<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CABLE-SAT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
FLORIDA 7372 65-0581474
(State of other Jurisdiction (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No)
</TABLE>
2105 HAMILTON AVENUE
SUITE 140
SAN JOSE, CA 95125
(408) 879-6600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
ABE OSTROVSKY
2105 HAMILTON AVENUE
SUITE 140
SAN JOSE, CA 95125
(408) 879-6600
(Name, address, including zip code, and telephone number,
including area code, of registrant's agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
JOEL BERNSTEIN, ESQ. DAVID A. CARTER, P.A.
P.O.BOX 330072 355 WEST PALMETTO PARK ROAD
MIAMI, FL 33233 BOCA RATON, FL 33432
(305) 751-3008 (407)750-6999
(305) 751-4928 (FAX) (407) 367-0960 (FAX)
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock.............................. 1,150,000 $6.00 $6,900,000 $
- ---------------------------------------------------------------------------------------------------------------
Common Stock(2)........................... 1,150,000 6.00 6,900,000
- ---------------------------------------------------------------------------------------------------------------
Stock Purchase Warrant.................... 1,150,000 .125 143,750
- ---------------------------------------------------------------------------------------------------------------
Underwriters' Warrant..................... 100,000 .001 100
- ---------------------------------------------------------------------------------------------------------------
Common Stock(2)........................... 200,000 7.20 1,440,000
- ---------------------------------------------------------------------------------------------------------------
Underlying Underwriters' Warrant.......... 100,000 .15 15,000
- ---------------------------------------------------------------------------------------------------------------
Common Stock.............................. 2,094,000 2.50 5,235,000
- ---------------------------------------------------------------------------------------------------------------
Total..................................... $20,633,850 $7,115.12
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Representing the Common Stock issuable upon exercise of warrants. This
registration statement also relates to such additional indeterminate number
of shares of Common Stock as may be issued upon adjustment of the warrants
in accordance with the terms therefore to prevent dilution.
THE REGISTRANT HEREBY AMENDS THIS REGULATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
CABLE-SAT SYSTEMS, INC.
1,000,000 SHARES OF COMMON STOCK
1,000,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Cable-Sat Systems, Inc. (the "Company") is offering hereby 1,000,000 shares
of its Common Stock, $.001 par value per share (the "Common Stock") and
1,000,000 Redeemable Common Stock Purchase Warrants (the "Warrants"). The Common
Stock and the Warrants (collectively, the "Securities") are separately
transferable at any time after the date of this Prospectus (the "Effective
Date"). Each Warrant entitles the registered holder thereof to purchase, at any
time during the period commencing on the Effective Date, one share of Common
Stock at a price of $6.00 per share, subject to adjustment under certain
circumstances, through [three years from Effective Date]. The Warrants offered
hereby are not exercisable unless, at the time of exercise, the Company has a
current prospectus covering the shares of Common Stock issuable upon exercise of
the Warrants and such shares have been registered, qualified or deemed to be
exempt under the securities laws of the states of residence of the exercising
holders of the Warrants. Commencing after the Effective Date, the Warrants are
subject to redemption by the Company at $.25 per Warrant on 30 days' prior
written notice if the closing bid price for the Company's Common Stock, as
reported on The NASDAQ SmallCap Market ("NASDAQ"), or the last sale price as
reported on a national or regional securities exchange, as applicable, for 30
consecutive trading days ending within 10 days of the notice of redemption of
the Warrants, averages at least $12.00. The Company is required to maintain an
effective registration statement with respect to the Common Stock underlying the
Warrants prior to redemption of the Warrants. The Warrants may not be redeemed
during the first year from the effective date without the consent of Barron
Chase Securities, Inc.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. It is anticipated that upon completion of this Offering
the Common Stock and the Warrants will be listed on NASDAQ under the symbols
" " and " ", respectively, and the Common Stock and Warrants
will be listed for trading on The Boston Stock Exchange (the "Boston Exchange")
under the symbols " " and " ". There is no assurance that an
active trading market in the Company's Common Stock or Warrants will develop.
The offering price of the Common Stock and Warrants, as well as the exercise
price and other terms of the Warrants have been determined by negotiation
between the Company and Barron Chase Securities, Inc. (the "Representative"),
acting as representative of the several underwriters identified elsewhere herein
(the "Underwriters"), and bear no relationship to the Company's asset value, net
worth or other established criteria of value. See "RISK FACTORS" and
"UNDERWRITING."
------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS OF THE SECURITIES OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE CsOMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................................. $6.00 $.60 $5.40
- ----------------------------------------------------------------------------------------------------------
Per Warrant............................................... $.125 $.0125 $.1125
- ----------------------------------------------------------------------------------------------------------
Total (3)................................................. $6,125,000 $612,500 $5,512,500
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include additional compensation to be received by the
Representative in the form of (i) a non-accountable expense allowance of
$183,750, ($211,312.50 if the Underwriters' over-allotment option is
exercised in full); (ii) Representative Warrants to purchase up to 100,000
shares of Common Stock at $7.20 per Share (120% of the initial offering
price) and 100,000 Underlying Warrants at $.15 per warrant exercisable over
a period of five years commencing on the Effective Date (the
"Representative's Warrants"); and (iii) a financial advisory agreement for
the Representative to act as an investment banker for the Company for a
period of three years at a fee of $108,000, payable at the closing of the
Offering. In addition, the Company has agreed to indemnify the Underwriters
against certain civil liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of this Offering payable by the Company, estimated
at $310,212 including the Representative's non-accountable expense
allowance.
(3) The Company has granted to the Underwriters an option, exercisable within
forty-five (45) days of the date of consummation of this Offering, to
purchase up to 150,000 additional shares of Common Stock and 150,000
additional Warrants on the same terms and conditions as set forth above to
cover over-allotments, if any (the "Over-allotment Option"). If all such
additional Securities are purchased, the Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company will be increased to
$7,043,750, $704,375 and $6,339,375, respectively. See "Underwriting."
[BARRON CHASE SECURITIES LOGO]
7700 WEST CAMINO REAL
SUITE 200
BOCA RATON, FLORIDA 33433
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND THE WARRANTS TO LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Securities are being offered on a firm commitment basis, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to the approval of certain legal matters by counsel and certain other
conditions. It is expected that delivery of certificates representing the
Securities will be made at the offices of Barron Chase Securities, Inc., 7700 W
Camino Real, Suite 200, Boca Raton, Florida 33433-5541, on or about
.
Concurrently with this offering, the Company has registered 1,367,630
shares of Common Stock (the "Selling Stockholders Shares") for resale by certain
of its stockholders (the "Selling Stockholders") and 724,370 shares of Common
Stock for distribution by Call Now, Inc. as a dividend to its stockholders of
record as of March 12, 1996 (the "Distribution"). The Selling Stockholders have
agreed not to sell any of the Selling Stockholders' Shares for periods from six
months from the date of this Prospectus (in the case of 667,630 of such shares)
or 12 months (in the case of 700,000 of such shares) after the date of this
Prospectus without the prior written consent of the Representative. Call Now,
Inc. has agreed not to make the Distribution until six months from the date of
this Prospectus. None of these 2,092,000 shares are being underwritten by the
Underwriters and the Company will not receive any of the proceeds from the
Distribution or sale of the Selling Stockholders Shares. See "Selling
Stockholders" and "The Distribution".
To the date hereof, the Company has not been required to file, and has not
filed, periodic reports with the Securities and Exchange Commission. Following
consummation of this Offering, the Company intends to furnish to its
stockholders annual reports containing financial statements audited and reported
on by independent auditors and may provide quarterly reports containing
unaudited financial information for each of the first three quarters of each
fiscal year.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, information
in this Prospectus, including share and per share data, assumes no exercise of
(i) the Underwriter's Over-allotment Option and (ii) the Warrants.
THE COMPANY
The Company, a development stage company organized in August 1994, is
developing products to allow the facsimile transmission of color images from
computers equipped with the Company's software programs. Such color facsimiles
can then be viewed on the receiving computer's screen, stored and printed on a
color printer. Recipients equipped with black and white electronic fax software
or a black and white fax machine can still receive faxes sent via the software;
the faxes will simply appear in black and white. There are millions of computers
equipped with appropriate fax modems or boards, but such computers lack software
programs which will enable them to send and receive color fax images. The
Company believes that the recent price reductions of color peripherals will
result in substantial demand for the ability to transmit and receive color
facsimiles. The Company's initial color fax software product, not yet named but
being developed under the working name TRUE COLOR FAX, is in technology
prototype testing at this time. Color images contain very large quantities of
data requiring a considerable amount of a computer's data storage resources and
resulting in a long transmission time. In order to fax color images over
standard phone lines in a short amount of time, the data must be compressed. The
International Telecommunications Union (ITU) has recently recommended a standard
for color image facsimile transmission (the "International Standard"). The
standard allows all machines meeting the standard to communicate with each
other. The Company's color fax software will incorporate the new International
Standard for color faxing. Use of the International Standard is anticipated to
result in transmission times of 4-8 minutes per typical page. The Company's
second color fax product with the working name, TRUE COLOR FAX PRO, which is
currently in development, in addition to complying with the International
Standard for faxing, will contain the Company's proprietary processes which will
enable large quantities of color picture data to be reduced by a significant
factor, resulting in significantly reduced file sizes and thereby making color
fax transmission and storage more efficient. When communicating with other
computers equipped with CableSat TRUE COLOR FAX PRO software, the Company's
proprietary process will be used. The Company anticipates that with its
proprietary process TRUE COLOR FAX PRO software will be more efficient than the
International Standard and projects a transmission time under 2 minutes for a
typical page.
The Company's color facsimile software products integrate new and existing
components into a system that the Company believes will provide competitively
priced, color facsimile capabilities.
The Company has not sold or licensed any of its products or technologies.
The Company's prospects must be considered in light of the risks associated with
the establishment of a new business in the evolving computer industry, as well
as further risks encountered in the shift from development to commercialization
of new products based on innovative technology. There can be no assurance that
the Company will be able to generate revenues or achieve profitable operations.
See "Risk Factors," "Business" and "Financial Statements."
The Company was incorporated under the laws of Florida on August 26, 1994.
The Company's corporate offices are located at 2105 Hamilton Avenue, Suite 140,
San Jose, California 95125. The Company's telephone number is (408) 879-6600.
SECURITIES OFFERED
The Offering............... 1,000,000 shares of Common Stock and 1,000,000
Warrants to purchase 1,000,000 shares of Common
Stock. See "Description of Securities" and
"Underwriting."
Offering price............. $6.00 per share of Common Stock and $.125 per
Warrant.
3
<PAGE> 5
Common Stock outstanding:
Prior to the Offering...... 3,772,000 shares of Common Stock
After the Offering(1)...... 4,922,000 shares of Common Stock
Warrants outstanding after
the Offering(2)............ 1,000,000 warrants
Exercise price of Warrants
offered hereby........... $6.00 per share, subject to adjustment in certain
circumstances. See, "Description of
Securities -- Redeemable Warrants".
Exercise period of Warrants
offered hereby........... The three year period from the effective date
hereof.
Redemption of Warrants..... Redeemable by the Company at any time after the
date hereof (or earlier with the prior written
consent of the Underwriter) on not less than 30
days prior written notice to the holders of the
Warrants, provided the average closing bid
quotation of the Common Stock as reported on the
NASDAQ Stock Market, if traded thereon, or if not
traded thereon, the average closing sale price of
the Common Stock if listed on a national
securities exchange (or other reporting system
that provides last sale prices), has been at
least $12.00 for a period of 30 consecutive
trading days ending within 10 days prior to the
date on which the Company gives notice of
redemption. The Warrants may not be redeemed
during the first year from the effective date
without the consent of Barron Chase Securities,
Inc. The Warrants will be exercisable until the
close of business on the day immediately
preceding the date fixed for redemption. See
"Description of Securities Redeemable Warrants."
Use of Proceeds............ The net proceeds to the Company, aggregating
approximately $5,198,550, will be applied to
redeem Preferred Stock for $450,000 and for
research and development; marketing;
manufacturing; general and administrative
expense; the purchase of equipment and inventory;
and the balance for working capital and general
corporate purposes. See "Use of Proceeds."
Risk Factors............... The securities offered hereby involve a high degree
of risk and substantial immediate dilution to new
investors. Only investors who can bear the risk
of their entire investment should invest. See
"Risk Factors" and "Dilution".
Proposed NASDAQ symbols.... -- Common Stock
-- Warrants
Proposed Boston Stock
Exchange Symbols........... -- Common Stock
-- Warrants
- ---------------
(1) Includes 1,000,000 shares of Common Stock offered hereby and 150,000 shares
of Common Stock issuable upon redemption of the Company's outstanding
Preferred Stock. Excludes (i) 1,000,000 shares of Common Stock reserved for
issuance upon exercise of the Warrants; (ii) an aggregate of 200,000 shares
of Common Stock reserved for issuance upon exercise of the Representative's
Warrants and the warrants included therein; (iii) 150,000 shares of Common
Stock issuable upon exercise of the Underwriter's Over-allotment Option;
and (iv) 566,200 shares reserved for issuance upon exercise of other
outstanding options. See "Management -- Employment Agreements," "Certain
Transactions," "Description of Securities" and "Underwriting."
4
<PAGE> 6
(2) Includes (i) 1,000,000 Warrants offered hereby. Excludes (i) 100,000
Representative's Warrants to be issued to the Representative upon closing
of the Offering; and (ii) 150,000 Warrants issuable upon exercise of the
Underwriter's Over-allotment Option.
SUMMARY FINANCIAL INFORMATION
The summary financial data set forth below is derived from and should be
read in conjunction with the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
FROM INCEPTION
(AUGUST 26, 1994)
THROUGH MARCH 31, 1996
----------------------
<S> <C>
Revenues (interest income)............................................... $ 7,589
Net loss................................................................. $ (836,132)
Net loss per common share(1)............................................. $ (.36)
Weighted average number of shares(1)..................................... 2,291,111
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------- PRO FORMA
ACTUAL PRO FORMA(2) ADJUSTED(2)(3)
--------- --------------- --------------
<S> <C> <C> <C>
Working capital....................................... $ 430,512 $ 1,570,512 $6,772,860
Total assets.......................................... $ 573,564 $ 1,713,564 $6,915,852
Total liabilities..................................... $ 43,473 $ 43,473 $ 43,473
Deficit accumulated during the development stage...... $(836,132) $ (836,132) $ (836,132)
Stockholders' equity.................................. $ 530,091 $ 1,670,091 $6,512,529
</TABLE>
- ---------------
(1) The net loss per common share has been computed in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 64 ("SAB
64"). SAB 64 requires the net loss per common share to be computed based on
the weighted average number of shares of common stock outstanding,
increased for certain shares or stock options, including shares of
Preferred Stock, issued within one year or in contemplation of the
Company's filing of its registration statement, and that such shares be
treated as if outstanding for all periods presented.
(2) Gives effect to the issuance of 1,072,000 shares of Common Stock in exchange
for an aggregate net consideration of approximately $1,260,000 which
occurred after March 31, 1996. See "Recent Financing".
(3) Gives effect to the sale of the Common Stock and Warrants offered hereby and
the application of a portion of the estimated net proceeds therefrom to
redeem the Preferred Stock. See "Use of Proceeds."
5
<PAGE> 7
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk, including, but not limited to, the risk factors described below. Each
prospective investor should carefully consider the following risk factors before
making an investment decision.
Development Stage Company; Absence of Operating History. The Company was
incorporated in August 1994 and is in the development stage. Accordingly, the
Company has no significant operating history upon which an evaluation of the
Company's prospects can be made. Since inception, the Company has been engaged
primarily in the design and development of TRUE COLOR FAX and TRUE COLOR FAX PRO
(the "Initial Color Fax Products") and related technology, the recruitment of
key management and technical personnel and raising capital to fund its
operations. The Company has produced technology prototypes of its initial color
fax software program, currently called TRUE COLOR FAX, and is in the process of
developing its advanced color fax software product, currently called TRUE COLOR
FAX PRO. It has not licensed or sold any of its products or technologies. The
Company's viability, profitability and growth depend upon successful completion
of the development and commercialization of these products. There can be no
assurance that any of the Company's technologies or products will be
successfully developed or commercialized. The prospects for the Company's
success must be considered in light of the risks, expenses and difficulties
often encountered in the establishment of a new business in a continually
evolving industry subject to rapid technological and price changes, and
characterized by an increasing number of market competitors. The risks, expenses
and difficulties often encountered in a shift from the research and development
of prototype products to the commercialization of new products based on
innovative technology must also be considered. See "Business."
No Revenues; Accumulated Deficit; Anticipated Future Losses. To date, the
Company has had no operating revenue and does not anticipate any operating
revenue until such time as its relevant technology and one or more of its
Initial Color Fax Products are completely developed, manufactured in commercial
quantities and available for commercial distribution, none of which can be
assured. There can be no assurance that the Company's technology and products,
if developed and manufactured, will be able to compete successfully in the
marketplace and/or generate significant revenue. The Company anticipates
incurring significant costs in connection with the development of its
technologies and proposed Initial Color Fax Products and there is no assurance
that the Company will achieve sufficient revenues to offset anticipated
operating costs. As of March 31, 1996, the Company's deficit accumulated during
the developmental stage was $836,132. Further, the Company anticipates
continuing losses until its Initial Color Fax Products generate substantial
revenues, which cannot be assured. Included in such losses are research and
development expenses, marketing costs, production costs, and general and
administrative expenses. See "Summary Financial Information."
Significant Capital Requirements; Dependence on Offering Proceeds; Need for
Additional Financing. The Company's capital requirements in connection with its
development activities have been and will continue to be significant. The
Company has been dependent upon the proceeds of sales of its securities to
private investors to fund its initial development activities. The Company
anticipates that the proceeds of this offering will be sufficient to satisfy its
contemplated cash requirements for at least 12 months following the consummation
of this offering. After such time, the completion of the Company's development
activities relating to its Initial Color Fax Products and the commencement of
marketing and distribution activities in connection with such products may
require continued funding in excess of the proceeds of this offering or any
funds otherwise currently available to the Company. The Company has no current
arrangements with respect to sources of additional financing and there is no
assurance that other additional financing will be available to the Company in
the future on commercially reasonable terms, or at all. The inability to obtain
additional financing, when needed, would have a material adverse effect on the
Company, including possibly requiring the Company to curtail or cease
operations. To the extent that any future financing involves the sale of the
Company's equity securities, the Company's then existing stockholders, including
investors in this offering, could be substantially diluted.
6
<PAGE> 8
New Concept; Uncertainty of Market Acceptance; Lack of Marketing
Experience. The Initial Color Fax Products currently being developed by the
Company utilize new concepts and designs in image compression and processing.
The Company's prospects for success will therefore depend on its ability to
successfully license and sell its products to key manufacturers and distributors
who may be inhibited from doing business with the Company because of their
commitment to their own technologies and products. As a result, demand and
market acceptance for the Company's technologies and proposed products is
subject to a high level of uncertainty. The Company currently has limited
financial, personnel and other resources to undertake the extensive marketing
activities that will be necessary to market its technology and products once
their development is completed. There is no assurance that any of the Company's
potential customers will enter into any arrangements with the Company. There is
no assurance that the Company will be able to formalize any marketing
arrangements or that its marketing efforts will be successful. See
"Business -- Sales and Marketing" and "Business -- Research and Development."
Dependent on Manufacturers. The Company intends to rely in part on the
manufacturers of personal computers, fax modems, color printers and scanners for
initial distribution of its Initial Color Fax Products. The Company is therefore
dependent upon such firms to distribute its products. To date, the Company does
not have any agreements with any manufacturers to distribute its color fax
products. The failure of such manufacturers to distribute copies of the
Company's Initial Color Fax Products with their products would have a material
adverse effect on the Company's ability to market its Initial Color Fax
Products.
Uncertainty of Product and Technology Development; Need for Product
Testing; Technological Factors. The Company has not completed development of any
of the Company's proposed Initial Color Fax Products in commercially salable
form. Technologies and proposed products being developed by the Company are in
various stages of development. Product development efforts are subject to all of
the risks inherent in the development of new technology and products (including
unanticipated delays, expenses, technical problems or difficulties, as well as
the possible insufficiency of funding to complete development). There can be no
assurance as to when, or whether, such developments will be successfully
completed.
Competition; Product Obsolescence. The markets for the technology and
products being developed by the Company are characterized by rapid changes and
evolving industry standards often resulting in product obsolescence or short
product life cycles. As a result, certain companies may be developing
technologies or products of which the Company is unaware which may be
functionally similar, or superior, to some or all of those being developed by
the Company. These companies may have substantially greater financial,
technical, personnel and other resources than the Company and may have
established reputations for success in developing, licensing and sales of their
products. The ability of the Company to compete will depend on its ability to
complete development and introduce to the marketplace in a timely and
cost-competitive manner its proposed products and technology, to continually
enhance and improve such products and technology, to adapt its proposed products
to be compatible with specific products manufactured by others, and to
successfully develop and market new products and technology. There is no
assurance that the Company will be able to compete successfully, that its
competitors or future competitors will not develop technologies or products that
render the Company's products and technology obsolete or less marketable or that
the Company will be able to successfully enhance its proposed products or
technology or adapt them satisfactorily.
Dependence on Key Personnel. The success of the Company will be largely
dependent on its ability to hire and retain qualified executive, scientific and
marketing personnel. There is no assurance that the Company will be able to hire
or retain such necessary personnel.
Protection of Proprietary Information. The Company will apply for
copyrights relating to certain of its proposed Initial Color Fax Products and
may also apply for patent protection. There is no assurance that any patents
will be obtained. If obtained, there is no assurance that any patents or
copyrights will afford the Company commercially significant protection of its
technologies or that the Company will have adequate resources to enforce its
patents and copyrights. The Company also intends to seek foreign patent and
copyright protection. With respect to foreign patents and copyrights, the laws
of other countries may differ significantly from those of the United States as
to the patentability of the Company's products or technology. Moreover, the
degree of protection afforded by foreign patents or copyrights may be different
from that in the United
7
<PAGE> 9
States. Patent applications in the United States are maintained in secrecy until
patents issue, and since publication of discoveries in the scientific or patent
literature tends to lag behind actual discoveries by several months, the Company
cannot be certain that it will be the first creator of inventions covered by any
patent applications it makes or the first to file patent applications on such
inventions.
Competitors in both the United States and foreign countries, many of which
have substantially greater resources and have made substantial investments in
competing technologies, may have applied for or obtained, or may in the future
apply for and obtain, patents that will prevent, limit or otherwise interfere
with the Company's ability to make and sell its products. The Company has not
conducted an independent review of patents issued to third parties. In addition,
because of the developmental stage of the Company, claims that the Company's
products infringe on the proprietary rights of others are more likely to be
asserted after commencement of commercial sales incorporating the Company's
technology. Although the Company believes that its products do not infringe the
patents or other proprietary rights of third parties, there can be no assurance
that other third parties will not assert infringement claims against the Company
or that such claims will not be successful. There can also be no assurance that
competitors will not infringe the Company's patents. Defense and prosecution of
patent suits, even if successful, are both costly and time consuming. An adverse
outcome in the defense of a patent suit could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed from third
parties or require the Company to cease selling its products.
The Company also relies on unpatented proprietary technology, and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's unpatented technology. To
protect its trade secrets and other proprietary information, the Company
requires employees, consultants, advisors and collaborators to enter into
confidentiality agreements. There can be no assurance that these agreements will
provide meaningful protection for the Company's trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.
