
1996 1997
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................................................... $ 86,780
Proceeds from loans payable--stockholders................................................. 60,840 $ 498,875
Proceeds from loans payable--others....................................................... 178,087 183,700
Proceeds from bridge financing............................................................ 135,720
Proceeds from convertible debentures...................................................... 54,980
Increase in note payable--line of credit.................................................. 257,241
Costs of proposed financing............................................................... (27,500)
Costs of proposed public offering......................................................... (187,560)
Payments of loans payable--stockholders................................................... (3,649)
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NET CASH PROVIDED BY FINANCING ACTIVITIES............................................... 485,258 752,256
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INCREASE (DECREASE) IN CASH............................................................. 7,747 (31,763)
CASH--beginning........................................................................... 5,840 34,099
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CASH--ending.............................................................................. $ 13,587 $ 2,336
---------- ----------
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest.................................................................... $ 4,495 $ 45,816
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</TABLE>
6
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APOLLO INTERNATIONAL OF DELAWARE INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Apollo International of Delaware, Inc. (Company) develops, manufactures
and distributes world-wide electric power protection and control products,
utilizing computer and fiber optics technologies, for industry and electric
utilities.
2. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles for
financial statements. For further information, refer to the audited financial
statements and notes thereto for the year ended December 31, 1996, included
in the Company's Prospectus dated July 10, 1997.
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the financial
statements have been made.
The results for the three months and six months ended June 30, 1996 and
1997 are not necessarily indicative of the results to be expected for the
full year.
3. LOSS PER SHARE
Loss per share was computed based upon the weighted average number of
common shares and common share equivalents outstanding during the three and
six months ended June 30, 1996 and 1997. Fully-dilutive loss per common share
has not been presented because it was anti-dilutive
In February 1997, the FASB issued Statement No, 128, "Earnings Per
Share", which changes the calculations and disclosures of earnings per share.
As of January 1, 1997 the Company adopted Statement No. 128 without material
effect.
4. PUBLIC OFFERING
In July 1997, the Company closed its initial public offering and sold
800,000 shares of common stock at $5, per share, and 920,000 warrants at
$.25, per warrant, resulting in net proceeds of approximately $3,200,000.
7
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5. LOANS PAYABLE--STOCKHOLDERS
During the quarter ended June 30, 1997, the Company borrowed
approximately $160,000 for inventory purchases under the same terms as the
note payable--shareholder for inventory purchases.
6. LOANS PAYABLE--OTHERS
During the quarter ended June 30, 1997, the Company borrowed an aggregate
of $175,000, all of which were subsequently repaid.
8
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ITEM 2. MANAGEMENT'S DISCUSSION OF PLAN OF OPERATIONS
This section of the Report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results for future periods could differ materially from those
discussed in this section as a result of the various risks and uncertainties
discussed herein and in the Company's registration statement on Form SB-2
(File No. 333-18071), which was declared effective on July, 10, 1997.
GENERAL
Apollo International of Delaware, Inc. (the "Company") emerged from
development stage during the last quarter of its fiscal year ended December
31, 1996 with minimal revenues. Prior to September 1996, the Company's
operating activities were related primarily to recruiting personnel, raising
capital, purchasing operating assets and performing research and development.
Therefore, the following discussion focuses on comparisons between the three
months ended and the six months ended June 30, 1997.
The Company engages in the development, production and marketing of
protection relays for heavy industry and electric utilities worldwide.
RESULTS OF OPERATIONS
REVENUES. Gross revenues for the three months ended and six months ended
June 30, 1997 were $5,460 and $443,259, respectively, generating a gross
profit of $726 and $204,000, respectively. The decrease in revenue in the
second quarter resulted from the Company's inability to fill existing orders
due to its financial constraints prior to the closing of its initial public
offering, which closed on July 16, 1997.
OPERATING EXPENSES. Operating expenses for the three months and the six
months ended June 30, 1997 were $582,083 and $1,131,695, respectively. The
increased costs in the second quarter primarily resulted from increases in
marketing costs, interest expense and increased research and development
costs in connection with the commercialization of the Company's technology.
In order to meet its cash requirements until the consummation of its
initial public offering, the Company arranged for factoring and financing of
its accounts receivable. Under the factoring agreement, the Company sold
accounts receivable at a 6% discount, plus pays a fee on the outstanding
balance at the rate of 1% per month. That agreement was terminated effective
December 31, 1996, at which time accounts receivable sold under the agreement
were $160,350. At June 30, 1997, $141,047 of such amount remained uncollected.