If the Company is unable to maintain the proprietary nature of its technologies,
the Company could be adversely affected. See "Business -- Patents; Proprietary
Information."
Control by Management. Upon consummation of the Offering, the directors
and officers of the Company will beneficially own 2,048,273 shares of Common
Stock, or approximately 38% of the Company's then outstanding shares of Common
Stock and have the right to acquire 230,000 additional shares pursuant to
outstanding options. Such directors and officers would in all likelihood be in a
position to control the election of the Company's directors and thereby select
the management, and direct the policies, of the Company. See "Management,"
"Principal Stockholders" and "Description of Securities."
No Dividends. The Company has paid no cash dividends to date. Payment of
dividends on the Common Stock is within the discretion of the Board of Directors
and will depend upon the Company's earnings, its capital requirements and
financial condition, and other relevant factors. The Company does not currently
intend to declare any dividends on its Common Stock in the foreseeable future.
Currently, the Company plans to retain any earnings it receives for development
of its business operations. See "Summary Financial Information."
Redemption of Preferred Stock; Benefit to Stockholder. $450,000 of the
proceeds of this offering will be used to redeem outstanding Preferred Stock
and, accordingly, such funds will not be available to fund future growth. See
"Use of Proceeds."
Dilution. Investors purchasing shares of Common Stock in the Offering will
incur immediate and substantial dilution in the net tangible book value per
share of the Common Stock from the initial public offering price as compared to
the increase in net tangible book value per share that will accrue to existing
stockholders. Such dilution is estimated to be $4.52 per share (or approximately
75%). See "Dilution".
Shares Eligible for Future Sale; Registration Rights. Upon the
consummation of this offering, the Company will have 4,922,000 shares of Common
Stock outstanding, assuming no exercise of the Warrants or outstanding options.
All of the Company's presently issued and outstanding shares of Common Stock are
8
<PAGE> 10
deemed to be "restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act ("Rule 144") and may, in certain
circumstances, be sold without registration pursuant to such rule. All of such
"restricted" shares will become eligible for sale under Rule 144 beginning in
April 1997 (subject to certain recurring three-month volume limitations
prescribed by Rule 144). The possibility that substantial amounts of Common
Stock may be sold in the public market may adversely affect prevailing market
prices for the Common Stock and the Warrants and could impair the Company's
ability in the future to raise additional capital through the sale of its equity
securities. See "Principal Stockholders", "Underwriting", "Selling Stockholders"
and "The Distribution".
No Assurance of Public Market; Determination of Public Offering Price;
Possible Volatility of Market Price of Common Stock and Warrants. Prior to this
offering, there has been no public trading market for the shares of Common Stock
or the Warrants. Consequently, the initial offering price of the Common Stock
and the Warrants and the exercise price of the Warrants have been determined by
negotiations between the Company and the Underwriter and do not necessarily
reflect the Company's book value or other established criteria of valuation.
There can be no assurance that a regular trading market for either the Common
Stock or the Warrants will develop after this offering or that, if developed, it
will be sustained. In addition, the market price of the securities of
development-stage companies in high-technology industries has been highly
volatile. In addition, the market prices for securities of many emerging
companies have experienced wide fluctuations not necessarily related to the
operating performance of such companies. Factors such as the Company's operating
results, announcements by the Company of licensing of distribution contracts,
orders for its products and announcements by the Company or its competitors
concerning technological innovations, new products or systems may have a
significant impact on the market price of the Company's securities. See
"Underwriting."
Necessity of Future Registration of Warrants and State Blue Sky
Registration; Exercise of Warrants. The Warrants will trade separately upon the
closing of the Offering. Although the Warrants will not knowingly be sold to
purchasers in jurisdictions in which the Warrants are not registered or
otherwise knowingly be sold to purchasers in jurisdictions in which the Warrants
are not registered or otherwise qualified for sale or exempt, purchasers may buy
Warrants in the after-market or may move to jurisdictions in which the Warrants
and the Common Stock underlying the Warrants are not so registered or qualified
or exempt. In this event, the Company would be unable lawfully to issue Common
Stock to those persons desiring to exercise their Warrants (and the Warrants
will not be exercisable by those persons) unless and until the Warrants and the
underlying Common Stock are registered or qualified for sale in jurisdictions in
which such purchasers reside or an exemption from such registration or
qualification requirements exists in such jurisdictions. There can be no
assurance that the Company will be able to effect any required registration or
qualification.
The Warrants offered hereby will not be exercisable unless the Company
maintains a current registration statement on file with the Commission either by
filing post-effective amendments to the Registration Statement of which this
Prospectus is a part or by filing a new registration statement with respect to
the exercise of such Warrants. The Company has agreed to use its best efforts to
file and maintain, so long as the Warrants offered hereby are exercisable, a
current registration statement with the Commission relating to such Warrants and
the shares of Common Stock underlying such Warrants. However, there can be no
assurance that it will do so or that such Warrants or such underlying Common
Stock will be or continue to be so registered.
The value of the Warrants could be adversely affected if a then current
prospectus covering the Common Stock issuable upon exercise of the Warrants is
not available pursuant to an effective registration statement or if such Common
Stock is not registered or qualified for sale or exempt from registration or
qualification in the jurisdictions in which the holders of Warrants reside. See
"Description of Securities -- Redeemable Warrants."
Adverse Effect of Redemption of Warrants. The Warrants are generally
subject to redemption by the Company at a price of $.25 per Warrant at any time,
on at least 30 days prior written notice, if the average closing bid quotation
of the Common Stock as reported on the NASDAQ Stock Market, if traded thereon,
or if not traded thereon, the average closing sale price of the Common Stock if
listed on a national securities exchange (or other reporting system that
provides last sale prices), has been at least 200% of the then current
9
<PAGE> 11
exercise price of the Warrants (initially, $12.00 per share), for a period of 30
consecutive trading days ending on the 10th day prior to the date on which the
Company gives notice of redemption. If the Company gives such notice of
redemption, holders of the Warrants will lose their rights to exercise the
Warrants after the date fixed therein for their redemption. Upon the receipt of
a notice of redemption of the Warrants, the holders thereof would be required to
(i) exercise the warrants and pay the exercise price at a time when it may
disadvantageous for them to do so, (ii) sell the Warrants at the then market
price, if any, when they might otherwise wish to hold the Warrants or (iii)
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption. The Warrants may not be
redeemed during the first year from the effective date without the consent of
Barron Chase Securities, Inc., or at any time that a current registration
statement is not in effect. See "Description of Securities -- Redeemable
Warrants."
Anti-Takeover Statutes. Florida has enacted legislation which prohibits a
publicly-held Florida corporation from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an "interested stockholder," unless the
business combination is approved in a prescribed manner. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within the prior three years did own) 15% or
more of a corporation's voting stock. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
"interested stockholder." See "Description of Securities -- Anti-Takeover
Provisions of Florida Law."
Tax Loss Carryforwards. At March 31, 1996 the Company had available unused
net operating loss carryforwards ("NOLs") aggregating approximately $836,132 to
offset future taxable income. Under Section 382 of the Internal Revenue Code of
1986, as amended (the "Code"), utilization of prior NOLs is limited after an
ownership change, as defined in such Section 382, to an amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change, multiplied by the federal long-term tax-exempt rate in
effect during the month that the ownership change occurred. Upon the
consummation of this offering, the Company may be subject to limitations on the
use of its NOLs as provided under Section 382. Accordingly, there can be no
assurance that a significant amount of the Company's existing NOLs will be
available to the Company following the Offering. In the event that the Company
achieves profitability, as to which there can be no assurance, such limitation
would have the effect of increasing the Company's tax liability and reducing the
net income and available cash resources of the Company in the future.
Possible Delisting and Risk of Low-Priced Securities. The Company has
applied for quotation of the Common Stock and the Warrants on NASDAQ and has
applied for listing of the Common Stock and the Warrants on the Boston Stock
Exchange. No assurance can be given that the Common Stock and the Warrants will
qualify for initial quotation or listing or that the Company will continue to be
able to satisfy certain specified financial tests and market related criteria
required for continued quotation on NASDAQ and continued listing on the Boston
Stock Exchange following the Offering. If the Company is unable to satisfy such
maintenance criteria in the future, the Common Stock and the Warrants may be
delisted from trading on NASDAQ and/or the Boston Stock Exchange, as the case
may be, and consequently an investor could find it more difficult to dispose of,
or to obtain accurate quotations as to the price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
In addition, if the Company's securities are not quoted on NASDAQ or the
Boston Stock Exchange, or if the Company does not meet the other exceptions to
the penny stock regulations cited above, trading in the Company's securities
would be covered by Rule 15g-9 promulgated under the Exchange Act for non-NASDAQ
and non-national securities exchange listed securities. Under such rule,
broker/dealers who
10
<PAGE> 12
recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities also are exempt from this rule if the market price is
at least $5.00 per share.
If the Company's securities become subject to the regulations applicable to
penny stocks, the market liquidity for the Company's securities could be
adversely affected. In such event, the regulations on penny stocks could limit
the ability of broker/dealers to sell the Company's securities and thus the
ability of purchasers of the Company's securities to sell their securities in
the secondary market.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock and
Warrants offered hereby are estimated to be $5,202,288. The Company anticipates
that these proceeds will be used as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Research and development(1)................................. $ 1,400,000 26.9%
Redemption of preferred stock(2)............................ 450,000 8.7
Marketing(3)................................................ 2,600,000 50.0
Purchase of equipment and inventory(4)...................... 200,000 3.8
Working capital and general corporate purposes(5)........... 552,288 10.6
------------- ------
Total............................................. $ 5,202,288 100.0%
=========== ==========
</TABLE>
- ---------------
(1) Includes estimated costs to continue the development of the TRUE COLOR FAX
and TRUE COLOR FAX PRO. See "Management's Discussion and Analysis of
Financial Condition" and "Plan of Operation."
(2) Represents the redemption of Preferred Stock issued to Call Now, Inc. in
February 1996 for $450,000. The Company used the net proceeds from the sale
of such stock to pay for research and product development and operating
expenses. See Note 2 and 6 of Notes to Financial Statements.
(3) Includes estimated expenses associated with participation in trade shows,
business travel, advertising in trade magazines, the preparation of sales
presentations and brochures and market research and related payroll
expenses of marketing personnel and consultants. See "Business -- Marketing
and Distribution."
(4) Includes the estimated costs associated with the purchase of equipment and
the purchase of inventories of the TRUE COLOR FAX and TRUE COLOR FAX PRO.
The Company has no commitments to date for the purchase of any inventory.
See "Plan of Operation."
(5) Includes anticipated payment of the salaries of the Company's current
personnel. The remainder will be used for working capital and general
corporate purposes.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that the proceeds of this offering will be
sufficient to satisfy the Company's contemplated cash requirements for at least
12 months following the consummation of this offering. In the event the
Company's plans change or its assumptions change or prove to be inaccurate or
the proceeds of this offering prove to be insufficient to fund operations (due
to unanticipated expenses, delays, problems or otherwise), the Company may find
it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to use portions thereof for other purposes and
could be required to seek additional financing sooner than currently
anticipated. See "Plan of Operation."
Proceeds not immediately required for the purposes described above will be
invested principally in government securities and/or short-term certificates of
deposit.
11
<PAGE> 13
DILUTION
As of March 31, 1996, the net tangible book value of the Company was
$545,906 or approximately $.18 per share of Common Stock. After giving
retroactive effect to the Pro Forma Adjustments (see "Prospectus
Summary -- Summary Financial Information"), the pro forma net tangible book
value of the Company was $1,685,906 or $.45 per share of Common Stock. After
also giving effect to the sale of the 1,000,000 shares of Common Stock and
1,000,000 Warrants being offered hereby (less underwriting discounts and
commissions and estimated expenses of this offering), the adjusted net tangible
book value of the Company as of March 31, 1996, would have been approximately
$7,085,906, or $1.48 per share, representing an immediate increase in net
tangible book value of $1.03 per share of Common Stock to existing stockholders
and an immediate dilution of $4.52 per share to new investors. The following
table illustrates this dilution to new investors on a per share basis:
<TABLE>
<S> <C>
Public offering price........................................................ $6.00
Net tangible book value before Pro Forma Adjustments......................... .18
Increase attributable to Pro Forma Adjustments............................. .27
-----
Pro Forma net tangible book value before Offering.......................... .45
Increase attributable to new investors..................................... 1.03
-----
Adjusted net tangible book value after Offering.............................. 1.48
-----
Dilution to new investors.................................................... $4.52
=====
</TABLE>
The above table assumes no exercise of outstanding stock options and
warrants. As of the date of this Prospectus, there are outstanding stock options
to purchase an aggregate of 735,000 shares of Common Stock having exercise
prices of $.10 per share to $2.50 per share. To the extent that stock options or
warrants are exercised at prices below the public offering price per share,
there will be further dilution to new investors. See "Risk Factors," "Plan of
Operation," "Certain Transactions," "Description of Securities" and
"Underwriting."
The following table sets forth with respect to existing common stockholders
and new investors in this offering, a comparison of the number of shares of
Common Stock acquired from the Company, the percentage of ownership of such
shares, the total consideration paid, the percentage of total consideration paid
and the average price per share.
<TABLE>
<CAPTION>
SHARES TOTAL
------------------- -----------------------
PURCHASED CONSIDERATION
NUMBER NUMBER PERCENT AMOUNT PERCENT CONSIDERATION
- -------------------------------------------- --------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 3,772,000 79% $ 2,176,250 26.6% $ .58
New investors............................... 1,000,000 21% 6,000,000 73.4% 6.00
--------- ------- ------------- -------
Total............................. 4,772,000 100% $ 8,176,250 100%
</TABLE>
The above tables assume no exercise of the Underwriter's Over-allotment
Option. If such option is exercised in full, the new investors will have paid
$6,900,000 for 1,150,000 shares of Common Stock, representing approximately 76%
of the total consideration for 23% of the total number of shares of Common Stock
outstanding.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth capitalization of the Company as of March
31, 1996 and as adjusted to reflect the sale of the 1,000,000 shares offered
hereby and the application of the net proceeds and issuance of additional shares
since March 31, 1996.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
<S> <C> <C> <C>
Stockholder's Equity:
Series A Preferred Stock, $.001 par value 150,000
shares authorized............................. $ 450,000 $ 450,000 $ -0-
Common Stock, $.001 par value, 50,000,000 shares
authorized; 3,000,000 shares issued and
outstanding; 4,000,000 shares to be outstanding
as adjusted...................................... $ 3,000 $ 3,772 $ 4,922
Additional Paid-in Capital......................... $1,003,223 $2,142,451 $ 7,343,739
Subscription Note Receivable....................... $ (90,000) $ (90,000) $ -0-
Accumulated Deficit................................ $ (836,132) $ (836,132) $ (836,132)
Total Stockholders' Equity......................... $ 530,091 $1,670,091 $ 6,512,529
Total Capitalization..................... $1,456,223 $2,596,251 $ 7,778,539
</TABLE>
13
<PAGE> 15
SELECTED FINANCIAL DATA
The following selected financial data are qualified by reference to, and
should be read in conjunction with, the Company's Financial Statements, the
Notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Plan of Operations" contained elsewhere in this Prospectus. The selected
financial data for each of the two years ended September 30, 1994 and 1995 are
derived from Company's audited financial statements, and the selected financial
data for the six-month periods ended March 31, 1995 and 1996 are derived from
the Company's unaudited financial statements.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
------------------- -------------------
1994 1995 1995 1996
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $ -0- $ -0- $ -0- $ -0-
General and administrative expenses..................... -0- 256,554 -0- 587,167
Income (loss) from operations........................... -0- (256,554) -0- (587,167)
Other income (expense).................................. -0- 1,789 -0- 5,800
Income (loss) before income taxes....................... -0- (254,765) -0- (581,367)
Provision for income taxes.............................. -0- -0- -0- -0-
Net income (loss)....................................... -0- (254,765) -0- (581,367)
Earnings (loss) per share............................... -0- (.12) -0- (.25)
Weighted average shares outstanding..................... -0- 2,200,000 -0- 2,291,111
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1996
------------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets........................................................ $ 425,319 $ 473,985
Working capital....................................................... 382,383 430,512
Total assets.......................................................... 488,394 573,564
Current liabilities................................................... 42,936 43,473
Stockholders' equity (deficit)........................................ 445,458 530,091
</TABLE>
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATIONS
GENERAL
Since inception of its organizational activities in April 1995, the
Company, a development stage company, has been engaged primarily in the design
and development of its Initial Color Fax Products and related technology, the
recruitment of key management and technical personnel, including outside
consultants, researching the patentability of its products and technology and
raising capital to fund its operations. The Company has produced prototypes of
the TRUE COLOR FAX computer program, but not the TRUE COLOR FAX PRO. It has not
licensed or sold any of its products or technologies. The Company requires the
proceeds of this offering to continue to develop its Initial Products and (in
the event the Company is able to successfully complete certain additional
research and development, prototypes and product testing relating thereto) to
commence the commercialization of the Initial Color Fax Products.
As of March 31, 1996, the Company had an accumulated deficit of $836,132.
Significant additional losses have been incurred since such date. The Company
will continue to have a high level of operating expenses and will be required to
make significant expenditures in connection with its research and development
activities and the production and marketing of its proposed products and
technologies following the consummation of this offering. Although the Company
anticipates deriving some revenue from the sale of its TRUE COLOR FAX and TRUE
COLOR FAX PRO computer programs within the next 12 months, no assurance can be
given that these products will be successfully developed, tested and brought to
market during such period, and the Company has projected its expenses based on
the assumption that it will receive no revenues from the sale of its products
during the 12 months after the conclusion of this offering. Even if revenues are
produced from the sale of such Initial Color Fax Products, the Company expects
to continue to incur substantial losses for at least the next 12 months, and
thereafter until the Company is able to attain revenues from sales, licensing or
other arrangements sufficient to support its operations, which cannot be
assured.
RESEARCH AND DEVELOPMENT
From inception though March 31, 1996, substantially all of the Company's
activities related to research and development. During the 12 months following
the Offering, the Company intends to spend approximately $1,400,000 on research
and development. In the event the Company is able to generate revenues from
sales of its Initial Color Fax Products during such 12-month period, it
anticipates it will increase its expenditures for research and development.
MARKETING AND DISTRIBUTION
Achieving significant market acceptance and commercialization of the
Company's Initial Color Fax Products will require substantial marketing efforts
and the expenditure of significant funds to establish market awareness of the
Company and the Initial Color Fax Products. The Company anticipates spending
$2,250,000 over the 12 months following the Offering to develop and implement a
formal marketing, advertising and public relations program. The Company
initially intends to market the Initial Color Fax Products through manufacturers
of personal computers, fax modems, scanners and color printers. It also may
license to third parties the rights to manufacture the products, either through
direct licensing, OEM arrangements or otherwise. See "Business Manufacturing."
The Company does not currently have a sales force to implement the sale
and/or licensing of its products or related technology. The Company has
determined that it will need to employ an internal sales staff of at least four
people by December 31, 1996. See "Business -- Marketing and Distribution."
Manufacturing
The Company does not contemplate that it will directly manufacture any of
its products. It intends to contract with third parties to manufacture its
proposed Initial Color Fax Products. The Company has not
15
<PAGE> 17
made any manufacturing arrangements for such products. However, the Company
believes that there are a large number of firms equipped to copy and package the
Initial Color Fax Products.
Employees
The Company currently has eight employees and four consultants. Depending
on its level of business activity, the Company expects to hire additional
employees in the next 12 months, including marketing and sales personnel, and
has allocated $1,215,000 of the proceeds of this offering for the recruitment
and related payroll expenses for approximately 9 additional employees over the
next 12-month period.
Liquidity and Capital Resources
Since inception, the Company has relied for all of its funding
(approximately $2,566,000 in cash) on private sales of its equity securities.
The Company intends to use $450,000 of the proceeds of this offering to redeem
Preferred Stock issued to Call Now, Inc. in connection with such financings.
The Company's plan of operation over the 12 months following the
consummation of this offering focuses primarily on the continued design,
development and patent and/or copyright protection of its proposed products and
in particular, the production of prototypes, testing and the marketing of the
TRUE COLOR FAX and TRUE COLOR FAX PRO. The Company anticipates, based on its
current proposed plans and assumptions relating to its operations, that the
proceeds of this offering will be sufficient to satisfy the contemplated cash
requirements of the Company for at least 12 months following the consummation of
this offering. In the event that the Company's plans change or its assumptions
prove to be inaccurate or the proceeds of this offering prove to be insufficient
to fund operations (due to unanticipated expenses, delays, problems, or
otherwise), the Company would be required to seek additional funding sooner than
anticipated. Depending upon the Company's progress in the development of its
products and technology, their acceptance by third parties, and the state of the
capital markets, the Company may also determine that it is advisable to raise
additional equity capital, possibly within the next 12 months. In addition, in
the event that the Company receives a larger than anticipated number of initial
purchase orders upon introduction of its Initial Color Fax Products, it may
require resources substantially greater than the proceeds of this offering or
than are otherwise available to the Company. In such event the Company may be
required to raise additional capital. The Company has no current arrangements
with respect to, or sources of, any such capital, and there can be no assurance
that such additional capital will be available to the Company when needed, on
commercially reasonable terms or at all. The inability of the Company to obtain
additional capital would have a material adverse effect on the Company and could
cause the Company to be unable to implement its business strategy, to postpone
or cancel the development of certain of its proposed products, or to otherwise
significantly curtail or cease its operations. Additional equity financing may
involve substantial dilution to the interests of the Company's then existing
stockholders.
The Company's future performance will be subject to a number of business
factors, including those beyond the Company's control, such as economic
downturns and evolving industry needs and preferences and the availability of
competing products, as well as the ability of the Company to successfully market
its products and technology and to effectively monitor and control its costs.
There can be no assurance that the Company will be able to successfully
implement a marketing strategy, generate significant revenues or ever achieve
profitable operations. In addition, because the Company has had only limited
operations to date, there can be no assurance that its estimates will prove to
be accurate or that unforeseen events will not occur.
RECENT FINANCING
In April 1996 the Company sold 350,000 shares of Common Stock at $.60 per
share to private investors and issued 50,000 shares for services valued at
$30,000.
In May 1996 the Company completed a private placement of 372,000 shares of
its Common Stock at $2.50 per share to certain accredited investors. The Company
received cash proceeds of approximately $902,000 after expenses.
16
<PAGE> 18
BUSINESS OF THE COMPANY
Facsimile transmission, better known as "fax", has become a major means of
communication in today's business community. A fax machine can be found in
almost every organization and is a standard office tool.
Facsimile machines convert text or graphics into digital form that can be
electronically transmitted and received across telephone lines. When sending
images, fax machines operate as scanners, converting images into a series of
dots which are then digitally encoded. The digital signal is then converted to a
voiceband ("audio") signal for transmission over the telephone network. When
receiving images, the machines affix images to paper through a variety of means.
The image is converted to a series of dots (either by scanning, in the case of a
fax machine, or electronically, in the case of a computer). Many technologies
employed in facsimile imaging are similar to those used in computer printers and
photocopiers.
Individual personal computers can be utilized as fax machines by the
addition of special circuitry known as a modem with fax capabilities. This
allows the computer to send and receive faxes directly without utilizing a
freestanding fax machine. Using a computer as a fax machine requires that a
telephone line be available during fax transmission and receiving. A fax
received directly by a computer can be immediately viewed on screen or stored
for later viewing. If the computer is connected to printer, the fax transmission
can be printed.
The Company believes that the recent price reduction of color printers and
scanners and their commensurate sales increase will result in demand for color
fax capabilities so that the color images that are being utilized by computer
users can impact their facsimile transmissions.
A communications software program controls the exchange of information
between the computer and the remote computer or facsimile machine at the other
end of the phone line. Current communications software packages do not allow a
computer generated fax to be sent other than in black and white.
Such communications software operates in accordance with international
standards adopted by an international telecommunications standard-making
organization. Such standards assure that faxes can be sent and received all over
the world regardless of the fax machine manufacturer or publisher of the fax
software.
The Company believes that the demand for color fax capabilities will be
substantial for the following reasons:
1. The price of color printers is declining rapidly which the Company
believes will result in color printers being the standard printer used with
personal computers rather than a high priced luxury.
2. The price of color scanners is declining making them reasonably
available to users of personal computers.
3. The Windows 95 operating system has built-in color management
capabilities thereby making color easier to use in applications.
4. Newer computers are generally equipped with faster processors and
larger storage devices thereby making it more practical to work with
image-intensive applications.
5. A boom in small office and work-at-home sector.
6. The surge in computer sales for home use.
The Company believes that the foregoing trends will result in a substantial
demand for color technology, including fax.
THE COMPANY'S COLOR FAX PRODUCTS
The Company's first product which is currently in technology testing is
currently internally called TRUE COLOR FAX. It is a communications software
program designed to allow facsimile transmission of color images. It
incorporates the new international standard for color faxing established by the
International Telecommunications Union (ITU) and includes the Joint Photographic
Experts Group (JPEG) standard for image compression. It enables users to send
and receive color faxes to and from their personal computer.
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<PAGE> 19
To the Company's knowledge, TRUE COLOR FAX will be the first commercially
available fax product that will be compliant with the international color fax
standard established in 1995 by the ITU, providing assurance that the product
will be compatible with other standards -- compliant fax applications and
machines produced in the future, regardless of manufacturer. This will give
users a fax software package that will work in both color and black and white.
A color page creates a very large raw data file when scanned into a color
fax program. A file size of 10 Mb is not uncommon. To manage such files within
the computer's memory and to transmit them in a reasonable amount of time, files
of this size are usually compressed. The ITU color fax standard specifies how a
file is to be managed. This specification imposes certain tations on file
management within the color fax product. The standard requires the use of JPEG
compression. This compression algorithm has a large inherent structural
overhead, and results in a file, depending upon the data within the page, that
will require 4 to 8 minutes to transmit using V.17 (14.4 kb/s) transmission
protocols as specified within the ITU color fax standard. Implementing this
standard assures compatibility with all other standards-based products that are
issued in the future, whether by the Company or any other vendor.
To make color faxing even more desirable, the Company's advanced version
which is in development will contain several transmission modes. In addition to
complying with the JPEG standard, this second version, currently internally
called TRUE COLOR FAX PRO (PRO) will incorporate a proprietary compression
process. This compression process reduces large color files by a significant
factor resulting in image file sizes that make transmission and storage more
efficient. When communicating with a remote PRO-equipped system, the proprietary
compression process and V.34 (28.8 bps) transmission protocols are automatically
utilized. The Company's compression process and the communications protocol are
more efficient and will result in faster transmission, estimated at 2 minutes
for a typical high resolution (300 dpi), 24-bit, full-color page.
The PRO version will use one of three modes, all transparent to the user:
(1) ITU Standard. This enables operation with any fax machine or
software (black and white or color) that is compliant with the
international standard;
(2) Company Proprietary. For fast transmission that works with only
the Company fax software package; or
(3) Black and White. Compliant with the black and white faxes that
operate under the current international standards for black and white fax
operation.
In addition to the proprietary compression process, the Company expects to
implement a color calibration/correction process within PRO for accurate color
reproduction of the original document at varied resolutions. The Company
believes that successful integration of color correction, compression and
communications technologies is required to make color fax software products
popular. The Company is investigating potential patents for parts of the
process.
TRUE COLOR FAX includes a color scanner interface standard which allows a
variety of color scanners to be used for input. The software also supports
Windows-compatible color printers.
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<PAGE> 20
The following diagram illustrates the color faxing process from start to
finish.
THE COMPANY'S OTHER POTENTIAL PRODUCTS
The Company is considering investigation, research and development
activities with respect to several other products relating to digital
compression. These activities may give rise to additional products which may be
commercialized by the Company. However, there can be no assurance that its
efforts will result in marketable products or products which can be produced at
commercially acceptable costs.
RESEARCH AND DEVELOPMENT
From inception though March 31, 1996, substantially all of the Company's
activities related to research and development. Such research and development
activities were conducted by the Company's employees and consultants. Over the
next twelve months the Company intends to spend approximately $1,400,000 of the
proceeds from the recent financings and this Offering on research and
development, primarily to complete the development of TRUE COLOR FAX into a
commercial product and to complete the development of TRUE COLOR FAX PRO. See,
"Risk Factors -- Uncertainty of Product and Technology Development; Need for
Product Testing; Technological Factors."
MARKETING AND DISTRIBUTION
The Company initially intends to market the TRUE COLOR FAX to persons
working at home or in small office environments and computer hobbyists. The
Company's marketing strategy, as currently formulated, emphasizes the rapid
introduction of its TRUE COLOR FAX software via all possible channels of
distribution in order to garner public awareness of the product and to encourage
usage. The Company will offer the product to manufacturers of color printers,
scanners, computers, modems and other software applications to distribute with
their products. The Company will have the product available for downloading from
the Internet and may market it directly by telephone sales.
In order to establish a large base of users, this initial marketing
strategy will entail distribution for little or no revenue to the Company. For
example, the Company will distribute a receive-only version of its program. In
many cases this version will be provided free of charge such as being
downloadable from the Internet. In other cases, it will be bundled with other
products such as color peripherals for only the cost of production and shipping.
In addition, the Company will also package a limited send module along with the
receive-only version. It is anticipated that the send module, however, will be
usable only for a limited number of uses. If the user desires to continue to use
the product to send color faxes after the limited usage has expired, a fee would
be payable to the Company. The Company will attempt to continually improve the
product and introduce upgrades. Users would be required to upgrade to obtain the
latest version of the software.
The Company believes that this marketing strategy will result in reviews in
computer magazines, television shows highlighting new technology and other media
for computer users. The Company intends to undertake an aggressive public
relations campaign to obtain further publicity and public awareness of the
product.
Eventually the Company will attempt to expand its market for the product
into the retail environment through distribution to wholesalers and retailers.
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<PAGE> 21
The Company has not entered into any agreement with respect to the
inclusion of TRUE COLOR FAX with any manufacturer's product or for wholesale or
retail distribution, and there can be no assurance that such distribution will
occur as projected or at all.
The Company does not currently have a sales force to implement the sale
and/or licensing of its products or related technology. The Company has
determined that it will need to employ an internal sales staff of at least four
people by December 31, 1996.
MANUFACTURING
The Company does not contemplate that it will directly manufacture any of
its color fax software products. It intends to contract with third parties to
copy and package the products. Although the Company has not entered into any
contracts with potential manufactures, it is aware of a significant number of
firms which have the capability of providing the services necessary to
manufacture the programs. It also may license to third parties the rights to
manufacture the products, either through direct licensing, OEM arrangements or
otherwise.
PATENTS; PROPRIETARY INFORMATION
To the extent practicable, the Company intends to file U.S. patent and/or
copyright applications on certain aspects of its technology and to file
corresponding applications in key industrial countries worldwide. In addition to
general legal protection for its technologies and products, the Company's
strategy is designed to make it difficult for competitors to assess the
specifics of the Company's technology. The Company also intends to gain
additional protection for its technology and products through the addition of
improvement Patents and/or Copyrights.
To the extent the Company determines to keep certain aspects of its
technology as trade secrets rather than as patents, the Company intends to
protect these developments by programming techniques that make it more difficult
to reverse-engineer the Company's software.
COMPETITION
The markets that the Company intends to enter are characterized by intense
competition. Most successful software products are eventually subject to
competing products from other developers. The markets for the technology and
products being developed by the Company are characterized by rapid changes and
evolving industry standards often resulting in product obsolescence or short
product life cycles. As a result, certain companies may be developing
technologies or products of which the Company is unaware which may be
functionally similar, or superior, to some or all of those being developed by
the Company. Such companies may have substantially greater financial, technical,
personnel and other resources than the Company and have established reputations
for success in the development, licensing, sale and service of their products
and technology. Certain of these potential competitors dominate their industries
and have the financial resources necessary to enable them to withstand
substantial price competition or downturns in the market for fax products.
The ability of the Company to compete successfully will depend on its
ability to complete development and introduce to the marketplace in a timely and
cost-competitive manner the initial color fax products and technology, to
continually enhance and improve such products and technology, and to
successfully develop and market new products and technology. There can be no
assurance that the Company will be able to compete successfully, that its
competitors or future competitors will not develop technologies or products that
render the Company's products and technology obsolete or less marketable or that
the Company will be able to successfully enhance its proposed products or
technology or adapt them satisfactorily.
EMPLOYEES
The Company currently has eight full-time employees, 2 of whom are in
management, 1 administrative and 5 technical.
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<PAGE> 22
FACILITIES
The Company has established its headquarters in San Jose, California.
Pursuant to the lease relating to such facility, the Company is obligated to
make monthly rental payments of $4,660. The lease is through June 3, 1998. The
Company's facility is approximately 2,511 square feet.
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<PAGE> 23
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
Abraham (Abe) Ostrovsky................ 53 Chief Executive Officer and Chairman
Wil F. Zarecor......................... 51 President and Director
Benjamin T. Maltby..................... 46 Secretary and Treasurer
William M. Allen....................... 67 Director
E. T. Kalinoski........................ 41 Director
John L. Douglas........................ 55 Director
</TABLE>
ABRAHAM (ABE) OSTROVSKY, CHIEF EXECUTIVE OFFICER AND CHAIRMAN. Mr.
Ostrovsky was appointed as Chairman and Chief Executive Officer in February
1996. He has served as Chairman of JetForm Corporation, a public form printing
company, since 1993. He joined JetForm in 1991 as Chief Operating Officer and
was Chief Executive Officer from 1991 to 1995. Prior to joining JetForm in 1991,
Mr. Ostrovsky was concurrently the Senior Vice President of Erskine House PLC,
an office equipment dealership and the Chairman of Savin Florida, a subsidiary
of Erskine House from 1988 to 1990.
WIL F. ZARECOR, PRESIDENT AND DIRECTOR. Mr. Zarecor has been President and
a director since September 1995. From 1988 to September 1995 he was Director of
Special Products for PanAmSat division of Alpha Lyracom, Inc. Mr. Zarecor holds
a BS in Mathematics from California State Fullerton.
BENJAMIN T. MALTBY, SECRETARY AND TREASURER. Mr. Maltby has been Secretary
and Treasurer since 1995. He also serves as Controller of Call Now, Inc., a
public long distance telephone company, since 1995. From 1990 to 1992 he was
Chief Financial Officer of College Housing of America. From 1992 to 1994 he was
President of Omegatel.
WILLIAM M. ALLEN, DIRECTOR. Mr. Allen, director since 1995, has been
President and director of Call Now, Inc. since June 1992. He has been managing
partner of Black Chip Stables from 1982 to date and President of Doric, Inc.
from 1985 until its merger with the Call Now, Inc. in 1994. He has served as
President of Kamm Corporation from 1985 to date and President of Kamm Life from
1985 to date. He was Chairman and CEO of Academy Insurance Group from 1975 to
1984. In May 1995 Call Now, Inc. made a subordinated loan to the Representative
which matures in March 1997.
E. T. KALINOSKI, DIRECTOR. Mr. Kalinoski has been a director since 1995
and served as President until September 1995. He has been a financial consultant
since 1986 with Southern Capital Consultants, a consulting firm, (1986-1991) and
MSH Capital, a consulting firm, since 1991.
JOHN L. DOUGLAS, DIRECTOR. Mr. Douglas has been a director and chief
scientist since 1995. From 1992 to 1995 he was a self-employed computer analyst.
From 1988 to 1992 he was employed as a computer analyst for C-Cube Microsystems,
a public computer chip company. He holds a BS in Mathematics from Cal Poly, and
an MS in Applied Mathematics from the University of Santa Clara.
Directors serve until the next annual meeting or until their successors are
elected and qualified. Officers serve at the discretion of the Board of
Directors.
Executive Compensation
The Company did not pay any executive officers or key employees total
compensation in excess of $100,000 per year in either of the Company's two
fiscal years from inception (August 26, 1994) to September 30, 1994 or the
fiscal year ended September 30, 1995. It paid total compensation of $36,000 to
Wil F. Zarecor, its President and Chief Executive Officer during the fiscal year
ended September 30, 1995 and $17,000 to E.T. Kalinoski during the period ended
August 31, 1995. There were no retirement, bonus, profit sharing or other
compensation payments during such periods.
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<PAGE> 24
Employment and Consulting Agreements
Abe Ostrovsky's employment with the Company is pursuant to an Employment
Agreement dated March 1, 1996 with Ostrovsky Consulting, Inc., a corporation
organized to market the services of Mr. Ostrovsky. Pursuant to the agreement,
Mr. Ostrovsky will serve as Chairman and Chief Executive Officer through
February 28, 1998. The agreement provides for an initial salary of $240,000 per
year and an annual bonus as determined by the Company's Board of Directors.
Pursuant to the agreement, Mr. Ostrovsky purchased 300,000 shares of the
Company's common stock at $.30 per share. Mr. Ostrovsky was granted an Incentive
Stock Option for 180,000 shares at $2.50 per share. Pursuant to the agreement,
Mr. Ostrovsky was appointed as a director of the corporation and is entitled to
nominate two additional independent directors for the Board and shall be
entitled to approve one of the other directors.
Wil F. Zarecor serves as President pursuant to a two year employment
agreement which terminates on August 30, 1997. Such agreement provides for a
base salary of $144,000 per year.
John L. Douglas serves as senior scientist pursuant to a two year
employment agreement which terminates on May 30, 1997. Such agreement provides
for a base salary of $120,000 per year.
Glenn Crepps serves as director of software development pursuant to a two
year employment agreement which terminates on May 30, 1997. Such agreement
provides for a base salary of $100,000 per year.
Stock Option Plan
On April 4, 1996, the Board of Directors adopted, and the stockholders of
the Company have approved, the Company's Stock Option Plan (the "Stock Option
Plan" or the "Plan"). The Plan provides for the granting of options on up to an
aggregate of 780,000 shares of Common Stock.
The Plan provides for the granting to eligible participants of options to
purchase Common Stock that qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") ("ISO"). ISOs are sometimes collectively referred to as "Options."
Employees of the Company are eligible to participate in the Plan. The Plan is
administered by the Board of Directors or a Committee appointed by the Board of
Directors, which determines the persons who are to receive Options, the terms
and number of shares subject to each Option.
ISOs may not be granted at a purchase price less than the fair market value
of the Common Stock on the date of the grant (or, for an Option granted to a
person holding more than 10% of the Company's voting stock, at less than 110% of
fair market value). Aside from the maximum number of shares of Common Stock
reserved under the Plan, there is no minimum or maximum number of shares that
may be subject to Options. However, the aggregate fair market value of the stock
subject to ISOs granted to any optionee that are exercisable for the first time
by an optionee during any calendar year may not exceed $100,000. ISOs generally
expire three months after the optionee is no longer an employee of the Company.
Options may not be transferred other than by will or the laws of descent and
distribution, and during the lifetime of an optionee may be exercised only by
the optionee. The term of each Option, which is fixed by the Board of Directors
at the time of grant, may not exceed five years from the date the option is
granted.
As of May 29, 1996, the Company had granted options for 555,000 shares with
a weighted average exercise price of $2.14, consisting of a range of exercise
prices from $.10 to $2.50 per share. As of May 29, 1996, 180,000 of such granted
options were vested and exercisable. Options were granted to directors and
officers as follows:
<TABLE>
<S> <C>
Abe Ostrovsky................................................ 180,000 shares @ $2.50
John Douglas................................................. 30,000 shares @ $2.50
Wil Zarecor.................................................. 20,000 shares @ $2.50
</TABLE>
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<PAGE> 25
CERTAIN TRANSACTIONS
In connection with the organization of the Company in April 1995, the
Company issued shares of its Common Stock at $.001 per share to the following
persons:
<TABLE>
<S> <C>
Dave Olsen................................................................. 320,000
Wil F. Zarecor............................................................. 235,000
Robert D. Widergren........................................................ 230,000
John L. Douglas............................................................ 100,000
Glenn Crepps............................................................... 100,000
E. T. Kalinoski............................................................ 100,000
Ed Martin.................................................................. 61,000
Patrick Kalinoski.......................................................... 60,000
Michael G. Widergren....................................................... 50,000
John McCracken............................................................. 30,000
Charles Gerber............................................................. 25,000
Benjamin T. Maltby......................................................... 20,000
Landis McHaffey............................................................ 5,000
</TABLE>
On June 1, 1995 the Company loaned $89,000 to E. T. Kalinoski, a founder
and director of the Company. Such loan, which was repayable January 12, 1997,
was forgiven in May 1996 and Mr. Kalinoski recognized $89,000 in compensation
income as a result of such forgiveness, In addition, Mr. Kalinoski has an
agreement with the Company under which he was paid $7,000 per month for
executive services (including serving as President from April 1995 to September
1995) until May 1996 and will receive a final payment of $30,000 one month after
closing of this offering.
On June 1, 1995 the Company loaned $10,000 to John Douglas, a shareholder
and director of the Company. This loan was forgiven on January 12, 1996 and Mr.
Douglas recognized $10,000 in compensation income as a result. On January 16,
1996 the Company sold Mr. Douglas 120,000 shares of its common stock for
$120,000 which was considered the fair market value on such date.
In August 1995 the Company sold 540,000 shares of its Common Stock to Call
Now, Inc. for $496,800 and an option to acquire 320,000 shares for $.92 per
share for a warrant price of $3,200. In September 1995 the number of shares
issued to Call Now, Inc. was adjusted to 550,000 due to additional shares issued
to other shareholders. William M. Allen, President of Call Now, Inc., was then
elected to the Board of Directors of the Company.
In January 1996 Call Now, Inc. lent the Company $50,000 for sixty (60) days
with interest at 8%. Such proceeds were used for working capital.
In March 1996 Call Now, Inc. purchased 320,000 shares of Common Stock for
$96,000 ($.30 per share), including the principal and accrued interest on the
foregoing loan with the balance in cash. The exercise price of the warrant
purchased in August 1995 was reduced to $.30 per share and was exercised in this
transaction.
In March 1996 Call Now, Inc. purchased 150,000 shares of the Company's
Preferred Stock for $3.00 per share. These shares will be redeemed at the
closing of this offering for $3.00 per share plus one share of the Company's
common stock per share.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, the
beneficial ownership of the Company's Common Stock by (i) the only persons who
own of record or are known to own, beneficially, more than 5% of the Company's
Common Stock; (ii) each director and executive officer of the Company; and (iii)
all directors and officers as a group adjusted to reflect the sale of shares
offered herein, but do not reflect
24
<PAGE> 26
any shares issuable on the exercise of Warrants, the Underwriters'
Over-Allotment Option and other outstanding options.
<TABLE>
<CAPTION>
NUMBER OF PERCENT BEFORE PERCENT AFTER
NAME AND ADDRESS SHARES OFFERING(1) OFFERING(2)
- -------------------------------------------------------- --------- -------------- -------------
<S> <C> <C> <C>
Call Now, Inc.(3)....................................... 870,000 23 % 6 %
P.O.Box 531399
Miami Shores, FL 33153
William M. Allen(4)..................................... 870,000 23 13.7
Abe Ostrovsky (5)....................................... 480,000 12.7 9.8
E. T. Kalinoski (6)..................................... 420,000 11.1 8.5
Wil Zarecor............................................. 235,000 6.2 4.8
Robert Widergren........................................ 230,000 6.1 4.7
John Douglas............................................ 220,000 5.8 4.5
Benjamin T. Maltby...................................... 20,000 * *
Officers and Directors as a group (5 persons)........... 2,245,000 59.5% 41.6%
</TABLE>
- ---------------
* Less than 1%
(1) Based on 3,772,000 shares outstanding.
(2) Based on 4,922,000 shares to be outstanding, including 150,000 shares to be
issued to Call Now, Inc. in connection with the redemption of the Company's
Preferred Stock.
(3) Does not include 150,000 shares of Preferred Stock which will be redeemed
for $450,000 and 150,000 shares of Common Stock upon closing of this
offering.
(4) Represents shares owned by Call Now, Inc. of which Mr. Allen is an
affiliate. Mr. Allen and his spouse will receive 377,643 of such shares as
a dividend from Call Now, Inc. See "The Distribution".
(5) Includes 180,000 shares which may be acquired pursuant to outstanding stock
options.
(6) Includes 320,000 shares owned by Dave Olson, a relative.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock with
$.001 par value. The holders of the Common Stock are entitled to one vote per
each share held and have the sole right and power to vote on all matters on
which a vote of stockholders is taken. Voting rights are non-cumulative. The
holders of shares of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available therefore
and to share pro-rata in any distribution to stockholders. The Company
anticipates that any earnings will be retained for use in its business for the
foreseeable future. Upon liquidation, dissolution, or winding up of the Company,
the holders of the Common Stock are entitled to receive the net assets held by
the Company after distributions to the holders of the Preferred Stock. The
holders of Common Stock do not have any preemptive right to subscribe for or
purchase any shares of any class of stock. The outstanding shares of Common
Stock and the shares offered hereby will not be subject to further call or
redemption and will be fully paid and non-assessable.
REDEEMABLE STOCK PURCHASE WARRANTS
Each Redeemable Stock Purchase Warrant will entitle the registered holder
to purchase one share of the Company's Common Stock for $6.00. The exercise
prices of the Warrants and the number of shares issuable upon exercise of such
Warrants will be subject to adjustment to protect against dilution in the event
of stock dividends, stock splits, combinations, subdivisions and
reclassification. Warrants may be exercised by payment of the exercise price in
United States funds by cash or certified or bank check. No fractional shares of
Common Stock will be issued in connection with the exercise of Warrants.
Warrants may not be exercised
25
<PAGE> 27
unless a registration statement pursuant to the Securities Act, as amended,
covering the underlying shares of Common Stock is current and such shares have
been qualified, or there is an exemption from qualification requirements under
the securities laws of the state of residence of the holder of the Warrants. In
the event that there is no such registration statement or exemption from
registration, the holder will not be able to exercise the Warrants.
The Company may redeem the Warrants at a price of $.25 per Warrant by
giving not less than 30 days prior written notice to the record holders if the
average closing bid price of the Common Stock as reported on NASDAQ or the last
trade price of the Common Stock (if the Common Stock is then traded on a
national securities exchange) equals or exceeds $12.00 for the 30 consecutive
trading days ending on the 10th day prior to the date on which the notice of
redemption is given. In the event the Company notifies record holders of its
intent to redeem any Warrants, the record holders may exercise same at any time
prior to the close of business on the day immediately preceding the date fixed
for redemption provided that there is a registration statement in effect or
there is an exemption from such registration. The Warrants may not be redeemed
during the first year from the effective date without the consent of Barron
Chase Securities, Inc.