9
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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 borrowed 94.5% of the face amount of
accounts receivable, which are collateral for the loans. Interest accrues at
the rate of 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 payable under the agreement is $500,000
and at June 30, 1997, there was an outstanding obligation of $257,241.
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
equipment and receives a security interest in the parts and equipment. The
advances accrue interest at 2% above the prime rate and are payable interest
only commencing August 1, 1997 and continuing on the first day of each month
thereafter until the outstanding principal and accrued interest is repaid.
Principal is due and payable one-half on the earlier of June 1, 1999, 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, 1999. As of June 30, 1997, the Company had
been advanced approximately $580,000 under this agreement, including interest.
During the quarter ended June 30, 1997, the Company borrowed an aggregate
of $175,000 from outside sources, all of which were subsequently repaid.
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.
For the three months ended and the six months ended June 30, 1997, the
Company incurred $94,830 and $201,196 of research and development costs. The
increases are due to efforts to commercialize the Company's products
currently being marketed and to develop new products.
SALES AND MARKETING. For the three months ended and the six months ended
June 30, 1997, sales and marketing costs were $61,047 and $82,628,
respectively. Sales and marketing expenses will increase as the Company
develops more products. During the
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three months ended June 30, 1997, the Company retained the services of a
public relations and marketing firm to assist the Company in its global
marketing efforts.
INCOME TAXES
As of June 30, 1997, the Company had federal net operating loss carry
forwards of approximately $3,000,000. This net operating loss can be carried
forward up to fifteen years to reduce 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 began generating sales in October 1996 and for the year ended
December 31, 1996 and the six months ended June 30, 1997 had sales of
$294,734 and $443,259, respectively. During the three months ended June 30,
1997, the Company accumulated back-orders of 170 feeder protection relays and
119 motor protection units for shipment to customers in North America,
Taiwan, Brazil and South Africa, pending receipt of the proceeds from its
initial public offering. Subsequent to the quarter ended June 30, 1997, the
Company entered into a 5-year agreement with a distributor for sales of the
Company's products in China and expects to initially ship approximately 6,400
units and upgrades under that agreement during the 12 months commencing
August/September 1997, for total anticipated revenues of approximately $3.8
million. Although the Company anticipates certain revenue from the China
agreement as well as its agreements with other international distributors,
actual results may materially differ depending on various factors, among them
being economic and political factors in the various nations, interruptions in
transport, and the Company's ability to manage its growth and meet increased
orders.
From the proceeds of its initial public offering, the Company plans to
hire additional personnel and to fund internal research and development for
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. During the three months ended June 30,
1997, the Company retained a public relations and marketing firm to assist
the Company with its domestic and international marketing efforts.
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
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exploit the OEM market and it is uncertain whether the Company can timely
supply products in the quantities that OEMS may require.
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
From its inception in November 1994 through June 30, 1997, the Company's
operations were financed principally through private sales of equity and debt
securities as well as loans and capital contributions from its stockholders,
including the factoring and accounts receivable financing and cash advance
agreements. At June 30, 1997, the Company had a working capital deficit of
$1,149,096, and a stockholders' deficit of $745,703.
In July 1997, the Company successfully completed an initial public
offering of its equity securities from which it received proceeds net of
commissions and offering expenses of approximately $3.2 million.
The Company has allocated approximately $810,000 of the net proceeds to
fund product development and engineering (which includes anticipated costs
for software in the amount of $325,000 for new product lines currently in
development; engineering costs associated with product tooling in the
approximate amount of $160,000; and engineering salaries in the approximate
amount of $325,000).
The Company has also allocated approximately $800,000 of the net proceeds
to advertising and promotion, including trade shows and trade publications.
The Company has also allocated approximately $475,000 for anticipated costs
of equipment, including computer hardware, engineering and testing equipment.
The Company believes that the net proceeds of its initial public offering
will be sufficient to meet its capital requirements for at least 12 months.