Unless extended by the Company at its discretion, the Warrants will expire
at 3:00 p.m. Eastern time on , the third anniversary of the date of
this Prospectus. In the event a holder of Warrants fails to exercise the
Warrants prior to their expiration, the Warrants will expire and the holder
thereof will have no further rights with respect to the Warrants.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the warrant agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or bank draft payable to the Company) to the warrant agent for
the number of Warrants being exercised. The Warrant Holders do not have the
rights or privileges of holders of Common Stock.
No Warrant will be exercisable unless at the time of exercise the Company
has filed a current registration statement with the Commission covering the
shares of Common Stock issuable upon exercise of such Warrant and such shares
have been registered or qualified or deemed to be exempt from registration or
qualification under the securities laws of the state of residence of the holder
of such Warrant. The Company will use its best efforts to have all such shares
so registered or qualified on or before the exercise date and to maintain a
current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement. While it is the Company's
intention to do so, there can be no assurance that it will be able to do so.
DIVIDENDS
To date, the Company has not declared or paid any dividends on its Common
Stock. The payment by the Company of dividends, if any, is within the discretion
of the Board of Directors and will depend on the Company's earnings, if any, its
capital requirements and financial condition, as well as other relevant factors.
The Board of Directors does not intend to declare any dividends in the
foreseeable future, but instead intends to retain earnings for use in the
Company's business operations.
TRANSFER AGENT AND WARRANT AGENT
The transfer agent for the Common Stock and the Warrant Agent for the
Warrants is American Stock Transfer & Trust Company, New York, NY.
REPORTS TO STOCKHOLDERS
The Company intends to file an application with the Securities and Exchange
Commission to register its Common Stock under the provisions of Section 12(g) of
the Exchange Act and has agreed with the Underwriter that it will use its best
efforts to continue to maintain such registration. Such registration will
require the Company to comply with periodic reporting, proxy solicitation and
certain other requirements of the Exchange Act.
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<PAGE> 28
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law, unless the
corporation has elected to opt out of those provisions in its articles of
incorporation or bylaws. The Company has not elected to opt out of those
provisions. The Common Stock of the Company is subject to the "affiliated
transactions" and "control-share acquisition" provisions of the Florida Business
Corporation Act. These provisions require, subject to certain exceptions, that
an "affiliated transaction" be approved by the holders of two-thirds of the
voting shares other than those beneficially owned by an "interest shareholder"
or by a majority of disinterested directors and that voting rights be conferred
on "control shares" acquired in specified control share acquisitions only to the
extent conferred by resolution approved by the stockholders, excluding holders
of shares defined as "interested shares."
LIMITED LIABILITY AND INDEMNIFICATION
The Articles of Incorporation of the Company provides that, to the fullest
extent permitted by applicable law, as amended from time to time, the Company
will indemnify its officers, directors, employees and agents incurred in
connection with the Company's affairs against liabilities, damages, settlements
and expenses (including attorneys' fees). This indemnification includes the
right to advancement of expenses when allowed pursuant to applicable law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 4,922,000
shares of Common Stock outstanding, assuming no exercise of the Warrants or
other outstanding options and warrants. Subject to the contractual restrictions
described below, 3,092,000 of these shares, including all 1,000,000 of the
shares being offered hereby and the 2,092,000 shares of Common Stock being
registered by the Company concurrently with this offering will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by an "affiliate" of the Company (in general, a
person who has a control relationship with the Company), which shares will be
subject to the resale limitations, described below, of Rule 144 promulgated
under the Securities Act. The remaining 1,830,000 shares (the "Restricted
Shares") are deemed to be "restricted securities," as that term is defined under
Rule 144, in that such shares were issued and sold by the Company in private
transactions not involving a public offering and, as such, may only be sold
pursuant to an effective registration under the Securities Act, in compliance
with the exemption provisions of Rule 144 or pursuant to another exemption under
the Securities Act. Such "restricted" shares will become eligible for sale under
Rule 144 beginning in April 1997. See "Selling Stockholders" and "The
Distribution".
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate), who has
owned restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the common stock is quoted on NASDAQ, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned shares of Common Stock for at
least three years is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above.
Company stockholders beneficially owning 1,942,000 of the "restricted"
shares of Common Stock referred to above have agreed not to sell or otherwise
dispose of any of their shares for a period of 12 months from the date of this
Prospectus. without the written consent of the Representative. Holders of
1,242,000
27
<PAGE> 29
shares being registered concurrently with this offering have agreed not to sell
or otherwise dispose of any of their shares for a period of six months from the
date of this Prospectus and the holders of the balance of 700,000 of the Selling
Stockholders Shares have agreed not to sell or otherwise dispose of any of their
shares for a period of twelve months from the date of this Prospectus without
the written consent of the Representative. See "Underwriting", "Selling
Stockholders" and "The Distribution".
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Common Stock and the Warrants prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and the Warrants and could impair the Company's ability in the
future to raise additional capital through the sale of its equity securities.
28
<PAGE> 30
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for whom Barron Chase Securities, Inc. is acting as
Representative, have severally agreed to purchase from the Company an aggregate
of 1,000,000 Shares of Common Stock ("Shares") and 1,000,000 Warrants
(collectively the "Securities"). The number of Shares and Warrants which each
Underwriter has agreed to purchase is set forth opposite its name.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME SHARES WARRANTS
---------------------------------------------------------------- --------- ---------
<S> <C> <C>
Barron Chase Securities, Inc....................................
Total................................................. 1,000,000 1,000,000
======== ========
</TABLE>
The Securities are offered by the Underwriters subject to prior sale, when,
as and if delivered to and accepted by the Underwriters and subject to approval
of certain legal matters by counsel and certain other conditions. The
Underwriters are committed to purchase all Securities offered by this
Prospectus, if any are purchased.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities offered hereby to the public at the
offering price set forth on the cover page of this Prospectus. The
Representative has advised the Company that the Underwriters propose to offer
the Securities through members of the National Association of Securities
Dealers, Inc. ("NASD"), and may allow a concession, in their discretion, to
certain dealers who are members of the NASD and who agree to sell the Securities
in conformity with the NASD Rules of Fair Practice. Such concessions shall not
exceed the amount of the underwriting discount that the Underwriters are to
receive.
The Company has granted to the Underwriters options, exercisable for 45
days from the date of this Prospectus, to purchase up to an additional 150,000
Shares and an additional 150,000 Warrants at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus (the "Over-
Allotment Option"). The Underwriters may exercise this option solely to cover
over-allotments in the sale of the Securities being offered by this Prospectus.
Officers and directors of the Company may introduce the Representative to
persons to consider this offering and purchase Securities either through the
Representative, other Underwriters, or through participating dealers. In this
connection, officers and directors will not receive any commissions or any other
compensation.
The Company has agreed to pay the Underwriters a commission of ten percent
(10%) of the gross proceeds of the offering (the "Underwriting Discount"),
including the gross proceeds from the sale of the Over-Allotment Option, if
exercised. In addition, the Company has agreed to pay to the Representative a
non-accountable expenses allowance of three percent (3%) of the gross proceeds
of this Offering, including proceeds from any Securities purchased pursuant to
the Over-Allotment Option. The Representative's expenses in excess of the
non-accountable expense allowance will be paid by the Representative. To the
extent that the expenses of the Representative are less than the amount of the
non-accountable expense allowance received, such excess shall be deemed to be
additional compensation to the Representative.
The Company has agreed to engage the Representative as a financial advisor
for a period of three (3) years from the consummation of this Offering, at a fee
of $108,000, all of which is payable to the
29
<PAGE> 31
Representative on the closing date. Pursuant to the terms of a financial
advisory agreement, the Representative has agreed to provide, at the Company's
request, advice to the Company concerning potential merger and acquisition and
financing proposals, whether by public financing or otherwise.
Prior to the Offering, there has been no public market for the Shares of
Common Stock or Warrants of the Company. Consequently, the initial public
offering price for the Securities, and the terms of the Warrants (including the
exercise price of the Warrants), have been determined by negotiation between the
Company and the Representative. Among the factors considered in determining the
public offering price were the history of, and the prospects for, the Company's
business, an assessment of the Company's management, its past and present
operations, the Company's development and the general condition of the
securities market at the time of the offering. The initial public offering price
does not necessarily bear any relationship to the Company's assets, book value,
earnings or other established criterion of value. Such price is subject to
change as a result of market conditions and other factors, and no assurance can
be given that a public market for the Shares and/or Warrants will develop after
the close of the Public Offering, or if a public market in fact develops, that
such public market will be sustained, or that the Shares and/or Warrants can be
resold at any time at the offering or any other price. See "Risk Factors."
At the closing of the Offering, the Company will issue to the
Representative and/or persons related to the Representative, for nominal
consideration, Common Stock Representative Warrants and Warrant Representative
Warrants (the "Representative's Warrants") to purchase up to 100,000 Shares and
100,000 Warrants ("Underlying Warrants"). The Representative's Warrants will be
exercisable for a five year period commencing on the date of this Prospectus.
The initial exercise price of each Common Stock Representative Warrant shall be
$7.20 per share (120% of the public offering price). The initial exercise price
of each Warrant Representative Warrant shall be $.15 per Underlying Warrant
(120% of the public offering price). Each Underlying Warrant will be exercisable
for a three (3) year period commencing on the date of this Prospectus to
purchase one Share of Common Stock at an exercise price of $7.20 per share of
Common Stock. The Representative's Warrants will not be transferable for one
year from the date of this Prospectus, except (i) to officers of the
Representative, other Underwriters, and members of the selling group and
officers and partners thereof; (ii) by will; or (iii) by operation of law.
The Representative's Warrants contain provisions providing for appropriate
adjustment in the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, stock split or similar transaction. The
Representative's Warrants contain net issuance provisions permitting the holders
thereof to elect to exercise the Representative's Warrants in whole or in part
and instruct the Company to withhold from the securities issuable upon exercise,
a number of securities, valued at the current fair market value on the date of
exercise, to pay the exercise price. Such net exercise provision has the effect
of requiring the Company to issue shares of Common Stock without a corresponding
increase in capital. A net exercise of the Representative's Warrants will have
the same dilutive effect on the interests of the Company's shareholders as will
a cash exercise. The Representative's Warrants do not entitle the holders
thereof to any rights as a shareholder of the Company until such
Representative's Warrants are exercised and shares of Common Stock are purchased
thereunder.
The Representative's Warrants and the securities issuable thereunder may
not be offered for sale except in compliance with the applicable provisions of
the Securities Act of 1933. The Company has agreed that if it shall cause a
post-effective amendment, a new registration statement, or similar offering
document to be filed with the Commission, the holders shall have the right, for
seven years from the date of this Prospectus, to include in such registration
statement or offering statement the Representative's Warrants and/or the
securities issuable upon their exercise at no expense to the holders.
Additionally, the Company has agreed that, upon request by the holders of 50% or
more of the Representative's Warrants and Registrable Securities during the
period commencing one year from the date of this Prospectus and expiring four
years thereafter, the Company will, on no more than two separate occasions,
register the Representative's Warrants and/or any of the securities issuable
upon their exercise. The initial such registration will be at the Company's
expense, and the second such registration shall be at the expense of the holders
of the Representative's Warrants and Registrable Securities.
30
<PAGE> 32
The Company has also agreed that if the Company participates in any merger,
consolidation or other such transactions which the Representative has brought to
the Company during a period of five years after the closing of this offering,
and which is consummated after the closing of this offering (including an
acquisition of assets or stock for which it pays, in whole or in part, with
Shares or other securities), or if the Company retains the services of the
Representative in connection with any merger, consolidation or other such
transaction, then the Company will pay for the Representative's services an
amount equal to 5% of up to one million dollars of value paid or received in the
transaction, 4% of the next million dollar of such value, 3% of the next million
dollars of such value, 2% of the next million dollars of such value and 1% of
the next million dollars and of all such value above $4,000,000.
The Company has agreed to indemnify the Underwriters against any costs or
liabilities incurred by the Underwriters by reasons of misstatements or
omissions to state material facts in connection with the statements made in the
Registration Statement and the Prospectus. The Underwriters have in turn agreed
to indemnify the Company against any liabilities by reason of misstatements or
omissions to state material facts in connection with the statements made in the
Prospectus, based on information relating to the Underwriters and furnished in
writing by the Underwriters. To the extent that this section may purport to
provide exculpation from possible liabilities arising from the federal
securities laws, in the opinion of the Commission, such indemnification is
contrary to public policy and therefore unenforceable.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."
SELLING STOCKHOLDERS
The Selling Stockholders may from time to time sell or otherwise dispose of
a total of 1,942,000 shares of Common Stock on their own behalf at market prices
then prevailing or otherwise at prices then available. None of these shares are
being sold in the offering which is being underwritten by the Underwriters, and
the Company will not receive any of the proceeds from the sale of these Selling
Stockholders' Shares. The Company is paying substantially all of the expenses of
registration of the Selling Stockholders' Shares. Brokers' commissions, taxes
and other selling expenses are to be borne by the Selling Stockholders and are
not expected to exceed normal selling expenses. Sales of the Selling
Stockholders' Shares will be subject to the prospectus delivery requirements and
other requirements of the Securities Act. The following tables sets forth
certain information with respect to the Selling Stockholders.
31
<PAGE> 33
The following Selling Stockholders have agreed not to sell their shares for
six months from the date of this Prospectus without the written consent of the
Representative:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
NAME OF SELLING STOCKHOLDER OWNED PRIOR TO SALE OFFERING(1)
------------------------------------------------------ ------------------- -------------------
<S> <C> <C>
Call Now, Inc......................................... 870,000 -0-
Alpha Ventures LLP.................................... 60,000 -0-
Martin Goldman........................................ 40,000 -0-
Peter Markle.......................................... 30,000 -0-
Fred and Linda Chanowski.............................. 20,000 -0-
Richard L. Tuch....................................... 20,000 -0-
Frog Hollow Partners.................................. 20,000 -0-
Jay Goldman Partnership............................... 20,000 -0-
Allen Goodman......................................... 20,000 -0-
Guy A. Naggar......................................... 20,000 -0-
Anders Ulegard........................................ 20,000 -0-
William R. and Jean Thompson.......................... 12,000 -0-
Barney R. Stephens.................................... 10,000 -0-
John F. Special....................................... 10,000 -0-
Mark Levine and Sara Imershein........................ 10,000 -0-
Ira Margolies......................................... 10,000 -0-
Irene Fradet.......................................... 10,000 -0-
Stan Fridstan......................................... 10,000 -0-
Hanna Nelson Kelly.................................... 10,000 -0-
Laurence Weinstein.................................... 10,000 -0-
</TABLE>
The following Selling Stockholders have agreed not to sell their shares for
twelve months from the date of this Prospectus without the written consent of
the Representative:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
NAME OF SELLING STOCKHOLDER OWNED PRIOR TO SALE OFFERING(1)
------------------------------------------------------ ------------------- -------------------
<S> <C> <C>
Abe Ostrovsky......................................... 480,000 180,000
David A. and Carol Smith.............................. 75,000 -0-
Fidelity Investments.................................. 50,000 -0-
Joel Bernstein........................................ 50,000 -0-
Stanley A. Young...................................... 50,000 -0-
Barbara E. Young...................................... 50,000 -0-
Stanley A. Young Trust................................ 40,000 -0-
Adam Young............................................ 37,500 -0-
Jeffry L. Dupr........................................ 37,500 -0-
Eugene B. and Charlotte Davis......................... 10,000 -0-
Helayne Young......................................... 10,000 -0-
</TABLE>
- ---------------
(1) Assumes that all shares offered are sold by the Selling Stockholders.
THE DISTRIBUTION
BACKGROUND AND REASON FOR DISTRIBUTION
Call Now, Inc. acquired shares of the Company's common stock in 1995 and
1996. See "Certain Transactions". Call Now's Board of Directors declared a
dividend of 1 share of the Company's common stock for each 10 shares of Call Now
outstanding to Call Now's stockholders of record on March 12, 1996 (the "Record
Date"). As a result Call Now is distributing 724,370 shares of the Company's
common stock to Call
32
<PAGE> 34
Now's shareholders as of the Record Date. The Distribution will provide the
shareholders of Call Now, Inc. with a source of potential profit in addition to
their direct investment in Call Now.
METHOD OF DISTRIBUTION
Certificates representing shares of the Common Stock will be distributed by
mail to holders of Call Now, Inc. common stock of record as of the close of
business on the Record Date on or about six months after the date of this
Prospectus. Copies of the Prospectus will be mailed to all shareholders of
record of Call Now as of the Record Date. The Distribution of the Company's
shares are subject to applicable securities laws and regulations (commonly
called Blue Sky Laws and regulations) of the states of residence of the persons
receiving shares.
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon for the
Company by Joel Bernstein, 9701 Biscayne Boulevard, Miami, Florida. Mr.
Bernstein is the owner of 50,000 shares of the Company's Common Stock.
Certain legal matters will be passed upon for the Underwriters by David A.
Carter, PA., 355 West Palmetto Park Road, Boca Raton, Florida 33432.
EXPERTS
The financial statements of Cable-Sat Systems, Inc. appearing in this
Prospectus and Registration Statement have been audited by Grant Schwartz
Associates, independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
securities offered hereby. This Prospectus, filed as a part of the Registration
Statement, does not contain certain information set forth in or annexed as
exhibits to the Registration Statement, and reference is made to such exhibits
to the Registration Statement for the complete text thereof For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and to the exhibits filed as
part thereof, which may be inspected at the office of the Commission without
charge, or copies thereof may be obtained therefrom upon payment of a fee
prescribed by the Commission.
33
<PAGE> 35
GRANT-SCHWARTZ ASSOCIATES, CPA'S
40 SOUTHEAST 5TH STREET, SUITE 500
BOCA RATON, FL 33432
(407) 394-8977
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cable-Sat Systems, Inc.
We have audited the accompanying balance sheet of Cable-Sat Systems,
formerly Cable-Sat Compression, Inc. (a development stage company) as of March
31, 1996 and the related statements of income and cash flows for the six months
ended March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates by management, as well as evaluating the overall
financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cable-Sat Systems, formerly
Cable-Sat Compression, Inc. (a development stage company) as of March 31, 1996
and its income and cash flows for the six months then ended in conformity with
generally accepted accounting principles.
GRANT-SCHWARTZ ASSOCIATES, CPA's
Boca Raton, Florida
May 31, 1996
F-1
<PAGE> 36
CABLE-SAT SYSTEMS, INC.
FORMERLY CABLE-SAT COMPRESSION, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
---------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash............................................................... $ 380,523 $ 314,078
Notes receivable -- Related parties................................ 89,000 109,000
Receivables -- Other............................................... 4,462 2,241
---------- -----------
Total Current Assets....................................... 473,985 425,319
---------- -----------
Fixed Assets
Office Furniture................................................... 21,353 19,329
Computer Equipment................................................. 65,876 40,195
---------- -----------
87,229 59,524
Less: Accumulated Depreciation..................................... 15,308 2,700
---------- -----------
Net Fixed Assets........................................... 71,921 56,824
---------- -----------
Other Assets
Organization Costs (Net of $228 and $115 Amortization)............. 1,493 1,606
Security Deposits.................................................. 4,645 4,645
Deferred Registration Costs........................................ 21,520 -0-
---------- -----------
Total Other Assets......................................... 27,658 6,251
---------- -----------
Total Assets............................................... $ 573,564 $ 488,394
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable................................................... $ 2,011 $ 600
Due to Affiliate................................................... 1,520 -0-
Payroll Taxes Payable.............................................. 13,221 42,336
Accrued Expenses................................................... 26,721 -0-
---------- -----------
Total Current Liabilities.................................. $ 43,473 $ 42,936
---------- -----------
Shareholders' Equity
Preferred Stock, Par Value $.001, Authorized Issued and Outstanding
150,000 Shares.................................................. $ 450,000 -0-
Common Stock, Par Value $.001 Per Share; Authorized 50,000,000
Shares; Issued and Outstanding 3,000,000 and 2,200,000 Shares... 3,000 2,200
Paid in Capital.................................................... 1,003,223 698,023
Deficit Accumulated During Development Stage....................... (836,132) (254,765)
Stock Subscription Receivable...................................... (90,000) -0-
---------- -----------
Total Shareholders' Equity................................. 530,091 445,458
---------- -----------
Total Liabilities and Shareholders' Equity................. $ 573,564 $ 488,394
========= ==========
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 37
CABLE-SAT SYSTEMS, INC.
FORMERLY CABLE-SAT COMPRESSION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF INCOME AND EXPENSES
MARCH 31, 1996
<TABLE>
<CAPTION>
FROM
AUGUST 26, 1994
SIX MONTHS YEAR (DATE OF
ENDED ENDED INCEPTION TO)
MARCH 31, 1996 SEPTEMBER 30, 1995 MARCH 31, 1996
-------------- ------------------- ----------------
<S> <C> <C> <C>
Sales............................................ $ -0- $ -0- $ -0-
Expenses
Depreciation and Amortization.................. 12,721 2,815 15,536
Research and Development....................... 28,297 191,931 220,228
Rent Expense................................... 28,381 13,472 41,853
Operating Expenses............................. 517,768 48,336 566,104
---------- --------- ----------
Total Expenses......................... 587,167 256,554 843,721
---------- --------- ----------
Operating Loss................................... (587,167) (256,554) (843 721)
---------- --------- ----------
Other Income (Expense)
Interest Income................................ 5,800 1,789 7,589
---------- --------- ----------
Net Loss....................................... $ (581,367) $(254,765) $ (836,132)
========== ========= ==========
Net Loss Per Share............................... $ (.25) $ (.12) $ (.36)
========== ========= ==========
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 38
CABLE-SAT SYSTEMS, INC.
FORMERLY CABLE-SAT COMPRESSION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
MARCH 31, 1996
<TABLE>
<CAPTION>
FROM
AUGUST 26, 1994
SIX MONTHS YEAR (DATE OF
ENDED ENDED INCEPTION TO)
MARCH 31, 1996 SEPTEMBER 30, 1995 MARCH 31, 1996
-------------- ------------------ ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Loss from Operations............................ $ (581,367) $ (254,765) $ (836,132)
Depreciation and Amortization................... 12,721 2,815 15,536
(Increase) Decrease -- Receivables.............. 17,779 (111,241) (93,462)
Increase (Decrease) -- Payables................. 537 42,936 43,473
---------- ---------- -----------
Net Cash Used in Operating Activities... (550,330) (320,255) (870,585)
---------- ---------- -----------
Cash Flows from Investing Activities
Purchase of Property and Equipment.............. (27,705) (59,524) (87,229)
Deposits and Other Assets....................... -0- (6,366) (6,366)
---------- ---------- -----------
Net Cash Used in Investing Activities... (27,705) (65,890) (93,595)
---------- ---------- -----------
Cash Flows from Financing Activities
Sale of Preferred Stock......................... 450,000 -0- 450,000
Sale of Common Stock............................ 216,000 700,223 916,223
Increase -- Deferred Registration Costs......... (21,520) -0- (21,520)
---------- ---------- -----------
Net Cash Provided in Financing
Activities............................ 644,480 700,223 1,344,703
---------- ---------- -----------
Net Increase in Cash.................... 66,445 314,078 380,523
Cash -- Beginning............................... 314,078 -0- -0-
---------- ---------- -----------
Cash -- Ending.................................. $ 380,523 $ 314,078 $ 380,523
========== ========== ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 39
CABLE-SAT SYSTEMS, INC.
FORMERLY CABLE-SAT COMPRESSION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
MARCH 31, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK DURING
------------------ ------------------ PAID IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
------- -------- --------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of Common Stock..... -0- $ -0- 2,200,000 $2,200 $ 698,023 $ -0- $ 700,223
Loss -- Year Ended
September 30, 1995..... -0- -0- -0- -0- -0- (254,765) (254,765)
------- -------- --------- ------ ---------- ----------- ---------
BALANCE -- -0-
September 30, 1995..... -0- 2,200,000 2,200 698,023 (254,765) 445,458
Sale of Preferred
Stock.................. 150,000 $450,000 -0- -0- -0- -0- 450,000
-0-
Sale of Common Stock..... -0- 800,000 800 305,200 -0- 306,000
Stock Subscription
Receivable............. -0- -0- -0- -0- -0- -0- (90,000)
Loss for the Six-Months -0-
ended March 31, 1996... -0- -0- -0- -0- (581,367) (581,367)
------- -------- --------- ------ ---------- ----------- ---------
BALANCE -- March 31,
1996................... 150,000 $450,000 3,000,000 $3,000 $1,003,223 $(836,132) $(530,091)
======= ======== ========= ====== ========= ========= =========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 40
CABLE-SAT SYSTEMS, INC.
FORMERLY CABLE-SAT COMPRESSION, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 -- THE COMPANY
The Company was organized in the State of Florida on August 26, 1994. It is
engaged in the development of digital image coding and data compression
products.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT STAGE COMPANY
The Company's primary operations since inception have been devoted to
developing digital image coding and data compression products. No significant
operating revenue has yet been generated. As a result, the financial statements
are presented in accordance with Statement of Financial Accounting Standards
(SFAS) No. 7, "Accounting and Reporting by Development Stage Enterprises."
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers money market
funds to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
rates based upon the estimated useful lives of the assets.
ORGANIZATION COSTS
Organization costs have been capitalized and are being amortized over a
sixty month period.
DEFERRED REGISTRATION COSTS
Deferred registration costs, incurred in connection with a private
placement, will be deducted from the proceeds of such offering, if successful.
If the private placement is unsuccessful, the deferred costs will be charged to
operations.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
NET LOSS PER SHARE
Net loss per share has been computed based on the weighted average number
of shares of common stock. NOTE 3 -- RELATED PARTY TRANSACTIONS
NOTES PAYABLE -- RELATED PARTIES
A shareholder of the company has been advanced funds. These advances are
evidenced by a promissory note bearing interest at the rate of 6% per annum and
were payable on September 1, 1995. The Company has extended the time for
payment.
DUE TO AFFILIATES
A shareholder has advanced funds for certain costs relating to the private
placement memorandum.
F-6
<PAGE> 41
CABLE-SAT SYSTEMS, INC.
FORMERLY CABLE-SAT COMPRESSION, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- INCOME TAXES
The Company has available at March 31, 1996, unused operating loss carry
forwards which may provide future tax benefits expiring as follows:
<TABLE>
<CAPTION>
YEARS OF EXPIRATION
---------------------------------------------------------------
<S> <C>
2010...................................................... $254,765
2011...................................................... 581,367
--------
$836,132
========
</TABLE>
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
The company has entered into a three year operating lease for office space
with minimal annual rent of:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
<S> <C>
September 30, 1996.............................................. $20,038
September 30, 1997.............................................. 40,075
September 30, 1998.............................................. 26,715
-------
$86,828
=======
</TABLE>
Rent expense was $28,381 and $13,360 respectively.
NOTE 6 -- SUBSEQUENT EVENTS
SALES TO PRIVATE INVESTORS
During April 1996, the Company issued 350,000 shares of its common stock
for cash of $210,000 and 50,000 shares for services valued at $30,000.
PRIVATE PLACEMENT
During May 1996, the Company completed a private placement of 372,000
shares of its common stock. The Company received proceeds of $930,000.
PROPOSED PUBLIC OFFERING
The Company has entered into an agreement with an underwriter to sell
1,000,000 shares of its common stock and 1,000,000 redeemable common stock
purchase warrants. Under the terms of the agreement, the securities are being
offered on a firm commitment basis.
STOCK OPTION PLAN
On April 4, 1996, the Board of Directors adopted, and the shareholders of
the Company have approved, a stock option plan. The plan provides for the
granting of options on up to an aggregate of 780,000 shares of common stock. As
of May 29, 1996, the Company had granted options for 555,000 shares with a
weighted average exercise price of $2.04. As of May 29, 1995, 180,000 of such
granted options were vested and exercisable.
F-7
<PAGE> 42
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON, REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES BY, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OR ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 11
Dilution.............................. 12
Capitalization........................ 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Plan of
Operations.......................... 15
Recent Financing...................... 16
Business of the Company............... 17
Management............................ 22
Certain Transactions.................. 24
Principal Shareholders................ 24
Description of Securities............. 25
Shares Eligible for Future Sale....... 27
Underwriting.......................... 29
Selling Stockholders.................. 31
The Distribution...................... 32
Legal Matters......................... 33
Experts............................... 33
Available Information................. 33
Financial Statements.................. F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
CABLE-SAT SYSTEMS, INC.
1,000,000 SHARES
OF COMMON STOCK
1,000,000 REDEEMABLE WARRANTS
TO PURCHASE COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
(LOGO) BARRON CHASE SECURITIES
7700 W. CAMINO REAL
SUITE 200
BOCA RATON, FLORIDA 33433
407-750-6081
ATLANTA, GEORGIA
BEVERLY HILLS, CALIFORNIA
BOSTON, MASSACHUSETTS
CHICAGO, ILLINOIS
CLEARWATER, FLORIDA
DALLAS, TEXAS
DENVER, COLORADO
EAST BOCA RATON, FLORIDA
HOOPESTON, ILLINOIS
MIAMI, FLORIDA
MIDDLETOWN, NEW JERSEY
MINNEAPOLIS, MINNESOTA
OKLAHOMA CITY, OKLAHOMA
PHOENIX, ARIZONA
SARASOTA, FLORIDA
TAMPA, FLORIDA
TULSA, OKLAHOMA
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance
and distribution of the securities offered hereby.
<TABLE>
<S> <C>
Registration Fee........................................................ $ 7,112.12
Listing Fee -- Boston Stock Exchange.................................... 15,250.00
NASD Filing Fee*........................................................ 1,850.00
Printing Expenses*...................................................... 20,000.00
Legal Fees and Expenses*................................................ 35,000.00
Accounting Fees and Expenses*........................................... 15,000.00
Blue Sky Fees and Expenses*............................................. 30,000.00
Transfer/Warrant Agent Fees and Expenses*............................... 1,000.00
Misc.*.................................................................. 1,250.00
-----------
Total......................................................... $126,462.12
==========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is hereby made to the provisions of Section 607.0850 of the
Florida Business Corporation Act which provides for indemnification of directors
and officers under certain circumstances.
Reference is hereby made to Section of the Underwriting Agreement filed
herewith as Exhibit 1(a). Reference is hereby made to Article 4 of the Company's
Amended and Restated Articles of Incorporation filed herewith as Exhibit 3(a).
Reference is hereby made to Article IV of the Company's Bylaws which are filed
herewith as Exhibit 3(b).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following provides information concerning all sales of outstanding
stock which were not registered.
In connection with the organizational activities of the Company in April
1995, the following shares were issued at par value ($.001):
<TABLE>
<S> <C>
Dave Olsen................................................................. 320,000
Wil F. Zarecor............................................................. 235,000
Robert D. Widergren........................................................ 230,000
John L. Douglas............................................................ 100,000
Glenn Crepps............................................................... 100,000
E. T. Kalinoski............................................................ 100,000
Ed Martin.................................................................. 61,000
Patrick Kalinoski.......................................................... 60,000
Michael G. Widergren....................................................... 50,000
John McCracken............................................................. 30,000
Charles Gerber............................................................. 25,000
Benjamin T. Maltby......................................................... 20,000
Landis McHaffey............................................................ 5,000
</TABLE>
II-1
<PAGE> 44
In August 1995 the Company sold 540,000 shares of its Common Stock to Call
Now, Inc. for $496,800 and an option to acquire 320,000 shares for $.92 per
share for a warrant price of $3,200. In September 1995 the number of shares
issued to Call Now, Inc. was adjusted to 550,000 due to additional shares issued
to other shareholders. William M. Allen, President of Call Now, Inc., was then
elected to the Board of Directors of the Company.
In January 1996 Call Now, Inc. lent the Company $50,000 for sixty (60) days
with interest at 8%. Such proceeds were used for working capital.
In March 1996 Call Now, Inc. purchased 320,000 shares of Common Stock for
$96,000 ($.30 per share), including the principal and accrued interest on the
foregoing loan with the balance in cash. The exercise price of the warrant
purchased in August 1995 was reduced to $.30 per share and was exercised in this
transaction.
In March 1996 Call Now, Inc. purchased 150,000 shares of the Company's
Preferred Stock for $3.00 per share. These shares will be redeemed at the
closing of this offering for $3.00 per share plus one share of the Company's
common stock per share.
In May 1995, 494,000 shares were sold to four private investors for
proceeds of $320,063.
In February 1996, 300,000 shares were sold to Abe Ostrovsky for $90,000.
In April 1996, 350,000 shares were sold to 8 private investors for $210,000
and 50,000 shares were issued to Joel Bernstein for services valued at $30,000.
In May 1996, 372,000 shares were issued to 24 private investors for
$930,000.
None of the securities discussed above were registered under the Securities
Act of 1933, exemption being claimed in each case pursuant to Section 4(2)
thereof. All of such shares were taken for investment and not with a view
towards their distribution and contain a restrictive legend. Furthermore, stop
transfer orders have been lodged against such shares.
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
1(a) -- Underwriting Agreement
1(b) -- Agreement Among Underwriters
1(c) -- Selected Dealer Agreement
3(a) -- Amended and Restated Articles of Incorporation of the Registrant
3(b) -- Bylaws of the Registrant
4.1 -- Form of Warrant Certificate
4.2 -- Form of Common Stock Certificate
5.1 -- Opinion of counsel*
10.1 -- Financial Advisory Agreement
10.2 -- Merger and Acquisition Agreement
10.3 -- Warrant Agreement*
10.4 -- Representative's Warrant Agreement
10.5 -- Incentive Stock Option Plan
10.5(a) -- Employment Agreement -- Ostrovsky Consulting, Inc.*
10.5(b) -- Employment Agreement -- Wil F. Zarecor*
10.5(c) -- Employment Agreement -- John L. Douglas*
10.5(d) -- Employment Agreement -- Glenn Crepps*
23 -- Consent of counsel is contained in Exhibit 5.1*
23.1 -- Independent Auditors Consent
24 -- Powers of Attorney -- See signature page
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
* To be filed by Amendment
II-2
<PAGE> 45
(b) Financial Statement Schedules
None
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denomination and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in San Jose, California on the 14th day
of June, 1996.
CABLE-SAT SYSTEMS, INC.
By: /s/ ABE OSTROVSKY
------------------------------------
Abe Ostrovsky
Chairman and Chief Executive Officer
SIGNATURES AND POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes and appoints
Abe Ostrovsky and Joel Bernstein, Esq., or either of them, as his
attorney-in-fact, with full power of substitution and resubstitution, to sign
and file on his behalf individually and in each such capacity stated below any
and all amendments and post-effective amendments to this Registration Statement,
as fully as such person could do in person, hereby verifying and confirming all
that said attorney-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------- --------------
<S> <C> <C>
/s/ ABE OSTROVSKY Chairman of the Board, Chief June 14, 1996
- --------------------------------------------- Executive Officer, Chief
Abe Ostrovsky Financial Officer
/s/ WIL F. ZARECOR President and Director June 14, 1996
- ---------------------------------------------
Wil F. Zarecor
/s/ WILLIAM M. ALLEN Director June 14, 1996
- ---------------------------------------------
William M. Allen
/s/ E. T. KALINOSKI Director June 14, 1996
- ---------------------------------------------
E. T. Kalinoski
/s/ JOHN DOUGLAS Director June 14, 1996
- ---------------------------------------------
John Douglas
/s/ BENJAMIN T. MALTBY Treasurer and Secretary (Chief June 14, 1996
- --------------------------------------------- Accounting Officer)
Benjamin T. Maltby
</TABLE>
II-4
<PAGE> 1
EXHIBIT 1(a)
CABLE-SAT SYSTEMS, INC.
1,000,000 SHARES OF COMMON STOCK AND
1,000,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
Boca Raton, Florida
_____________, 1996
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Gentlemen:
Cable-Sat Systems, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell in a public offering to be effected by such
Underwriters as named in Schedule A (the "Underwriters") to the Underwriting
Agreement (the "Agreement"), for whom Barron Chase Securities, Inc. is acting
as a representative (the "Representative"), pursuant to the terms of this
Agreement, on a "firm commitment" basis, 1,000,000 shares of Common Stock (the
"Shares") at $6.00 per Share and 1,000,000 Redeemable Common Stock Purchase
Warrants (the "Warrants") at $.125 per Warrant. The Shares and the Warrants
are collectively referred to as the "Securities". Each Warrant is exercisable
to purchase one (1) share of Common Stock (the "Common Stock") at $6.00 per
share at any time during the period between the Effective Date and three (3)
years from the Effective Date. The date upon which the Securities and Exchange
Commission ("Commission") shall declare the Registration Statement of the
Company effective shall be the
<PAGE> 2
"Effective Date". The Warrants are subject to redemption under certain
circumstances. In addition, the Company proposes to grant to the Underwriters
(or, at the option of the Representative, to the Representative, individually)
the option referred to in Section 2(b) to purchase all or any part of an
aggregate of 150,000 additional Shares and/or 150,000 additional Warrants (the
"Option Securities").
You have advised the Company that you and the other Underwriters
desire to purchase, severally, the Securities, and that you have been
authorized by the Underwriters to execute this Agreement on their behalf. The
Company confirms the agreements made by it with respect to the purchase of the
Securities by the several Underwriters on whose behalf you are signing this
Agreement, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with each of the
Underwriters as of the Effective Date (as defined above), the Closing Date (as
hereinafter defined) and the Option Closing Date (as hereinafter defined) that:
(a) A registration statement (File No. 33-________) on Form S-1
relating to the public offering of the Securities, including a preliminary form
of the prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Commission thereunder, and has been filed
with the Commission under the Act. The Company has prepared in the same manner
and proposes to file, prior to the Effective Date of such registration
statement, an additional amendment or amendments to such registration
statement, including a final form of Prospectus, copies of which shall be
delivered to you. "Preliminary Prospectus" shall mean each prospectus filed
pursuant to the Rules and Regulations under the Act prior to the Effective
Date. The registration statement (including all financial schedules and
exhibits) as amended at the time it becomes effective and the final prospectus
included therein are respectively referred to as the "Registration Statement"
and the "Prospectus", except that (i) if the prospectus first filed by the
Company pursuant to Rule 424(b) of the Rules and Regulations shall differ from
said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration
<PAGE> 3
statement and prior to the Option Closing Date (as hereinafter defined), the
terms "Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall include
the prospectus as so supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up
to the Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or Selected Dealers: (i) the Registration Statement and Prospectus
will in all respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make statements
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that the Company makes no representations,
warranties or agreement as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by the Underwriters specifically
for use in the preparation thereof. It is understood that the statements set
forth in the Prospectus with respect to stabilization, under the heading
"Underwriting" and regarding the identity of counsel to the Underwriters under
the heading "Legal Matters" constitute the only information furnished in
writing by the Underwriters for inclusion in the Prospectus.
(c) Each of the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own its properties and conduct its business
as described in the Prospectus and is duly qualified to do business as a
foreign corporation and is in good standing in all other jurisdictions in which
the nature of its business or the character or location of its properties
requires such qualification, except where failure to so qualify will not
materially affect the Company's business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the
Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; all of the issued and
3
<PAGE> 4
outstanding securities of the Company have been, or will be when issued as set
forth in the Prospectus, duly authorized, validly issued and fully paid and
non-assessable; the issuances and sales of all such securities complied in all
material respects with applicable Federal and state securities laws; the
holders thereof have no rights of rescission against the Company with respect
thereto, and are not subject to personal liability by reason of being such
holders; none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
securities of the Company have been granted or entered into by the Company; and
all of the securities of the Company, issued and to be issued as set forth in
the Registration Statement, conform to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and
paid for pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor
the offering or sale of the Securities as contemplated in this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any securities of the Company, except as
described in the Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Common Stock
issuable upon exercise of the Warrants have been reserved for issuance and when
issued in accordance with the terms of the Warrants and Warrant Agreement, will
be duly and validly authorized, validly issued, fully paid and non-assessable,
free of pre-emptive rights and no personal liability will attach to
4
<PAGE> 5
the ownership thereof. The Warrant exercise period may not be extended and the
Warrant exercise period may not be reduced by the Company, without the prior
written consent of the Representative. The Warrant Agreement has been duly
authorized and, when executed and delivered pursuant to this Agreement, will
have been duly executed and delivered and will constitute the valid and legally
binding obligation of the Company enforceable in accordance with its terms.
The Common Stock Representative Warrants, the Warrant Representative
Warrants, the Underlying Warrants, the shares of Common Stock issuable upon
exercise of the Common Stock Representative Warrants, and the shares of Common
Stock issuable upon exercise of the Underlying Warrants (all as defined in the
Representative's Warrant Agreement described in Section 12 herein), have been
duly authorized and, when issued, delivered and paid for, will be validly
issued, fully paid, non-assessable, free of pre-emptive rights and no personal
liability will attach to the ownership thereof, and will constitute valid and
legally binding obligations of the Company enforceable in accordance with their
terms and entitled to the benefits provided by the Representative's Warrant
Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and the
Representative's Warrant Agreement have been duly and validly authorized,
executed and delivered by the Company, and assuming due execution of this
Agreement by the other party hereto, constitute valid and binding obligations
of the Company enforceable against the Company in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally. The Company has full power and
lawful authority to authorize, issue and sell the Securities to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is
required in connection with such authorization, execution and delivery or with
the authorization, issue and sale of the Securities or the securities to be
issued pursuant to the Representative's Warrant Agreement, except such as may
be required under the Act or state securities laws, or as otherwise have been
obtained.
5
<PAGE> 6
(g) Except as described in the Prospectus, neither the Company nor
any subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement will not conflict with, or result in a breach of, or
constitute a material default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the property or assets of the
Company or each subsidiary or any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or each subsidiary is a party or by which the Company or each
subsidiary may be bound or to which any of the property or assets of the
Company or each subsidiary is subject, nor will such action result in any
material violation of the provisions of the articles of incorporation or
by-laws of the Company or each subsidiary, as amended, or any statute or any
order, rule or regulation applicable to the Company or subsidiary of any court
or of any regulatory authority or other governmental body having jurisdiction
over the Company or each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the
Company and each subsidiary have good and marketable title to all properties
and assets described in the Prospectus as owned by each of them, free and clear
of all liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to its business; all of the
material leases and subleases under which the Company or each subsidiary is the
lessor or sublessor of properties or assets or under which the Company or each
subsidiary holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, neither the Company nor each subsidiary is in default in any
material respect with respect to any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to rights
of the Company or each subsidiary as lessor, sublessor, lessee, or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or each subsidiary to continued possession
of the leased or subleased premises or assets under any such lease or sublease
except as described or referred to in the Prospectus; and the Company and each
subsidiary owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise
stated in the Prospectus, as
6
<PAGE> 7
proposed to be conducted as set forth in the Prospectus.
(i) Grant Schwartz Associates, who have given their reports on
certain financial statements filed and to be filed with the Commission as part
of the Registration Statement, and which are included in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements and schedules, together with related
notes, set forth in the Prospectus and the Registration Statement present
fairly the financial position and results of operations and changes in
financial position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and related notes and schedules have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved. The Company's internal
accounting controls and procedures are sufficient to cause the Company and each
subsidiary to prepare financial statements which comply in all material
respects with generally accepted accounting principles applied on a basis which
is consistent during the periods involved. During the preceding five (5) year
period, nothing has been brought to the attention of the Company's management
that would result in any reportable condition relating to the Company's
internal accounting procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus and to and including
the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) neither the Company nor any
subsidiary has incurred and will not have incurred any material liabilities or
obligations, direct or contingent, and has not entered into and will not have
entered into any material transactions other than in the ordinary course of
business and/or as contemplated in the Registration Statement and the
Prospectus; (ii) neither the Company nor any subsidiary has and will not have
paid or declared any dividends or have made any other distribution on its
capital stock; (iii) there has not been any change in the capital stock of, or
any incurrence of long-term debt by, the Company or any subsidiary; (iv)
neither the Company nor any subsidiary has issued any options, warrants or
7
<PAGE> 8
other rights to purchase the capital stock of the Company or any subsidiary;
and (v) there has not been and will not have been any material adverse change
in the business, financial condition or results of operations of the Company or
any subsidiary, or in the book value of the assets of the Company or any
subsidiary, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the Company
or any subsidiary, or any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might result in any material adverse
change in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and
each subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid all taxes shown as due thereon; and there is
no tax deficiency which has been or to the knowledge of the Company might be
asserted against the Company or any subsidiary that has not been provided for
in the financial statements.
(n) Except as set forth in the Prospectus, each of the Company and
each subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use
all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service mark registrations, copyrights,
and licenses necessary for the conduct of such business and has not received
any notice of conflict with the asserted rights of others in respect thereof.
To the best of the Company's knowledge, none of the activities or business of
the Company or any subsidiary are in violation of, or cause the Company or any
subsidiary to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or body of the United States or
of any state, county or locality, the violation of which would have a material
adverse impact upon
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<PAGE> 9
the condition (financial or otherwise), business, property, prospective results
of operations, or net worth of the Company and any subsidiary.
(o) Neither the Company nor any subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments or contributions required or
allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other
taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the several
Underwriters hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(r) Except as described in the Registration Statement and
Prospectus, no holders of Common Stock or of any other securities of the
Company have the right to include such Common Stock or other securities in the
Registration Statement and Prospectus.
(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor any subsidiary has any
material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed
in the Registration Statement and Prospectus, nor has it any equity interest in
any partnership, joint venture, association or other entity except as disclosed
in the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or
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<PAGE> 10
suspending the use of any Preliminary Prospectus with respect to the offer and
sale of the Securities and each Preliminary Prospectus, as of its date, has
conformed fully in all material respects with the requirements of the Act and
the Rules and Regulations and did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of
its officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 15 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriters against any losses, claims,
damages or liabilities, joint or several, which shall include, but not be
limited to, all costs to defend against any such claim, so long as such claim
arises out of agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or five percent (5%) or greater stockholder of the Company or
any subsidiary has any direct or indirect affiliation or association with any
member of the National Association of Securities Dealers, Inc. ("NASD"), except
as disclosed to the Representative in writing, and no beneficial owner of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member except as disclosed to the Representative in
writing. The Company will advise the Representative and the NASD if any five
percent (5%) or greater
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<PAGE> 11
shareholder of the Company or any subsidiary is or becomes an affiliate or
associated person of an NASD member participating in the distribution.
(z) The Company and each subsidiary is in compliance in all
material respects with all federal, state and local laws and regulations
respecting the employment of its employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. There are no
pending investigations involving the Company or any subsidiary by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company or any subsidiary
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or to the knowledge of the
Company, threatened against or involving the Company or any subsidiary or any
predecessor entity. No question concerning representation exists respecting
the employees of the Company or any subsidiary and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or any subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any
subsidiary, if any.