While the initial allocation of the net proceeds of the initial public offering
represents the Company's best estimates of their use, future events, including
problems, delays, expenses, and
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complications frequently encountered by companies which seek to develop new
technologies or establish new services or introduce products or services to a
new market, as well as changes in economic conditions, regulatory or 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. Pending specific allocation of the net proceeds, the net proceeds
are invested in short-term, investment grade, interest-bearing obligations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
FILING-STATUS--
EXHIBIT INCORPORATED BY
NUMBER EXHIBIT DESCRIPTION REFERENCE TO
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation Exhibit 3.1 to Form SB-2 Registration Statement,
filed on December 17, 1996, File No. 333-18071
3.2 Amended and Restated ByLaws Exhibit 3.2 to Form SB-2 Registration Statement,
filed on December 17, 1996, File No. 333-18071
3.2.1 Amendment to ByLaws Exhibit 3.2.1 to Amendment No. 2 to Form SB-2
Registration Statement, filed on April 29, 1997,
File No. 333-18071
4.1 Specimen of Common Stock Certificate Exhibit 4.1 to Amendment No. 2 to Form SB-2
Registration Statement, filed on April 29, 1997,
File No. 333-18071
4.2 Specimen of Warrant Certificate Filed herewith
4.3 Warrant Agreement between the Company and American Filed herewith
Stock Transfer & Trust Company, as Warrant Agent,
dated July 16, 1997
10.1 Form of Warrant issued to investors in the Exhibit 4.4 to Form SB-2 Registration Statement,
Company's private placement, dated August 5, 1996 filed on December 17, 1996, File No. 333-18071
through November 14, 1996.
</TABLE>
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<TABLE>
<CAPTION>
FILING-STATUS--
EXHIBIT INCORPORATED BY
NUMBER EXHIBIT DESCRIPTION REFERENCE TO
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.2 Warrant dated September 26, 1996 in favor of Exhibit 4.5 to Form SB-2 Registration Statement,
Steven D. Smith, as amended. filed on December 17, 1996, File No. 333-18071
10.3 Warrant dated September 26, 19986 in favor of Exhibit 4.6 to Form SB-2 Registration Statement,
Don P. Louw, as amended. filed on December 17, 1996, File No. 333-18071
10.4 Amended Warrant dated October 29, 1996 in favor of Filed herewith
Perryman Corporation N.V.
10.5 Warrant dated June 25, 1996 in favor of Imagine Exhibit 4.10 to Form SB-2 Registration Statement
Holdings filed on December 17, 1996, File No. 333-18071
10.6 Warrant dated December 15, 1996 in favor of Exhibit 4.11 to Amendment No. 1 to Form SB-2 filed
Matthias E. Lukens, Jr. on March 6, 1997, File No. 333-18071
10.7 Form of Registration Rights Agreement between the Exhibit 4.12 to Form SB-2 Registration Statement
Company and private placement investors dated filed on December 17, 1996, File No. 333-18071
August 5, 1996 through November 14, 1996
10.8 Form of Registration Rights Agreement between the Exhibit 4.13 to Form SB-2 Registration Statement
Company and certain investors dated in May, 1996 filed on December 17, 1996, File No. 333-18071
10.9 Warrant dated June 30, 1996 in favor of Imagine Exhibit 4.14 to Amendment No. 1 Form SB-2
Holdings Registration Statement filed on March 6, 1997, File
No. 333-18071
</TABLE>
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<TABLE>
<CAPTION>
FILING-STATUS--
EXHIBIT INCORPORATED BY
NUMBER EXHIBIT DESCRIPTION REFERENCE TO
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.10 Warrant dated November 1, 1996 in favor of Exhibit 4.15 to Amendment No. 1 to Form SB-2
Robert Swatland Registration Statement filed on March 6, 1997,
File No. 333-18071
10.11 Underwriters' Warrant dated July 16, 1997 Filed herewith
10.12 1996 Stock Option Plan Exhibit 10.1 to Form SB-2 Registration Statement
filed on December 17, 1996, File No. 333-18071
10.13 Stock Purchase Agreement between the Company and Exhibit 10.2 to Form SB-2 Registration Statement
Christine Clewes, dated June 13, 1996 filed on December 17, 1996, File No. 333-18071
10.14 Stock Purchase Agreement between the Company and Exhibit 10.3 to Form SB-2 Registration Statement
Frank Mancini, dated June 24, 1996 filed on December 17, 1996, File No. 333-18071
10.15 Stock Purchase Agreement between the Company and Exhibit 10.4 to Form SB-2 Registration Statement
Framan, a business entity, dated June 24, 1996 filed on December 17, 1996, File No. 333-18071
10.16 Consulting Agreement between the Company and Exhibit 10.5 to Form SB-2 Registration Statement
Perryman Corporation, N.V., dated May 10, 1996 filed on December 17, 1996, File No. 333-18071
10.17 Amended and Restated Consulting Agreement between Exhibit 10.6 to Form SB-2 Registration Statement
the Company and Imagine Holdings, dated June 1, filed on December 17, 1996, File No. 333-18071
1996
10.18 Lease between the Company and South Hillsborough Exhibit 10.7 to Amendment No. 1 to Form SB-2
Community Bank Office/ Complex, Richard L. Phagan, Registration Statement, filed on March 6, 1997,
dated October 31, 1995 File No. 333-18071
</TABLE>
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<TABLE>
<CAPTION>
FILING-STATUS--
EXHIBIT INCORPORATED BY
NUMBER EXHIBIT DESCRIPTION REFERENCE TO
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.18.1 Lease between the Company and South Hillsborough Exhibit 10.7.1 to Form SB-2 Registration Statement
Community Bank Office/Complex, dated October 24, filed on December 17, 1996, File No. 333-18071
1996
10.19 Amended and Restated Consulting Agreement between Exhibit 10.8 to Form SB-2 Registration Statement
the Company and Matthias E. Lukens, Jr. dated filed on December 17, 1996, File No. 333-18071
November 30, 1996
10.20 Consulting Agreement between the Company Exhibit 10.9 to Form SB-2 Registration
and Frank J. Mancini dated December 20, 1996 Statement filed on December 17, 1996, File No.
333-18071
10.21 Agreement between the Company and Phasetronics, Exhibit 10.10 to Form SB-2 Registration Statement
Inc. dated January 31, 1996 filed on December 17, 1996, File No. 333-18071
10.22 Agreement between the Company and Phasetronics, Exhibit 10.11 to Form SB-2 Registration Statement
Inc. dated January 31, 1996 filed on December 17, 1996, File No. 333-18071
10.23 Sale of Accounts Receivable Agreement between the Exhibit 10.12 to Form SB-2 Registration Statement
Company and Queensbury, Inc. dated October 31, 1996 filed on December 17, 1996, File No. 333-18071
10.24 Cash Advance and Security Agreement and amendment Exhibit 10.13 to Form SB-2 Registration Statement
thereto between Frank J. Mancini and the Company filed on December 17, 1996, File No. 333-18071
</TABLE>
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<TABLE>
<CAPTION>
FILING-STATUS--
EXHIBIT INCORPORATED BY
NUMBER EXHIBIT DESCRIPTION REFERENCE TO
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.24.1 Second Amendment to Cash Advance and Security Exhibit 10.13.1 to Form SB-2 Registration Statement
Agreement dated May 19, 1997 filed on December 17, 1996, File No. 333-18071
10.24.2 Third Amendment to Cash Advance and Security Exhibit 10.13.2 to Form SB-2 Registration Statement
Agreement dated May 27, 1997 filed on December 17, 1996, File No. 333-18071
10.25 Form of Indemnification Agreement for directors and Exhibit 10.14 to Form SB-2 Registration Statement
officers filed on December 17, 1996, File No. 333-18071
10.26 Revolving Line of Credit Agreement between the Exhibit 10.15 to Form SB-2 Registration Statement
Company and Queensbury, Inc. filed on December 17, 1996, File No. 333-18071
10.27 Amended and Restated License Agreement between the Exhibit 10.16 to Form SB-2 Registration Statement
Company and Matthias E. Lukens, Jr., d/b/a WHR filed on December 17, 1996, File No. 333-18071
Partners, dated December 16, 1997
10.28 Stock Purchase Agreement between the Company and Exhibit 10.17 to Form SB-2 Registration Statement
Matthias E. Lukens, Jr., d/b/a WHR Partners dated filed on December 17, 1996, File No. 333-18071
December 16, 1997
10.29 Executive Employment Agreement between the Company Exhibit 10.18 to Form SB-2 Registration Statement
and David W. Clarke filed on December 17, 1996, File No. 333-18071
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FILING-STATUS--
EXHIBIT INCORPORATED BY
NUMBER EXHIBIT DESCRIPTION REFERENCE TO
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.30 Executive Employment Agreement between the Company Exhibit 10.19 to Form SB-2 Registration Statement
and Christine Clewes filed on December 17, 1996, File No. 333-18071
10.31 Executive Employment Agreement between Exhibit 10.20 to Form SB-2 Registration
the Company and Donald P. Louw Statement filed on December 17, 1996,
File No. 333-18071
10.32 Executive Employment Agreement between the Company Exhibit 10.21 to Form SB-2 Registration Statement
and Steven D. Smith filed on December 17, 1996, File No. 333-18071
10.33 Executive Employment Agreement between the Company Exhibit 10.22 to Form SB-2 Registration Statement
and Robert Swatland filed on December 17, 1996, File No. 333-18071
10.34 Financial Advisor and Investment Banking Agreement Exhibit 10.23 to Amendment No. 1 to Form SB-2
between the Company and May Davis Group, Inc. dated Registration Statement filed on March 6, 1997.