(aa) Neither the Company nor any subsidiary maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or arrangement
that is an "employee pension benefit plan", an "employee welfare benefit plan",
or a "multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Neither the Company nor any subsidiary
maintained or contributed to a defined benefit plan, as defined in Section
3(35) of ERISA.
(ab) Based upon written representations received from the officers
and directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of
the Company or any subsidiary have been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by or
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<PAGE> 12
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which either or them was a general
partner at or within two years before the time of such filing,
or any corporation or business association of which either of
them was an executive officer at or within two years before
the time of such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
Federal or State securities law or Federal Commodity
laws.
(4) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated of any
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<PAGE> 13
Federal or State authority barring, suspending or otherwise
limiting for more than sixty (60) days either of their right
to engage in any activity described in paragraph (3)(i) above,
or be associated with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in
a civil action or by the Securities and Exchange Commission to
have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any Federal Commodities Law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(ac) Based upon written representations received from the officers
and directors of the Company, each of the officers and directors of the Company
has reviewed the sections in the Prospectus relating to their biographical data
and equity ownership position in the Company, and all information contained
therein is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and upon
the basis of the representations, warranties and agreements herein contained,
the Company hereby agrees to issue and sell to the Underwriters an aggregate of
1,000,000 Shares at $5.40 per Share and 1,000,000 Warrants at $.1125 per
Warrant, (the public offering price less ten percent (10%)), at the place and
time hereinafter specified, in accordance with the number of Shares and/or
Warrants set forth opposite the names of the Underwriters in Schedule A
attached hereto (the "Securities") plus any additional Securities which such
Underwriters may become obligated to purchase pursuant to the provisions of
Section 9 hereof. The Securities shall consist of 1,000,000 Shares and
1,000,000 Warrants to be purchased from the Company, and the price at which the
Underwriters shall sell the Securities to the public shall be $6.00 per Share
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<PAGE> 14
and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take place
at the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite
200, Boca Raton, Florida 33433 (or at such other place as may be designated by
the Representative) at 10:00 a.m., Eastern Time, on such date after the
Registration Statement has become effective as the Representative shall
designate, but not later than ten (10) business days (holidays excepted)
following the first date that any of the Securities are released to you, such
time and date of payment and delivery for the Securities being herein called
the "Closing Date".
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriters (or,
at the option of the Representative, to the Representative, individually) to
purchase all or any part of an aggregate of an additional 150,000 Shares and
150,000 Warrants at the same price per Share and Warrant as the Underwriters
shall pay for the Securities being sold pursuant to the provisions of
subsection (a) of this Section 2 (such additional Securities being referred to
herein as the "Option Securities"). This option may be exercised within 45
days after the Effective Date of the Registration Statement upon notice by the
Underwriters to the Company advising as to the amount of Option Securities as
to which the option is being exercised, the names and denominations in which
the certificates for such Option Securities are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall
be determined by the Underwriters (or the Representative, individually) but
shall not be later than ten (10) full business days after the exercise of said
option, nor in any event prior to the Closing Date, and such time and date is
referred to herein as the "Option Closing Date". Delivery of the Option
Securities against payment therefor shall take place at the offices of the
Representative. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriters of the Securities referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Closing Date.
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<PAGE> 15
(c) The Company will make the certificates for the Securities to
be sold hereunder available to you for inspection at least two (2) full
business days prior to the Closing Date at the offices of the Representative,
and such certificates shall be registered in such names and denominations as
you may request. Time shall be of the essence and delivery at the time and
place specified in this Agreement is a further condition to the obligations of
the Company to each Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase prices by the several Underwriters, by certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company or
by wire transfer in New York Clearing House funds.
In addition, in the event the Underwriters (or the Representative
individually) exercises the option to purchase from the Company all or any
portion of the Option Securities pursuant to the provisions of subsection (b)
above, payment for such Securities shall be made payable in New York Clearing
House funds at the offices of the Representative, or by wire transfer in New
York Clearing House funds, at the time and date of delivery of such Securities
as required by the provisions of subsection (b) above, against receipt of the
certificates for such Securities by the Representative for the respective
accounts of the several Underwriters registered in such names and in such
denominations as the Representative may request.
It is understood that you, individually and not as Representative of
the several Underwriters, may (but shall not be obligated to) make any and all
payments required pursuant to this Section 2 on behalf of any Underwriters
whose check or checks shall not have been received by the Representative at the
time of delivery of the Securities to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder. It is also
understood that you individually, rather than all of the Underwriters, may (but
shall not be obligated to) purchase the Option Securities referred to in
subsection (b) of this Section 2, but only to cover overallotments.
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<PAGE> 16
It is understood that the several Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement is declared effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously been advised and furnished with a copy or to which you or your
counsel shall have objected in writing, acting reasonably, or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to
the later of (i) the completion by the Underwriters of the distribution of the
Securities as contemplated hereby; or (ii) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the
Company will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or Prospectus which
may be necessary or advisable in connection with the distribution of the
Securities and as mutually agreed by the Company and the Representative.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of the
receipt of any comments of the Commission, of the effectiveness of any post-
effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop order or
other order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting
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<PAGE> 17
thereof.
The Company has caused to be delivered to you copies of each
Preliminary and Final Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and Selected Dealers to use the Prospectus
in connection with the sale of the Securities for such period as in the opinion
of counsel to the Underwriters the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by the Underwriters or Selected
Dealers, of any event of which the Company has knowledge and which materially
affects the Company or the securities of the Company, or which in the opinion
of counsel for the Company or counsel for the Underwriters, should be set forth
in an amendment to the Registration Statement or a supplement to the
Prospectus, in order to make the statements therein not then misleading, in
light of the circumstances existing at the time the Prospectus is required to
be delivered to a purchaser of the Securities, or in case it shall be necessary
to amend or supplement the Prospectus to comply with law or with the Act and
the Rules and Regulations, the Company will notify you promptly and forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or
supplemented, will not contain any untrue statement of a material fact or omit
to state any material facts necessary in order to make the statements in the
Prospectus, in the light of the circumstances under which they are made, not
misleading. The preparation and furnishing of any such amendment or supplement
to the Registration Statement or amended Prospectus or supplement to be
attached to the Prospectus shall be without expense to the Underwriters.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will act in good faith and use its best efforts
and cooperate with you and your counsel to qualify to register the Securities
for sale under the securities or "blue sky"
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<PAGE> 18
laws of such jurisdictions as the Representative may designate and will make
such applications and furnish such information as may be required for that
purpose and to comply with such laws, provided the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or to
execute a general consent to service of process in any jurisdiction in any
action other than one arising out of the offering or sale of the Securities.
The Company will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect for
so long a period as the Underwriters may reasonably request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8(a) and 8(c) hereof, and either (i)
the out-of-pocket expenses of the Representative, not to exceed the $50,000
previously paid if the Representative elects to terminate the offering for any
reason; or (ii) the out-of-pocket expenses of the Representative if the Company
elects to terminate the offering for any reason. For the purposes of this
sub-paragraph, the Representative shall be deemed to have assumed such expenses
when they are billed or incurred, regardless of whether such expenses have been
paid. The Representative shall not be responsible for any expenses of the
Company or others, or for any charges or claims relative to the proposed public
offering if it is not consummated.
(d) The Company will deliver to you at or before the Closing Date
two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of each amendment or supplement
thereto. The Company will deliver to or upon the order of the several
Underwriters, from time to time until the Effective Date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission prior to the Effective Date of the Registration Statement as the
Underwriters may reasonably request. The Company will deliver to the
Underwriters on the Effective Date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from
time to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented as the several Underwriters may from time to time
reasonably request.
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<PAGE> 19
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Representative during the period ending five (5) years from the Effective
Date, (i) as soon as practicable after the end of each fiscal year, a balance
sheet of the Company and any of its subsidiaries as at the end of such fiscal
year, together with statements of income, surplus and cash flow of the Company
and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as they are available, a copy of all reports
(financial or other) mailed to security holders; (iii) as soon as they are
available, a copy of all non-confidential documents, including annual reports,
periodic reports and financial statements, furnished to or filed with the
Commission under the Act and the 1934 Act; (iv) copies of each press release,
news item and article with respect to the Company's affairs released by the
Company; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will make generally available to its stockholders
and to the registered holders of its Warrants and deliver to you as soon as it
is practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the
necessary action to become a reporting company under Section 12 of the 1934
Act, and the Company will make all filings required to, and will have obtained
approval for, the listing of the Shares and Warrants on The NASDAQ Small Cap
Market System, and the Boston or Pacific Stock Exchange, and will use its best
efforts to maintain such listing for at least seven (7) years from the date of
this Agreement.
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<PAGE> 20
(i) For such period as the Company's securities are registered
under the 1934 Act, the Company will hold an annual meeting of stockholders for
the election of Directors within 180 days after the end of each of the
Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years will provide the Company's stockholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the 1934 Act and shall be included in an annual report
pursuant to the requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption
"Use of Proceeds" in the Prospectus, and will file such reports with the
Commission with respect to the sale of the Securities and the application of
the proceeds therefrom as may be required by Sections 12, 13 and/or 15 of the
1934 Act and pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriters and the Company
may be reasonably necessary or advisable in connection with the distribution of
the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to
you the Representative's Warrant Agreement. The Representative's Warrant
Agreement and Warrant Certificates will be substantially in the form of the
Representative's Warrant Agreement filed as an Exhibit to the Registration
Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Representative's Warrants outstanding from time to time.
(n) All existing beneficial owners of the Company's securities
(including warrants, options and Common Stock of the Company) holding in excess
of 70,000 shares as the Effective Date
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<PAGE> 21
shall agree in writing, in a form satisfactory to the Representative, not to
sell, transfer or otherwise dispose of any of such securities (or underlying
securities) for a period of twelve (12) months form the Effective Date or any
longer period required by any state, without the prior written consent of the
Representative; provided however that such period shall be six (6) months with
respect to those stockholders who purchased shares pursuant to the Company's
private placement memorandum dated March 15, 1996, and twelve (12) months for
Stan Young and his affiliates (300,000 shares) however such shares are issued.
Call Now, Inc. shall agree in writing, as of the Effective Date, not
to distribute, sell, transfer or otherwise dispose of any such securities for a
period of six (6) months from the Effective Date or any longer period required
by any State, without the prior written consent of the Representative.
All sales of the Company's securities by executive officers and/or
directors of the Company shall be effected through the Representative for a
period of eighteen (18) months from the Effective Date; provided that such
requirement shall expire as to orders which have not been filled at market
prices within forty-eight (48) hours of entry (excluding weekends and market
holidays).
(o) The Company will obtain, on or before the Closing Date, key
person life insurance on each of the lives of Abraham Ostrovsky and John
Douglas in an amount of not less than $1,000,000 each, and will use its best
efforts to maintains such insurance for a period of at least five (5) years
from the Effective Date.
(p) At the Closing Date, the Company will engage the
Representative as a non-exclusive financial advisor to the Company for a period
of thirty-six (36) months commencing on the first day of the month following
the Company's receipt of the proceeds of this offering, at an aggregate fee of
$108,000, all of which shall be payable to the Representative on the Closing
Date. The financial advisory agreement will provide that the Representative
shall, at the Company's request, provide advice and consulting services to the
Company concerning potential merger and acquisition proposals and the obtaining
of short or long-term financing for the Company, whether by public financing or
otherwise.
(q) Prior to the Closing Date, the Company shall, at its own
expense, undertake to list the Company's securities in the
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<PAGE> 22
appropriate recognized securities manual or manuals published by Standard &
Poor's Corporation and such other manuals as the Representative may designate,
such listings to contain the information required by such manuals and the
Uniform Securities Act. The Company hereby agrees to use its best efforts to
maintain such listing for a period of not less than five (5) years. The
Company shall take such action as may be reasonably requested by the
Representative to obtain a secondary market trading exemption in such states as
may be reasonably requested by the Representative.
(r) During the one hundred eighty (180) day period commencing on
the Closing Date, the Company will not, without the prior written consent of
the Representative, grant options or warrants to purchase the Company's Common
Stock at a price less than the initial per share public offering price.
(s) Prior to the Closing Date, neither the Company nor any
subsidiary will issue, directly or indirectly, without your prior consent, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering of the Securities other than
routine customary advertising of the Company's products and services, and
except as required by any applicable law or the directives of any relevant
regulatory authority in any relevant jurisdiction.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the
financial statements to be included in any registration statement or similar
disclosure document to be filed by the Company hereunder, or any amendment or
supplement thereto. For a period of five (5) years from the Effective Date,
the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
quarterly report and the mailing of quarterly financial information to
stockholders.
(u) The Company shall retain American Stock Transfer & Trust
Company as the transfer agent for the securities of the Company, or such other
transfer agent as you may agree to in writing. In addition, the Company shall
direct such transfer agent to furnish the Representative with daily transfer
sheets as to each of the
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<PAGE> 23
Company's securities as prepared by the Company's transfer agent and copies of
lists of stockholders and warrantholders as reasonably requested by the
Underwriter, for a five (5) year period commencing from the Closing Date.
(v) The Company shall cause the Depository Trust Company, or such
other depository of the Company's securities, to deliver a "special security
position report" to the Representative on a daily and weekly basis at the
expense of the Company, for a five (5) year period from the Effective Date.
(w) Following the Effective Date, the Company shall, at its sole
cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Representative shall designate and the Company may
reasonably agree.
(x) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of five
(5) persons, two (2) of whom shall be independent and not otherwise affiliated
with the Company or associated with any of the Company's affiliates. The
Representative shall have the opportunity to invite an observer to attend Board
of Directors meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and deliver to
you a non-exclusive M/A Agreement with the Representative in a form
satisfactory to the Representative, providing:
(1) The Representative will be paid a finder's fee, of
from five percent (5%) of the first $1,000,000 ranging in $1,000,000
increments down to one percent (1%) of the excess, if any, over
$4,000,000 of the consideration involved in any transaction introduced
in writing by the Representative (including mergers, acquisitions,
joint ventures, and any other business for the Company introduced by
the Representative) consummated by the Company, as an "Introduced,
Consummated Transaction", by which the Representative introduced the
other party to the Company during a period ending five (5) years from
the date of the M/A Agreement; and
(2) That any such finder's fee due to the Representative
will be paid in cash or stock as mutually agreed at the
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closing of the particular Introduced, Consummated Transaction for
which the finder's fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Representative at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement or a new Registration Statement to become effective in
compliance with the Act and without any lapse of time between the effectiveness
of any such post-effective amendments and cause a copy of each Prospectus, as
then amended, to be delivered to each holder of record of a Warrant and to
furnish to each of the Underwriters and each dealer as many copies of each such
Prospectus as such Underwriter or such dealer may reasonably request. Such
post-effective amendments or new Registration Statements shall also register
the Representative's Warrants and all the securities underlying the
Representative's Warrants. The Company shall not call for redemption of any of
the Warrants unless a Registration Statement covering the securities underlying
the Warrants has been declared effective by the Commission and remains current
at least until the date fixed for redemption. In addition, the Warrants shall
not be redeemable during the first year after the Effective Date without the
written consent of the Representative.
(ab) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange or the American Stock Exchange,
the Company shall engage the Company's legal counsel to deliver to the
Representative a written opinion detailing those states in which the Shares and
Warrants of the Company may be traded in non-issuer transactions under the Blue
Sky laws of the fifty states ("Secondary Market Trading Opinion"). The initial
Secondary Market Trading Opinion shall be delivered to the Representative on
the Effective Date, and the Company shall continue to update such opinion and
deliver same to the Representative on a timely basis, but in any event at the
beginning of each fiscal quarter, for a five (5) year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company
will prepare, at its own expense, hard cover "bound
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<PAGE> 25
volumes" relating to the offering, and will distribute such volumes to the
individuals designated by the Representative or counsel to the Representative.
4. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters to purchase and pay for the Securities which they have
agreed to purchase hereunder from the Company are subject, as of the date
hereof and as of each Closing Date, to the continuing accuracy of, and
compliance with, the representations and warranties of the Company herein, to
the accuracy of statements of officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective
not later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at
such later time or on such later date as you may agree to in writing; (ii) at
or prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceeding for that purpose shall have been initiated or pending, or shall be
threatened, or to the knowledge of the Company, contemplated by the Commission;
(iii) no stop order suspending the effectiveness of the qualification or
registration of the Securities under the securities or "blue sky" laws of any
jurisdiction (whether or not a jurisdiction which you shall have specified)
shall be threatened or to the knowledge of the Company contemplated by the
authorities of any such jurisdiction or shall have been issued and in effect;
(iv) any request for additional information on the part of the Commission or
any such authorities shall have been complied with to the satisfaction of the
Commission and any such authorities, and to the satisfaction of counsel to the
Underwriters; and (v) after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Underwriters and the Underwriters did not
object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any subsidiary except as set forth in or
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<PAGE> 26
contemplated by the Registration Statement, (ii) there shall not have been any
material adverse change in the general affairs, business, properties, condition
(financial or otherwise), management, or results of operations of the Company
or any subsidiary, whether or not arising from transactions in the ordinary
course of business, in each case other than as set forth in or contemplated by
the Registration Statement or Prospectus; (iii) neither the Company nor any
subsidiary shall have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree, which is not set forth in the
Registration Statement and Prospectus; and (iv) the Registration Statement and
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and shall in all material respects conform to
the requirements thereof, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstance under which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any material
action, suit, proceeding, inquiry, arbitration or investigation against the
Company or any subsidiary, or any of the officers or directors of the Company
or any subsidiary, or any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might result in any material adverse
change in the condition (financial or other), business prospects, net worth, or
properties of the Company or any subsidiary.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the Closing
Date as if made at the Closing Date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with.
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<PAGE> 27
(e) At each Closing Date, you shall have received the opinion,
together with copies of such opinion for each of the other several
Underwriters, dated as of each Closing Date, from Joel Bernstein, Esq., counsel
for the Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own its properties and conduct its
business as described in the Registration Statement and Prospectus and
is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business
requires such qualification except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the
Company and each subsidiary as a whole;
(ii) the authorized capitalization of the Company is as set
forth under "Capitalization" in the Prospectus; all shares of the
Company's outstanding stock and other securities requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully paid and non-
assessable and conform to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock of the Company and
other securities have not been issued in violation of the preemptive
rights of any shareholder and the shareholders of the Company do not
have any preemptive rights or, to such counsel's knowledge, other
rights to subscribe for or to purchase securities of the Company, nor,
to such counsel's knowledge, are there any restrictions upon the
voting or transfer of any of the securities of the Company, except as
disclosed in the Prospectus; the Common Stock, the Shares, the
Warrants, and the securities contained in the Representative's Warrant
Agreement conform to the respective descriptions thereof contained in
the Prospectus; the Common Stock, the Shares, the Warrants, the shares
of Common Stock to be issued upon exercise of the Warrants and the
securities contained in the Representative's Warrant Agreement, have
been duly authorized and, when issued, delivered and paid for, will be
duly authorized, validly issued, fully paid, non-assessable, free of
pre-emptive rights
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<PAGE> 28
and no personal liability will attach to the ownership thereof; all
prior sales by the Company of the Company's securities have been made
in compliance with or under an exemption from registration under the
Act and applicable state securities laws and no shareholders of the
Company have any rescission rights against the Company with respect to
the Company's securities; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the Warrants and
the Representative Warrants, and to the best of such counsel's
knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this Agreement
gives rise to any registration rights or other rights, other than
those which have been waived or satisfied or described in the
Registration Statement;
(iii) this Agreement, the Representative's Warrant Agreement,
the Warrant Agreement, the Financial Advisory Agreement and the M/A
Agreement have been duly and validly authorized, executed and
delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by the Representative, are
the valid and legally binding obligations of the Company, enforceable
in accordance with their terms, except (a) as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which
effect creditors' rights generally; and (b) no opinion is expressed as
to the enforceability of the indemnity provisions or the contribution
provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding
securities of the Company, the Shares, the Common Stock and the
Warrants are in valid and proper legal form;
(v) to the best of such counsel's knowledge, except as set
forth in the Prospectus, there is not pending or, to the knowledge of
the Company, threatened, any material action, suit, proceeding,
inquiry, arbitration or investigation against the Company or any
subsidiary or any of the officers of directors of the Company or any
subsidiary, nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and adversely
affect the
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<PAGE> 29
condition (financial or otherwise), business prospects, net worth, or
properties of the Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement, the
Financial Advisory Agreement and the M/A Agreement, and the incurrence
of the obligations herein and therein set forth and the consummation
of the transactions herein or therein contemplated, will not result in
a violation of, or constitute a default under (a) the Articles of
Incorporation or By-Laws of the Company and each subsidiary; (b) to
the best of such counsel's knowledge, any material obligations,
agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any contract, indenture,
mortgage, loan agreement, lease, joint venture or other agreement or
instrument to which the Company or any subsidiary is a party or by
which it or any of its properties is bound; or (c) to the best of such
counsel's knowledge, any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality
or court, domestic or foreign;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or
delivery of the Securities by the Company, in connection with the
execution, delivery and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein, or
the issuance of the Representative's Warrants or the Securities
underlying the Representative's Warrants, other than registrations or
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<PAGE> 30
qualifications of the Securities under applicable state or foreign
securities or Blue Sky laws and registration under the Act.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law, upon opinions of
counsel satisfactory to you and counsel to the Underwriters. The opinion of
such counsel to the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Representative and
they are justified in relying thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or that the Prospectus
or any supplement thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make statements therein, in light of the circumstances under which
they are made, not misleading (except, in the case of both the Registration
Statement and any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which such counsel
need express no opinion).
(f) You and the several Underwriters shall have received on each
Closing Date a certificate dated as of each Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of the Company and such other
officers of the Company as the Underwriters may request, certifying that:
(i) No Order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
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<PAGE> 31
Securities in effect and no proceedings for such purpose are pending
or are, to their knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or, to
their knowledge, threatened against the Company or any subsidiary or
any officer or director of the Company or any subsidiary of a
character required to be disclosed in the Registration Statement which
is not disclosed therein; they do not know of any contracts which are
required to be summarized in the Prospectus which are not so
summarized; and they do not know of any material contracts required to
be filed as exhibits to the Registration Statement which are not so
filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any
amendment or supplement to either of the foregoing contains an untrue
statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they are made, not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company or
any subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the Registration
Statement and the Prospectus and except as so reflected or
contemplated since such date, there has not been any material
transaction entered into by the Company or any subsidiary;
(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects and the
Company has complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is
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<PAGE> 32
delinquent in the filing of any federal, state and municipal tax
return or the payment of any federal, state or municipal taxes; they
know of no proposed redetermination or re-assessment of taxes, adverse
to the Company or any subsidiary, and the Company and each subsidiary
has paid or provided by adequate reserves for all known tax
liabilities;
(vii) They know of no material obligation or liability of the
Company or any subsidiary, contingent or otherwise, not disclosed in
the Registration Statement and Prospectus;
(viii) This Agreement, the Representative's Warran
Agreement, the Warrant Agreement, the Financial Advisory Agreement and
the M/A Agreement, the consummation of the transactions therein
contemplated, and the fulfillment of the terms thereof, will not
result in a breach by the Company of any terms of, or constitute a
default under, its Articles of Incorporation or By-Laws, any
indenture, mortgage, lease, deed or trust, bank loan or credit
agreement or any other material agreement or undertaking of the
Company or any subsidiary including, by way of specification but not
by way of limitation, any agreement or instrument to which the Company
or any subsidiary is now a party or pursuant to which the Company or
any subsidiary has acquired any right and/or obligations by succession
or otherwise;
(ix) The financial statements and schedules filed with and as
part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity with
generally accepted principles of accounting applied on a consistent
basis throughout the periods involved. Since the respective dates of
such financial statements, there have been no material adverse change
in the condition or general affairs of the Company, financial or
otherwise, other than as referred to in the Prospectus;
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, neither the Company nor
any subsidiary has, prior to the Closing Date, either (i) issued any
securities or incurred any material liability or obligation, direct or
contingent, for borrowed money, or (ii) entered into any material
transaction
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<PAGE> 33
other than in the ordinary course of business. The Company has not
declared, paid or made any dividend or distribution of any kind on its
capital stock;
(xi) They have reviewed the sections in the Prospectus
relating to their biographical data and equity ownership position in
the Company, and all information contained therein is true and
accurate; and
(xii) Except as disclosed in the Prospectus, during the past
five years, they have not been:
(1) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which either or them was a general
partner at or within two years before the time of such filing,
or any corporation or business association of which either of
them was an executive officer at or within two years before
the time of such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company,
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<PAGE> 34
or engaging in or continuing any conduct or practice
in connection with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
Federal or State securities law or Federal Commodity
laws.