July 16, 1997
27 Financial Data Schedule Filed herewith
99.1 Form of domestic distribution agreement Exhibit 99.3 to Amendment No. 1 to Form SB-2
Registration Statement filed on March 6, 1997
99.2 Form of international distribution agreement Exhibit 99.4 to Amendment No. 1 to Form SB-2
Registration Statement filed on March 6, 1997
</TABLE>
19
<PAGE>
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 22, 1997 APOLLO INTERNATIONAL
OF DELAWARE, INC.
(Registrant)
By: /s/ DAVID W. CLARKE
------------------------------
David W. Clarke
President and Chief Executive
Officer (As both a duly
Authorized Officer of the
Registrant and the Principal
Financial Officer of the
Registrant)
20
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------
<C> <S>
4.2 Specimen of Warrant Certificate
4.3 Warrant Agreement between the Company and American Stock
Transfer & Trust Company, as Warrant Agent dated July 16, 1997
10.4 Amended Warrant dated October 29, 1996 in favor of Perryman
Corporation N.V.
10.11 Underwriters' Warrant dated July 16, 1997
27 Financial Data Schedule
</TABLE>
21
<PAGE>
Exhibit 4.2
No. W__________ VOID AFTER 5:00 P.M. July 10, 2003
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
APOLLO INTERANTIONAL OF DELAWARE, INC.
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 International of Delaware, Inc., a Delaware corporation (the
"Company"), at any time from July 10, 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 July 16, 1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case
of the exercise of less than all the warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
<PAGE>
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
July 10, 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 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 July 10, 1998, 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 ("NASDAQ"), 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 in the over-the-counter market as furnished by The National Quotation
Bureau, Inc., or NASD historical research department, if the Common Stock is
not listed or admitted for trading on any national securities exchange, and
is not reported by 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); provided further, that if such
redemption occurs on or before July 10, 1999,
2
<PAGE>
the representative of the Company's Underwriters has consented in writing to
the redemption. Notice of redemption (the "Notice of Redemption") shall be
given not later than the thirtieth 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., its successors
and assigns shall be entitled to receive an aggregate of five percent (5%) of
the Purchase Price of the Warrants represented hereby.
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 as of the date first above, manually or in facsimile by
two of its officers thereunto duly authorized and a facsimile of its
corporate seal to be imprinted hereon.
SEAL APOLLO INTERNATIONAL OF
DELAWARE, INC.
By:___________________________
Name: David W. Clarke, President
By:____________________________
Name: Christine Clewes
Title: Secretary
3
<PAGE>
AGREEMENT, dated this 16th day of July, 1997 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
800,000 shares of the Company's common stock, $.01 par value ("Common
Stock"), and 800,000 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
120,000 shares of Common Stock and/or 120,000 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 80,000 shares of Common Stock and/or 80,000
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 920,000 Redeemable Warrants and may issue up to 80,000 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 and obligations thereunder of the Company, the
Underwriter, the holders of certificates representing the Warrants and the
Warrant Agent, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Company, par
value $.01 per share.
<PAGE>
(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 the earlier of the date
upon which the Company gives a notice of redemption of the Redeemable
Warrants or, July 10, 1999 for the Redeemable Warrants and for the Common
Stock Warrants.
(e) "Initial Warrant Redemption Date" shall mean July 10, 1998,
provided May Davis shall have consented in writing to the redemption, which
consent shall be required for redemptions occurring on or before July 10,
1999.
(f) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, $5.50 per share of Common Stock.
(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 July 10, 1997 between the Company and May Davis, relating to the
purchase for resale to the public of the Securities.
2
<PAGE>
(k) "Underwriter's Warrant Agreement" shall mean the agreement
dated as of July 16, 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 July 10, 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.
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 800,000 Redeemable Warrants to purchase up to an aggregate of
80,000 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 120,000 Redeemable Warrants to purchase up to an aggregate of 120,000
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.
(d) Upon exercise of the Underwriter's Warrants as provided
therein, and payment of the applicable exercise price, Warrant Certificates
representing 80,000 Common Stock Warrants to purchase up to an aggregate of
80,000 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
3
<PAGE>
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 80,000 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.
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
4
<PAGE>
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 is 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 is not in violation of
Regulation M 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) days
after the end of each month, commencing in July 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. 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
July 16, 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
5
<PAGE>
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 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 or other registration statement
or post-effective amendments or supplements 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 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.
6
<PAGE>
(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 by the Registered Holder thereof with such Registered Holder's
signature guaranteed.
(d) A $10 service charge may be imposed 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.
(f) All Warrant Certificates surrendered for exercise or for
exchange shall be promptly canceled by the Warrant Agent.
(g) 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.
7
<PAGE>
(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
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 Warrant (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
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<PAGE>
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 to such
shares of Common Stock shall be determined as provided in subsection (B) of
this Section 8(a).
(F) 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.
(i) 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
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<PAGE>
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 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
10
<PAGE>
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 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 the terms 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
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<PAGE>
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 or the number of
shares issuable 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,
including options to be granted under the Company's 1996 Stock Option Plan or
Common Stock issuable on the exercise of such options, 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.
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 (i) average closing bid price for
the Common Stock in the over-the-counter market as reported by the NASD
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) average closing sale price
in the over-the-counter market as furnished by The National Quotation Bureau,
Inc., or NASD historical research department, if the Common Stock is not
listed or admitted for trading on any national securities exchange, and is
not reported by NASDAQ, 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); provided further, that if such redemption
occurs on or before July 10, 1999, the representative of the Company's
Underwriters has consented in writing to the redemption. All Redeemable
Warrants must be redeemed if any are redeemed.
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<PAGE>
(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 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
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<PAGE>
by it in reliance on any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure
on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or
(iii) be liable for any act or omission in connection with this Agreement
except for its own gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) 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 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
14
<PAGE>
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.
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.
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<PAGE>
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 6542 Highway 41,
Suite 215, Apollo Beach, Florida 33572 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 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.
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<PAGE>
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]
APOLLO INTERNATIONAL OF AMERICAN STOCK TRANSFER & TRUST
DELAWARE, INC. COMPANY
By: /s/ David W. Clarke By: /s/ Herbert J. Lemmer
------------------------ ------------------------------
David W. Clarke, Name: Herbert J. Lemmer
President Title: President
17
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Exhibit A
No. W__________ VOID AFTER 5:00 P.M. July 10, 2003
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
APOLLO INTERANTIONAL OF DELAWARE, INC.
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 International of Delaware, Inc., a Delaware
corporation (the "Company"), at any time from July 10, 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 July 16, 1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
<PAGE>
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
July 10, 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 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 July 10, 1998, 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 ("NASDAQ"), or (ii) the average closing sale price on the
2
<PAGE>
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 in the over-the-counter market as furnished by The National Quotation
Bureau, Inc., or NASD historical research department, if the Common Stock is
not listed or admitted for trading on any national securities exchange, and
is not reported by 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); provided further, that if such
redemption occurs on or before July 10, 1999, the representative of the
Company's Underwriters has consented in writing to the redemption. Notice of
redemption (the "Notice of Redemption") shall be given not later than the
thirtieth 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., its successors
and assigns shall be entitled to receive an aggregate of five percent (5%) of
the Purchase Price of the Warrants represented hereby.
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.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed as of the date first above, manually or in facsimile by
two of its officers thereunto duly authorized and a facsimile of its
corporate seal to be imprinted hereon.
APOLLO INTERNATIONAL OF
SEAL DELAWARE, INC.
By:----------------------------------
Name: David W. Clarke, President
By:-----------------------------------
Name: Christine Clewes
Title: Secretary
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
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
Group, Inc. o
2. The exercise of this Warrant was solicited
by __________________________________. o
3. If the exercise of this Warrant was not
solicited, please check the following box. o
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>
Warrant to Purchase 400,000 shares of Common Stock
APOLLO INTERNATIONAL OF DELAWARE, INC.