(4) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated of any Federal
or State authority barring, suspending or otherwise limiting
for more than sixty (60) days either of their right to engage
in any activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in
a civil action or by the Securities and Exchange Commission to
have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any Federal Commodities Law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriters shall have received from Grant Schwartz
Associates, independent auditors to the Company, certificates or letters, one
dated and delivered on the Effective Date and one dated and delivered on the
Closing Date, in form and substance satisfactory to the Underwriters, stating
that:
(i) they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
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<PAGE> 35
(ii) the financial statements and the schedules included
in the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form S-1;
(iii) on the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
shareholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their
attention as a result of the foregoing inquiries and procedures that
causes them to believe that:
(a) during the period from (and including) the
date of the financial statements in the Registration Statement
and the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, shareholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriters
may request advice, in each case as compared with amounts
shown in the balance sheet as of the date of the financial
statement in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or will occur;
(b) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to such specified date there was any material
decrease in revenues or in the total or per
35
<PAGE> 36
share amounts of income or loss before extraordinary items or
net income or loss, or any other material change in such other
items appearing in the Company's financial statements as to
which the Underwriters may request advice, in each case as
compared with the fiscal period ended as of the date of the
financial statement in the Prospectus, except in each case for
increases, changes or decreases which the Prospectus discloses
have occurred or will occur;
(c) the unaudited interim financial statements of
the Company appearing in the Registration Statement and the
Prospectus (if any) do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations or are not fairly presented
in conformity with generally accepted accounting principles
and practices on a basis substantially consistent with the
audited financial statements included in the Registration
Statements or the Prospectus.
(iv) they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
(v) they have not during the immediately preceding five
(5) year period brought to the attention of the Company's management
any reportable condition related to the Company's internal accounting
procedures, weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriters. Any changes, increases or decreases
in the items set forth in such letters
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<PAGE> 37
which, in the judgment of the several Underwriters, are materially adverse with
respect to the financial position or results of operations of the Company shall
be deemed to constitute a failure of the Company to comply with the conditions
of the obligations to the several Underwriters hereunder.
(h) Upon exercise of the option provided for in Section 2(b)
hereof, the obligation of the several Underwriters (or, at its option, the
Representative, individually) to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of counsel to the Underwriters.
(ii) At the Option Closing Date, there shall have been
delivered to you the signed opinion from Joel Bernstein, Esq., counsel
for the Company, dated as of the Option Closing Date, in form and
substance satisfactory to counsel to the Underwriters, which opinion
shall be substantially the same in scope and substance as the opinion
furnished to you at the Closing Date pursuant to Section 4(e) hereof,
except that such opinion, where appropriate, shall cover the Option
Securities.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Option Closing Date,
in form and substance satisfactory to counsel to the Underwriters,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from Grant Schwartz Associates, independent auditors to
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<PAGE> 38
the Company, dated the Option Closing Date and addressed to the
several Underwriters confirming the information in their letter
referred to in Section 4(g) hereof and stating that nothing has come
to their attention during the period from the ending date of their
review referred to in said letter to a date not more than five
business days prior to the Option Closing Date, which would require
any change in said letter if it were required to be dated the Option
Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be satisfactory in form and substance to the Underwriters, and
the Underwriters and counsel to the Underwriters shall have been
furnished with all such documents, certificates, and opinions as you
may request in connection with this transaction in order to evidence
the accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with any of
the covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD,
the effect of which would make it improper, at any time prior to the Closing
Date, for members of the NASD to execute transactions (as principal or agent)
in the Common Stock and no proceedings for the taking of such action shall have
been instituted or shall be pending, or, to the knowledge of the several
Underwriters or the Company, shall be contemplated by the Commission or the
NASD. The Company represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall advise the Representative of any NASD affiliations of any of its
officers, directors, or stockholders or their affiliates in accordance with
paragraph 1(y) of this Agreement.
(j) At the Effective Date, you shall have received from counsel to
the Company, dated as of the Effective Date, in form and substance satisfactory
to counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with paragraph 3(ab) of this Agreement.
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<PAGE> 39
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the several Underwriters, and such counsel shall be furnished with such
documents, certificates and opinions as they may reasonably request to enable
them to pass upon the matters referred to in this sub-paragraph.
(l) Prior to the Effective Date, the Representative shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Representative, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters under this Agreement may be canceled
at, or at any time prior to, the Closing Date and/or the Option Closing Date by
the Representative and/or the Underwriters notifying the Company of such
cancellation in writing or by telegram at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of the several
Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation
of the Company to sell and deliver the Securities is subject to the following
conditions:
(i) The Registration Statement shall have become effective
not later than 5:00 p.m., Eastern Time, on the date of this Agreement,
or on such later time or date as the Company and the Representative
may agree in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement
shall have been issued under the Act or any proceedings therefore
initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled
after the Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of the
option provided for in
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<PAGE> 40
Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds
harmless each Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such
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 statement or alleged untrue statement
of any material fact contained in (i) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by
the Company and filed in any state or other jurisdiction in order to qualify
any or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. Notwithstanding
the foregoing, the Company shall have no liability under this section if such
untrue statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons
alleging the liability upon which indemnification is being sought. This
indemnity will be in addition to any liability which the Company may otherwise
have.
40
<PAGE> 41
(b) Each Underwriter, severally, but not jointly, indemnifies and
holds harmless the Company, each of its directors, each nominee (if any) for
director named in the Prospectus, each of its officers who have signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which the Company or any such director, nominee, 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 statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, 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 necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statements or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you specifically for use in the preparation thereof.
Notwithstanding the foregoing, the Underwriters shall have no liability under
this section if such untrue statement or omission made in a Preliminary
Prospectus is cured in the Prospectus and the Prospectus is not delivered to
the person or persons alleging the liability upon which indemnification is
being sought through no fault of the Underwriter. This indemnity agreement
will be in addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party 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 Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying
41
<PAGE> 42
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, subject to the provisions herein stated, 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 Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that if the indemnified party is an Underwriter or a person who
controls such Underwriter within the meaning of the Act, the fees and expenses
of such counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party or (ii) the named parties to any such action (including any
impleaded parties) include both the Underwriter or such controlling person and
the indemnifying party and in the reasonable judgment of the Representative, it
is advisable for the Representative or such Underwriters or controlling persons
to be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
Underwriter or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
all such Underwriters and controlling persons, which firm shall be designated
in writing by you). No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such
indemnifying party.
7. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) each Underwriter makes
claim for indemnification pursuant to Section 6
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<PAGE> 43
hereof but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case, notwithstanding the fact that the express
provisions of Section 6 provide for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any Underwriter, then
the Company and each person who controls the Company, in the aggregate, and any
such Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either such case (after
contribution from others) in such proportions that all such Underwriters are
responsible in the aggregate for that portion of such losses, claims, damages
or liabilities represented by the percentage that the underwriting discount per
Share appearing on the cover page of the Prospectus bears to the public
offering price appearing thereon, and the Company shall be responsible for the
remaining portion, provided, however, that (a) if such allocation is not
permitted by applicable law then the relative fault of the Company and the
Underwriter and controlling persons, in the aggregate, in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the Company, or
the Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
controlling persons in the aggregate were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the first sentence of this Section; and
(b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of
Securities purchased by such Underwriter to the number of Securities purchased
43
<PAGE> 44
by all contributing Underwriters) of the portion of such losses, claims,
damages or liabilities for which the Underwriters are responsible. No person
ultimately determined to be guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not ultimately determined to be guilty of such fraudulent
misrepresentation. As used in this paragraph, the term "Underwriter" includes
any officer, director, or other person who controls the Underwriter within the
meaning of Section 15 of the Act, and the word "Company" includes any officer,
director, or person who controls the Company within the meaning of Section 15
of the Act. If the full amount of the contribution specified in this paragraph
is not permitted by law, then the Underwriter and each person who controls the
Underwriter shall be entitled to contribution from the Company, its officers,
directors and controlling persons to the full extent permitted by law. This
foregoing agreement shall in no way affect the contribution liabilities of any
persons having liability under Section 11 of the Act other than the Company and
the Underwriter. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in
light of all factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this Agreement
becomes effective or the sale of the Securities to the Underwriters is
consummated, the Company will pay all costs and expenses incident to the
performance of this Agreement by the Company including but not limited to the
fees and expenses of counsel to the Company and of the Company's accountants;
the costs and expenses incident to the preparation, printing, filing and
distribution under the Act of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented; the fee
of the National Association of Securities Dealers, Inc. ("NASD") in connection
with the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and
legal fees of counsel to the Representative who shall serve as Blue Sky counsel
to the Company in connection with the filing of applications to register the
Securities under the state securities or blue sky laws (which legal fees shall
be payable by the Company in the sum of $20,000, of which $10,000 has been
paid); the cost of
44
<PAGE> 45
printing and furnishing to the several Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selected Dealers Agreement, the Agreement Among Underwriters, Underwriters
Questionnaire, Underwriters Power of Attorney and the Blue Sky Memorandum; the
cost of printing the certificates evidencing the securities comprising the
Securities; the cost of preparing and delivering to the Underwriters and its
counsel bound volumes containing copies of all documents and appropriate
correspondence filed with or received from the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and all
closing documents; and the fees and disbursements of the transfer agent for the
Company's securities. The Company shall pay any and all taxes (including any
original issue, transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriters hereunder. The Company will also
pay all costs and expenses incident to the furnishing of any amended Prospectus
or of any supplement to be attached to the Prospectus. The Company shall also
engage the Company's counsel to provide the Representative with a written
Secondary Market Trading Opinion in accordance with paragraphs 3(ab) and 4(j)
of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Representative a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
the overallotment option is exercised, the Company shall pay to the
Representative at the Option Closing Date an additional amount equal to three
percent (3%) of the gross proceeds received upon exercise of the overallotment
option.
(c) Other than as disclosed in the Registration Statement, no person
is entitled either directly or indirectly to compensation from the Company,
from the Representative or from any other person for services as a finder in
connection with the proposed offering, and the Company agrees to indemnify and
hold harmless the Representative and the other Underwriters against any losses,
claims, damages or liabilities, joint or several which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees, to which the Representative or such
other Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or
45
<PAGE> 46
actions in respect thereof) arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. Substitution of Underwriters. If any of the Underwriters
shall for any reason not permitted hereunder cancel their obligations to
purchase the Securities hereunder, or shall fail to take up and pay for the
number of Securities set forth opposite their respective names in Schedule A
hereto upon tender of such Securities in accordance with the terms hereof, then:
(a) if the aggregate number of Securities which such Underwriter
or Underwriters agreed but failed to purchase does not exceed ten percent (10%)
of the total number of Securities, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Securities which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed
number of Securities with respect to which such default or defaults occurs is
more than ten percent (10%) of the total number of Securities, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the Securities which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If such remaining Underwriters
do not, at the Closing Date, take up and pay for the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the Securities shall be extended to the next business day to
allow the several Underwriters the privilege of substituting within twenty-four
hours (including non-business hours) another Underwriter or Underwriters
satisfactory to the Company. If no such Underwriter or Underwriters shall have
been substituted as aforesaid, within such twenty-four period, the time of
delivery of the Securities may, at the option of the Company, be again extended
to the next following business day, if necessary, to allow the Company the
privilege of finding within twenty-four hours (including non-business hours)
another Underwriter or Underwriters to purchase the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining
46
<PAGE> 47
Underwriters or substituted Underwriters to take up the Securities of the
defaulting Underwriter or Underwriters as provided in this Section, (i) the
Company or the Representative shall have the right to postpone the time of
delivery for a period of not more than seven (7) business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees promptly to file any amendments to the Registration Statement or
supplements to the Prospectus which may thereby be made necessary; and (ii) the
respective numbers of Securities to be purchased by the remaining Underwriters
or substituted Underwriters shall be taken at the basis of the underwriting
obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Securities agreed
to be purchased by the defaulting Underwriters or substitute another
Underwriter or Underwriters as aforesaid, and the Company shall not find or
shall not elect to seek another Underwriter or Underwriters for such Securities
as aforesaid, then this Agreement shall terminate.
If, following exercise of the option provided in Section 2(b) hereof,
any Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Securities at the Option Closing
Date, or shall fail to take up and pay for the number of Option Securities,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Securities in accordance with the terms hereof, then the
remaining Underwriters or substituted Underwriters may take up and pay for the
Option Securities of the defaulting Underwriters in the manner provided in
Section 9(b) hereof. If the remaining Underwriters or substituted Underwriters
shall not take up and pay for all Option Securities, the Underwriters shall be
entitled to purchase the number of Option Securities for which there is no
default or, at their election, the option shall terminate, the exercise thereof
shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any non-defaulting
Underwriter to the Company, provided that the provisions of this Section 9
shall not in any event affect the
47
<PAGE> 48
liability of any defaulting Underwriter to the Company arising out of such
default.
10. Effective Date. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the
effective date of the Registration Statement, or at such earlier time after the
effective date of the Registration Statement as you in your discretion shall
first commence the public offering by the Underwriters of any of the
Securities. The time of the public offering shall mean the time after the
effectiveness of the Registration Statement when the Securities are first
generally offered by you to the other Underwriters and Selected Dealers. This
Agreement may be terminated by you at any time before it becomes effective as
provided above, except that Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17 and 18
shall remain in effect notwithstanding such termination.
11. Termination. (a) This Agreement, except for Sections 3(c),
6, 7, 8, 13, 14, 15, 16, 17, and 18 hereof, may be terminated at any time prior
to the Closing Date, and the option referred to in Section 2(b) hereof, if
exercised, may be cancelled at any time prior to the Option Closing Date, by
you if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriters for the resale of the Securities agreed to
be purchased hereunder by reason of: (i) the Company having sustained a
material adverse loss, whether or not insured, by reason of fire, earthquake,
flood, accident or other calamity, or from any labor dispute or court or
government action, order or decree; (ii) trading in securities on the New York
Stock Exchange or the American Stock Exchange having been suspended or limited;
(iii) material governmental restrictions having been imposed on trading in
securities generally (not in force and effect on the date hereof); (iv) a
banking moratorium having been declared by Federal or New York or Florida state
authorities; (v) an outbreak of major international hostilities or other
national or international calamity having occurred; (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Representative to have a material adverse impact on the business, financial
condition or
48
<PAGE> 49
financial statements of the Company or the market for the securities offered
hereby; (vii) any material adverse change in the financial or securities
markets beyond normal market fluctuations having occurred since the date of
this Agreement; (viii) any material adverse change having occurred, since the
respective dates as of which information is given in the Registration Statement
and Prospectus, in the earnings, business prospects or general condition of the
Company, financial or otherwise, whether or not arising in the ordinary course
of business; (ix) a pending or threatened legal or governmental proceeding or
action relating generally to the Company's business, or a notification having
been received by the Company of the threat of any such proceeding or action,
which could, in the reasonable judgment of the Representative, materially
adversely affect the Company; (x) except as contemplated by the Prospectus, the
Company is merged or consolidated into or acquired by another company or group
or there exists a binding legal commitment for the foregoing or any other
material change of ownership or control occurs; or (xi) the Company shall not
have complied in all material respects with any term, condition or provisions
on their part to be performed, complied with or fulfilled (including but not
limited to those set forth in this Agreement) within the respective times
therein provided.
(b) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
12. Representative's Warrant Agreement. At the Closing Date, the
Company will issue to the Representative and/or persons related to the
Representative, for an aggregate purchase price of $10, and upon the terms and
conditions set forth in the form of Representative's Warrant Agreement annexed
as an exhibit to the Registration Statement, Representative Warrants to
purchase up to an aggregate of 100,000 Shares and 100,000 Warrants, in such
denominations as the Representative shall designate. In the event of conflict
in the terms of this Agreement and the Representative's Warrant Agreement, the
language of the form of Representative's Warrant Agreement shall control.
13. Representations, Warranties and Agreements to Survive
Delivery. The respective indemnities, agreements, representations, warranties
and other statements of the Company and its principal
49
<PAGE> 50
officers, where appropriate, and the Underwriters set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriters, the Company or any of
its officers or directors or any controlling person and will survive delivery
of and payment for the Securities and the termination of this Agreement.
14. Notice. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, will be mailed, delivered or
telegraphed and confirmed:
If to the Underwriters: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
If to the Company: Abraham Ostrovsky, Chairman
Cable-Sat Systems, Inc.
2105 Hamilton Avenue, Suite 140
San Jose, California 95125
Copy to: Joel Bernstein, Esq.
9701 Biscayne Blvd.
Miami, Florida 33138
15. Parties in Interest. This Agreement herein set forth is made
solely for the benefit of the several Underwriters, the Company and, to the
extent expressed, any person controlling the Company or of the Underwriters,
and directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of the Securities, as
such purchaser, from the several Underwriters. All of the obligations of the
Underwriters hereunder are several and not joint.
50
<PAGE> 51
16. Applicable Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed entirely within the State of Florida. The
parties agree that any action brought by any party against another party in
connection with any rights or obligations arising out of this Agreement shall
be instituted properly in a federal or state court of competent jurisdiction
with venue only in the Fifteenth Judicial Circuit Court in and for Palm Beach
County, Florida or the United States District Court for the Southern District
of Florida, West Palm Beach Division. A party to this Agreement named as a
Defendant in any action brought in connection with this Agreement in any court
outside of the above named designated county or district shall have the right
to have the venue of said action changed to the above designated county or
district or, if necessary, have the case dismissed, requiring the other party
to refile such action in an appropriate court in the above designated county or
federal district.
17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
18. Entire Agreement. This Agreement and the agreements referred
to within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
19. Representative as Underwriter. In the event the
Representative acts as the sole Underwriter ("Underwriter") in connection with
the underwriting of the securities being offered pursuant to the Registration
Statement, all references to the Representative in this Agreement shall be
replaced by reference to the "Underwriter", and (i) any consents required to be
obtained from the Representative shall be required to be obtained solely from
the Underwriter; (ii) all compensation to be received by the Representative
shall instead be received by the Underwriter; and (iii) the provisions of
section nine (9) of this Agreement shall not apply.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it
51
<PAGE> 52
will become a binding Agreement between the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
CABLE-SAT SYSTEMS, INC.
BY:
-------------------------------
Wil F. Zarecor, President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
BARRON CHASE SECURITIES, INC.
BY:
-------------------------------
Robert T. Kirk, President
For itself and as Representative
of the several Underwriters
52
<PAGE> 53
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
<TABLE>
<CAPTION>
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Barron Chase Securities, Inc. . . . . . . . . . . . . . . . . . . ---------
1,000,000
<CAPTION>
UNDERWRITER WARRANTS
- ----------- ---------
Barron Chase Securities, Inc. . . . . . . . . . . . . . . . . . . ---------
1,000,000
</TABLE>
53
<PAGE> 1
EXHIBIT 1(b)
CABLE-SAT SYSTEMS, INC.
1,000,000 Shares of Common Stock and
1,000,000 Common Stock Purchase Warrants
AGREEMENT AMONG UNDERWRITERS
Boca Raton, Florida
_____________, 1996
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Dear Sirs:
1. Underwriting Agreement. We understand that Cable-Sat Systems,
Inc. (the "Company"), proposes to enter into an underwriting agreement attached
hereto as Exhibit A (the "Underwriting Agreement") with Barron Chase
Securities, Inc. (the "Representative") and the other underwriters named in
Schedule A to the Underwriting Agreement (the "Underwriters"), acting severally
and not jointly, with respect to the purchase of an aggregate of 1,000,000
Shares of Common Stock (the "Shares") and 1,000,000 Warrants (the "Warrants").
The Shares and Warrants are hereinafter also referred to collectively as the
"Securities". The Securities and the terms under which they are to be offered
for sale by the several Underwriters are more particularly described in the
Registration Statement, Underwriting Agreement and Prospectus.
Unless the context indicates otherwise, the term Securities shall also
include an additional 150,000 Shares and an additional 150,000 Warrants (the
"Option Securities"), all or any part of which the Representative and/or the
Underwriters are entitled to purchase from the Company upon exercise of the
Representative's over-allotment option referred to in Section 2(b) of the
Underwriting Agreement.
This is to confirm that we agree to purchase, in accordance with the
terms hereof and of the Underwriting Agreement, the number of Securities set
forth opposite our name in Schedule A, plus such number of Securities, if any,
which we may become obligated to purchase pursuant to Section 2(b) of the
Underwriting Agreement and
1
<PAGE> 2
Section 4 hereof ("our Securities"). The ratio which the number of our
Securities bears to the total number of Securities purchased pursuant to the
Underwriting Agreement is herein called "our underwriting proportion".
2. Registration Statement and Prospectus. We have heretofore
received and examined a copy of the registration statement, as amended to the
date hereof, and the related prospectus in respect of the Securities, as filed
with the Securities and Exchange Commission. The registration statement as
amended at the time it becomes effective, including financial statements and
exhibits, is hereafter referred to as the "Registration Statement", and the
prospectus in the form first filed with the Securities and Exchange Commission
pursuant to its Rule 424(b) after the Registration Statement becomes effective
is referred to as the "Prospectus".
We confirm that the information furnished to you by us for use in the
Registration Statement and in the Prospectus is correct and is not misleading
insofar as it relates to us. We consent to being named as an Underwriter in
such Registration Statement and we are willing to accept our responsibilities
under the Securities Act of 1933 (the "Act"), as a result thereof. We confirm
that we have authorized you to advise the Company on our behalf (a) as to the
statements to be included in any Preliminary Prospectus and in the Prospectus
under the heading "Underwriting" insofar as they relate to us and (b) that
there is no other information about us required to be stated in the
Registration Statement or Prospectus. We further confirm that, upon request by
you as Representative, we have furnished a copy of any amended Preliminary
Prospectus to each person to whom we have furnished a copy of any previous
Prospectus, and we confirm that we have delivered, and we agree that we will
deliver, all preliminary and final Prospectuses required for compliance with
the provisions of Rule 15c2-8 under the Securities Exchange Act of 1934 (the
"1934 Act").