Amended
Common Stock Purchase Warrant
October 29, 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 Perryman Corporation N.V. (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 400,000 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. The rights represented by this Warrant shall be exercisable, at
any time commencing one year from the effective date of the Company's
Registration Statement for an initial public offering of its securities (the
"Effective Date"), until May 10, 2001 (the "Exercise Period") at a purchase
price of $3.00 per share (the "Exercise Price"), subject to adjustment in
accordance with Paragraph 6. After May 10, 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 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.
<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. 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 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.
d. In addition to the modification provisions of Section 1.b.
hereof, the Company may, but under no circumstances is obligated to, modify
the terms of this Warrant to provide
<PAGE>
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.
8. This Amended Warrant amends and restates in full the Warrant
issued to Holder dated October 29, 1996.
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
-----------------------------------
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 10.11
Dated July 16,1997 80,000 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 80,000 shares of the Company's common stock, $.01 par value
(the "Shares"), and/or 80,000 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 $8.25 per Share (the "Share Exercise Price") and $.4125 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 80,000 Shares and/or 80,000 Public Warrants, issued
pursuant to an Underwriting Agreement dated July 10, 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 800,000 shares of Common Stock and 800,000 Warrants as therein
described (and up to an additional 120,000 shares of Common Stock and 120,000
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.
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 July 10, 1998 (the
"Initial Period") inclusive, the Holder shall have no right to purchase any
Securities hereunder.
(b) Between July 10, 1998 and July 10, 2003 (the "Expiration Date")
inclusive, the Holder shall have the option to purchase Shares hereunder at a
price of $8.25 per Share and to purchase Warrants at a price of $.4125 per
Warrant subject to adjustment as provided in paragraph 8 hereof.
<PAGE>
(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 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 July 10, 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.
2
<PAGE>
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 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 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 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
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<PAGE>
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 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; 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.
(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
4
<PAGE>
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 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 information furnished by such
Distributing Holder or any other Distributing Holder for use in the preparation
thereof.
5
<PAGE>
(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 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.
(e) In order to provide for just equitable contribution under the Act
in any case in which (i) any person entitled to indemnification under this
Section 7 makes claim for indemnification pursuant hereto but it is judicially
determined (by entry of a final judgment or decree by a court of competent
jurisdiction an 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 7, then, and in each such case,
6
<PAGE>
the Company and each Holder 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 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 "contribution 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 provisions contained in this Section 7
are in addition to any other rights or remedies which either party hereto may
have with respect to the other or hereunder.
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
7
<PAGE>
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:
(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 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.
8
<PAGE>
(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 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
9
<PAGE>
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.
(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 Underwriter's Warrant then outstanding shall have the right
thereafter to receive on exercise of such Underwriter's 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
Underwriter's Warrants, the Warrant Certificates theretofore and thereafter
issued shall, unless the Company
10
<PAGE>
shall exercise its option to issue new Warrant Certificates pursuant hereto,
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 or the number of shares
issuable upon exercise of this Underwriter's Warrant 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, including options that may be granted under the Company's 1996 Stock
Option Plan or Common Stock issuable on the exercise of such options; 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,
any Holder shall not be entitled to cash dividends paid by the Company prior to
the exercise of any Underwriter's Warrant held by them.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York.
11
<PAGE>
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.
APOLLO INTERNATIONAL OF DELAWARE, INC.
By: /s/ David W. Clarke
---------------------------
Name: David W. Clarke
Title: President
12
<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)
13
<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)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS FOUND ON PAGES OF THE COMPANY'S FORM 10-QSB
FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2336
<SECURITIES> 0
<RECEIVABLES> 363,799
<ALLOWANCES> 0
<INVENTORY> 277,929
<CURRENT-ASSETS> 2150
<PP&E> 160,257
<DEPRECIATION> 34,288
<TOTAL-ASSETS> 1,838,619
<CURRENT-LIABILITIES> 1,815,310
<BONDS> 0
0
0
<COMMON> 18,214
<OTHER-SE> (766,983)
<TOTAL-LIABILITY-AND-EQUITY> 1,838,619
<SALES> 0
<TOTAL-REVENUES> 443,259
<CGS> 239,259
<TOTAL-COSTS> 1,038,603
<OTHER-EXPENSES> 801,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,092
<INCOME-PRETAX> (927,695)
<INCOME-TAX> 0
<INCOME-CONTINUING> (927,695)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (927,695)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> 0
</TABLE>