3. Authority of the Representative. We authorize you, acting as
Representative of the Underwriters, to execute and deliver on our behalf, the
Underwriting Agreement, and to agree to any variation of its terms (except as
to the purchase price and the number of our Securities) which, in your
judgment, is not a variation which materially and adversely affects our rights
and obligations. We also authorize you, in your discretion and on our behalf,
with approval of counsel for the Underwriters, to approve the Prospectus and to
approve of, or object to, any further
2
<PAGE> 3
amendments to the Registration Statement, or amendments or supplements to the
Prospectus. We further authorize you to exercise all the authority and
discretion vested in the Underwriters and in you by the provisions of the
Underwriting Agreement and to take all such action as you in your discretion
may believe desirable to carry out the provisions of the Underwriting Agreement
and of this Agreement including the extension of any date specified in the
Underwriting Agreement, the exercise of any right of cancellation or
termination and to determine all matters relating to the public advertisement
of the Securities; provided, however, that, except with the consent of
Underwriters who shall have agreed to purchase in the aggregate 50% or more of
the Securities, no extension of the time by which the Registration Statement is
to become effective as provided in the Underwriting Agreement shall be for a
period in excess of two business days. We authorize you to take such action as
in your discretion may be necessary or desirable to effect the sale and
distribution of the Securities, including, without limiting the generality of
the foregoing, the right to determine the terms of any proposed offering, the
concession to Selected Dealers (as hereinafter defined) and the reallowance, if
any, to other dealers and the right to make the judgments provided for in the
Underwriting Agreement.
4. Authority of Representative as to Defaulting Underwriters.
Until the termination of this Agreement, we authorize you to arrange for the
purchase by other persons, who may include you or any of the other
Underwriters, of any Securities not taken up by any defaulting Underwriter. In
the event that such arrangements are made, the respective amounts of the
Securities to be purchased by the non-defaulting Underwriters and by such other
person or persons, if any, shall be taken as the basis for all rights and
obligations hereunder; but this shall not in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
its default, nor shall any such default relieve any other Underwriter of any of
its obligations hereunder or under the Underwriting Agreement except as herein
or therein provided.
In the event of default by one or more Underwriters in respect of
their obligations (a) under the Underwriting Agreement to purchase the
Securities agreed to be purchased by them thereunder, (b) under this Agreement
to take up and pay for any Securities purchased or (c) to deliver any
Securities sold or over-allotted by you for the respective accounts of the
Underwriters pursuant to
3
<PAGE> 4
this Agreement, or to bear their respective share of expenses or liabilities
pursuant to this Agreement, and to the extent that arrangements shall not have
been made by you for any persons to assume the obligations of such defaulting
Underwriter or Underwriters, we agree to assume our proportionate share of the
obligations of each defaulting Underwriter (subject in the case of clause (a)
above to the limitations contained in the Underwriting Agreement) without
relieving any such defaulting Underwriter of its liability therefor.
5. Offering of Securities. We understand that you will notify us
when the public offering of the Securities is to be made and of the initial
public offering price. We hereby authorize you to fix the concession to
dealers and the reallowance to dealers and in your sole discretion after the
public offering to change the public offering price, the concession and the
reallowance. The offering price at any time in effect is hereinafter referred
to as the "public offering price". We agree that we will not offer any of the
Securities for sale at a price other than the public offering price or allow
any discount therefrom except as herein otherwise specifically provided.
We agree that public advertisement of the offering shall be made by
you on behalf of the Underwriters on such date as you shall determine. We have
not advertised the offering and will not do so until after such date. We
understand that any advertisement we may then make will be on our own
responsibility and at our own expense.
We authorize you to reserve and offer for sale to institutions and
other retail purchasers and to dealers (the "Selected Dealers") to be selected
by you (such dealers may include any Underwriter ) such of our Securities as
you in your sole discretion shall determine. Any such offering to Selected
Dealers may be made pursuant to a Selling Agreement, in the form attached
hereto as Exhibit B, or otherwise, as you may determine. The form of Selling
Agreement attached hereto as Exhibit B is satisfactory to us.
We authorize you to make purchases and sales of the Securities from or
to any Selected Dealers or Underwriters at the public offering price less all
or any part of the concession and, with your consent, any Underwriter may make
purchases or sales of the Securities from or to any Selected Dealer or
Underwriter at the public offering price less all or any of the concession.
4
<PAGE> 5
We understand that you will notify each Underwriter promptly upon the
release of the Securities for public offering as to the amount of Securities
reserved for sale to Selected Dealers and retail purchasers. Securities not so
reserved may be sold by each Underwriter for its own account, except that from
time to time you may, in your discretion, add to the Securities reserved for
sale to Selected Dealers and retail purchasers any Securities retained by an
Underwriter remaining unsold. We agree to notify you from time to time upon
request of the amount of our Securities retained by us remaining unsold. If
all the Securities reserved for offering to Selected Dealers and retail
purchasers are not promptly sold by you, any Underwriter may from time to time,
with your consent, obtain a release of all or any Securities of such
Underwriter then remaining unsold and Securities so released shall thereafter
be deemed not to have been reserved. Securities of any Underwriter so reserved
which remain unsold, or, if sold, have not been paid for at any time prior to
the termination of this Agreement may, in your discretion or upon the request
of such Underwriter, be delivered to such Underwriter for carrying purposes
only, but such Securities shall remain subject to redelivery to you upon demand
for disposition by you until this Agreement is terminated.
We agree that in connection with sales and offers to sell the
Securities, if any, made by us outside the United States or its territories or
possessions, (a) we will furnish to each person to whom any such offer or sale
is made such Prospectus, advertisement or other offering document containing
information relating to the Securities or the Company as may be required under
the laws of the jurisdiction in which such offer or sale is made and (b) we
will furnish to each person to whom any such offer is made a copy of the then
current Preliminary Prospectus and to each person to whom any such sale is made
a copy of the Prospectus referred to in the Underwriting Agreement (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto). Any Prospectus, advertisement or other offering document
(other than any such preliminary Prospectus or Prospectus) furnished by us to
any person in accordance with the preceding sentence and all such additional
offering material, if any, as we may furnish to any person (i) shall comply in
all respects with the laws of the jurisdiction in which it is so furnished,
(ii) shall be prepared and so furnished at our sole risk and expense, and (iii)
shall not contain information relating to the Securities or the Company which
is inconsistent in any respect with information contained in the then current
Preliminary Prospectus or in the Prospectus (as then amended or supplemented if
the Company shall
5
<PAGE> 6
have furnished any amendments or supplements thereto), as the case may be.
We recognize the importance of a broad distribution of the Securities
among bona fide investors and we agree to use our best efforts to obtain such
broad distribution and to that end, to the extent we deem practicable, to give
priority to small orders.
We agree that we will not sell to any account over which we exercised
discretionary authority any of the Securities which we have agreed to purchase
pursuant to the Underwriting Agreement.
6. Compensation to Representative. We authorize you to charge to
our account, as compensation for your services as Representative in connection
with this offering, including the purchase from the Company of the Securities
and the management of the offering, an amount equal to $_____ per Share and/or
$________ per Warrant in respect to each of our Securities.
7. Payment and Delivery. At or about 9:00 a.m., Eastern Time, on
the Closing Dates (including the first Closing Date and any Option Closing
Date, as defined in the Underwriting Agreement), we agree to deliver to you at
your office a certified or official bank check payable in New York Clearing
House funds to your order in an amount equal to the initial public offering
price, less the concession to the Selected Dealers in respect of that portion
of our Securities which has been retained by or released to us for direct sales.
In the event that our funds are not received by you when required, you
are authorized, in your discretion, but shall not be obligated, to make payment
for our account pursuant to the Underwriting Agreement by advancing your own
funds. Any such payment by you shall not relieve us from any of our
obligations hereunder or under the Underwriting Agreement.
We authorize you to hold and deliver against payment any of our
Securities which have been sold or reserved for sale to Selected Dealers or
retail purchasers. Any of our Securities not sold or reserved by you as
aforesaid, will be available for delivery to us at your office as soon as
practicable after such Securities have been delivered to you.
Upon the termination of this Agreement, or prior thereto at your
discretion, you will deliver to us any of our Securities
6
<PAGE> 7
reserved by you for sale to Selected Dealers or retail purchasers but not sold
and paid for against payment by us of an amount equal to the initial public
offering price of such Securities, less the concession to the Selected Dealers
in respect thereof.
8. Authority to Borrow. We authorize you to arrange loans for our
account and to execute and deliver any notes or other instruments in connection
therewith, and to pledge as security therefor all or any part of our
Securities, as you may deem necessary or advisable to carry out the purchase,
carrying and distribution of the Securities, and to advance your own funds,
charging current interest rates.
9. Over-allotment; Stabilization. We authorize you, for the
account of each Underwriter, prior to the termination of this Agreement, and
for such longer period as may be necessary to cover any short position incurred
for the accounts of the several Underwriters pursuant to this Agreement, (a) to
over-allot in arranging for sales of Securities to Selected Dealers and others
and, if necessary, to purchase Securities (whether pursuant to exercise of the
option set forth in Section 2(b) of the Underwriting Agreement or otherwise) at
such prices as you may determine for the purpose of covering such
over-allotments, and (b) for the purpose of stabilizing the market in the
Securities, to make purchases and sales of Securities on the open market or
otherwise, for long or short account, on a when-issued basis or otherwise, at
such prices, in such amounts and in such manner as you may determine; provided,
however, that at no time shall our net commitment, either for long or short
account, under this Section exceed 15% of the amount of our Securities. Such
purchases, sales and over-allotments shall be made for the respective accounts
of the several Underwriters as nearly as practicable to their respective
underwriting proportions. We agree to take up on demand at cost any Securities
so purchased for our account and deliver on demand any Securities so sold or
over-allotted for our account. We authorize you to sell for the account of the
Underwriters any Securities purchased pursuant to this Section, upon such terms
as you may deem advisable, and any Underwriter, including yourselves, may
purchase such Securities. You are authorized to charge the respective accounts
of the Underwriters with broker's commissions or dealer's mark-up on purchases
and sales effected by you.
If pursuant to the provisions of the preceding paragraph and prior to
the termination of this Agreement (or prior to such earlier date as you may
have determined) you purchase or contract
7
<PAGE> 8
to purchase for the account of any Underwriter in the open market or otherwise
any Securities which were retained by, or released to, us for direct sale, or
any Securities which may have been issued in exchange for such Securities, we
authorize you either to charge our account with an amount equal to the
concession to Selected Dealers with respect thereto, which amount shall be
credited against the cost of such Securities, or to require us to repurchase
such Securities at a price equal to the total cost of such purchase, including
transfer taxes and broker's commissions or dealer's mark-up, if any. In lieu
of such action you may, in your discretion, sell for our account the Securities
so purchased and debit or credit our account for the loss or profit resulting
from such sale.
You will notify us promptly if and when you engage in any
stabilization transaction pursuant to this Section or otherwise and will notify
us of the date of termination of stabilization. We agree to file with you any
reports required of us including "Not as Manager" reports pursuant to Rule
17a-2 under the 1934 Act not later than five business days following the date
upon which stabilization was terminated, and we authorize you to file on our
behalf with the Securities and Exchange Commission any reports required by such
Rule.
10. Limitation on Transactions by Underwriters. Except as
permitted by you, we will not during the term of this Agreement bid for,
purchase, sell or attempt to induce others to purchase or sell, directly or
indirectly, any Securities other than (i) as provided in the Underwriting
Agreement and in this agreement, (ii) purchases from or sales to dealers of the
Securities at the public offering price less all or any part of the reallowance
to dealers or (iii) purchases or sales by us of any Securities as broker or
unsolicited orders for the account of others.
We represent that we have not participated in any transaction
prohibited by the preceding paragraph and that we have at all times complied
with the provisions of Rule 10b-6 and Rule 10b-6A under the 1934 Act applicable
to this offering.
We may, with your prior consent, make purchases of the Securities from
and sales to other Underwriters at the public offering price, less all or any
part of the concession to dealers.
11. Allocation and Payment of Expenses. We understand that all
expenses of a general nature incurred by you, as Representative, in connection
with the purchase, carrying,
8
<PAGE> 9
marketing and sale of the Securities shall be borne by the Underwriters in
accordance with their respective share of the underwriting obligations. We
authorize you to charge our account with our share, based on our underwriting
obligation, of the aforesaid expenses including all transfer taxes paid of our
behalf on sales or transfers made for our account.
As promptly as possible after the termination of this Agreement, the
accounts arising pursuant hereto shall be settled and paid. Your ascertainment
of all expenses and the apportionment thereof shall be conclusive.
Notwithstanding any settlement or settlements hereunder, we will remain liable
for our share of all expenses and liabilities which may be incurred by or the
accounts of the Underwriters, including any expenses and liabilities referred
to in Sections 13 and 14 hereof, which shall be determined as provided in this
Section.
12. Termination. Unless this Agreement or any provision hereof is
earlier terminated by you and except for provisions herein that contemplate
obligations surviving the termination hereof as noted in the next paragraph,
this Agreement will terminate at the close of business on the 45th day after
the date hereof, but in your discretion may be extended by you for a further
period not exceeding 30 days with the consent of the Underwriters who have
agreed to purchase in the aggregate 50% or more of the Securities. No
termination or suspension pursuant to this Section shall affect your authority
to cover any short position under this Agreement.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder shall cease, except (i) the mutual obligations to settle
accounts under Section 11, (ii) our obligation to pay any transfer taxes which
may be assessed and paid on account of any sales thereunder for our account,
(iii) our obligation with respect to purchases which may be made by you from
time to time thereafter to cover any short position incurred under this
Agreement, (iv) the provisions of Sections 13 and 14 and (v) the obligations of
any defaulting Underwriter, all of which shall continue until fully discharged.
13. Liability of Representative and Underwriters. Neither as
Representative nor individually shall you be under any liability whatsoever to
any other Underwriter nor shall you be under any liability in respect of any
matters connected herewith or action taken by you pursuant hereto, except for
the obligations expressly
9
<PAGE> 10
assumed by you in this Agreement. You shall be under no liability for or in
respect of the value for the Securities or the validity of the form thereof,
the Registration Statement, the Prospectus, or agreements or other instruments
executed by the Company or others; or for or in respect of the delivery of the
Securities; or for the performance by the Company or others of any agreement on
its or their part.
Nothing herein contained shall constitute the several Underwriters an
association, or partners with us or with each other, or, except as herein
expressly provided, render any Underwriter liable for the obligation of any
other Underwriter. The rights, obligations and liabilities of each of the
Underwriters are several, in accordance with their respective obligations, and
not joint. Notwithstanding any settlement of accounts under this Agreement, we
agree to pay our underwriting proportion of the amount of any claim demand or
liability which may be asserted against and discharged by the Underwriters or
any of them, based on the claim that the Underwriters constitute an
association, unincorporated business or other entity, and also to pay our
underwriting proportion of expenses approved by you incurred by the
Underwriters, or any of them, in contesting any such claims, demands or
liabilities. If the Underwriters shall be deemed to constitute a partnership
for income tax purposes, it is the intent of each Underwriter to be excluded
from the application of Subchapter K, Chapter 1, Subtitle A of the Internal
Revenue Code of 1954, as amended. Each Underwriter elects to be so excluded
and agrees not to take any position inconsistent with such election. Each
Underwriter authorizes you, in your discretion, to execute and file on behalf
of the Underwriters such evidence of election as may be required by the
Internal Revenue Service.
14. Indemnification and Future Claims.
(a) We agree to indemnify and hold harmless you and each other
Underwriter, and each person, if any, who controls you and such other
Underwriter within the meaning of Section 15 of the Securities Act of 1933, and
to reimburse their expenses, to the extent and upon the terms that we agree to
indemnify and hold harmless the Company and to reimburse expenses as set forth
in the Underwriting Agreement. Our indemnity agreement set forth in this
Section remain in full force and effect regardless of any investigation made by
or on behalf of such other Underwriter or controlling person and shall survive
the delivery of and payment for the Securities and the termination of this
Agreement.
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<PAGE> 11
(b) In the event that at any time any claim or claims shall be
asserted against you, as Representative, or otherwise involving the
Underwriters generally, relating to the Registration Statement or any
Preliminary Prospectus or the Prospectus, as such may be from time to time
amended or supplemented, the public offering of the Securities or any of the
transactions contemplated by this Agreement, we authorize you to take such
other action as you shall deem necessary or desirable under the circumstances,
including settlement of any such claim or claims if such course of action shall
be recommended by counsel retained by you. We agree to pay to you on request,
our underwriting proportion of all expenses incurred by you (including, but not
limited to, disbursements and fees of counsel so retained) in investigating and
defending against such claim or claims and our underwriting proportion of any
liability incurred by you in respect of such claim or claims, whether such
liability shall be the result of a judgment or as a result of any such
settlement.
15. Title to Securities. The Securities purchased by, or on
behalf of, the respective Underwriters shall remain the property of such
Underwriters until sold, and title to any such Securities shall not in any
event pass to the Representative by virtue of any of the provisions of this
Agreement.
16. Blue Sky Matters. It is understood that you assume no
responsibility with respect to the right of any Underwriter or other person to
offer or to sell Securities in any jurisdiction, not withstanding any
information which you may furnish as to the jurisdictions under the securities
laws of which it is believed the Securities may be sold.
17. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Florida.
18. Capital Requirements. We confirm that the incurrence by us of
our obligation under this Agreement and under the Underwriting Agreement will
not place us in violation of the net capital requirements of Rule 15c3-1 under
the 1934 Act or of any applicable rules relating to capital requirements of any
securities exchange to which we are subject.
19. Miscellaneous. Any notice from you to us shall be deemed to
have been duly given if telefaxed, telephoned or telegraphed, and confirmed by
mail to us at the address set forth in the Underwriters Questionnaire furnished
by us to you. Any notice from
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<PAGE> 12
us to you shall be deemed to have been duly given if telefaxed or telegraphed,
and confirmed by mail to you at 7700 West Camino Real, Suite 200, Boca Raton,
Florida 33433.
We understand that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"). We hereby confirm that we
are actually engaged in the investment banking or securities business and are
either (i) a member in good standing of the NASD or (ii) a dealer with its
principal place of business located outside the United States, its territories
and its possession and not registered as a broker or dealer under the 1934 Act
who agrees not to make any sales within the United States, its territories or
its possessions or to persons who are nationals thereof or residents therein
(except that we may participate in sales to Selected Dealers and others under
Section 5 of this Agreement). We hereby agree that if we are members of the
NASD, we will comply with all of the provisions of Article III of the Rules of
Fair Practice of the NASD. If we are a foreign dealer, we agree to comply with
Section 24 of Article III of the Rules of Fair Practice of the NASD. If we are
a foreign dealer and not a member of the NASD, we agree to comply with the
NASD's interpretation with respect to free-riding and withholding, as though we
were a member of the NASD, with the provisions of Sections 8 and 36 of Article
III of the Rules of Fair Practice, and to comply with Section 25 of Article III
thereof as that Section applies to a non-member foreign dealer. In connection
with sales and offers to sell Securities made by us outside the United States,
its territories and possessions (i) we will either furnish to each person to
whom any such sale or offer is made a copy of the then current Preliminary
Prospectus or the Prospectus, as the case may be, or inform such person that
such Preliminary Prospectus or Prospectus will be available upon request, and
(ii) we will furnish to each person to whom any such sale or offer is made such
Prospectus, advertisement or other offering document containing information
relating to the Securities or the Company as may be required under the law of
the jurisdiction in which such sale or offer is made. Any Prospectus,
advertisement or other offering document furnished by us to any person in
accordance with the preceding sentence and any such additional offering
material as we may furnish to any person (i) shall comply in all respects with
the law of the jurisdiction in which it is so furnished, (ii) shall be prepared
and so furnished at our sole risk and expenses and (iii) shall not contain
information relating to the Securities or the Company which is inconsistent in
any respect with the information contained in the then current preliminary
Prospectus or in the Prospectus, as the
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<PAGE> 13
case may be.
We understand that, in consideration of your services in connection
with the public offering of the Securities, the Company has agreed with you
individually, and not as Representative of the Underwriters (a) to sell to you
the Representative's Warrants referred to in the Underwriting Agreement for the
sum of $10; (b) to pay to you a non-accountable expense allowance referred to
in the Underwriting Agreement; (c) to pay you a financial advisory fee referred
to in the Underwriting Agreement; and (d) to enter into the Merger and
Acquisition Agreement (the "M/A Agreement") referred to in the Underwriting
Agreement. In addition, you may, at your sole discretion, elect to exercise
the over-allotment option individually. We confirm to you that we shall make
no claim to the Representative's Warrants (or any offering of the Company's
securities related thereto, or any right to participate in any capacity in any
offering resulting therefrom), any rights related thereto, the Company's
securities underlying the Representative's Warrants, the non-accountable
expense allowance, the financial advisory fee, or, to the over-allotment option
to the extent you elect to exercise such option individually, or the M/A
Agreement. You confirm to us that we shall have no obligation or liabilities
with respect to the purchase of the Representative's Warrants, the exercise
thereof, the Company's securities underlying the Representative's Warrants (or
any offering of the Company's securities related thereto, unless we shall
subsequently agree to become an underwriter for, or otherwise participate in
any such offering) or the non-accountable expense allowance, the financial
advisory agreement, the M/A Agreement, or, the over-allotment option, to the
extent you elect to exercise such option individually.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
By:
------------------------------
(Attorney-in-fact for each of
the several Underwriters named
in Schedule A to the attached
Underwriting Agreement.)
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<PAGE> 14
Confirmed as of the date first
above written:
BARRON CHASE SECURITIES, INC.
By:
-------------------------------
Robert T. Kirk, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby
irrevocably constitute and appoint Robert T. Kirk and/or Barron Chase
Securities, Inc., the true and lawful agent and attorney-in-fact of the
undersigned with respect to all matters arising in connection with the
undersigned's acting as one of the Underwriters of the proposed offering of an
aggregate of
1,000,000 Shares of Common Stock and
1,000,000 Common Stock Purchase Warrants
of
CABLE-SAT SYSTEMS, INC.
(such securities being more fully described in the Registration Statement No.
33-________ filed by Cable-Sat Systems, Inc. pursuant to the Securities Act of
1933) with full power and authority to execute and deliver for and on behalf of
the undersigned all such agreements, consents and documents in connection
therewith as said agent and attorney-in-fact may deem advisable. The
undersigned hereby gives to said agent and attorney-in-fact full power and
authority to act in the premises, including, but not limited to, the power an
authority to execute and deliver an Agreement Among Underwriters relating to
such financing, to agree to increase or
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<PAGE> 15
decrease the size of the offering to an amount as shall be approved by Barron
Chase Securities, Inc., as Representative of the Underwriters, and to appoint a
substitute or substitutes to act hereunder with the same power and authority as
said agent and attorney-in-fact would have if personally acting. The
undersigned hereby ratifies and confirms all that said agent and
attorney-in-fact, or any substitute or substitutes, may do by virtue hereof.
WITNESS the due execution hereof at
-----------------------------------
- --------------------------------------------------------------------------------
(Street) (City)
this day of , 1996.
--------- ------------------
--------------------------------
Firm Name
By:
- --------------------------- --------------------------------
Witness Partner, Officer or
Sole Proprietor
(indicate which)
CORPORATE ACKNOWLEDGEMENT
STATE OF )
) ss.:
COUNTY OF )
On this ________ day of _________________, 1996, before me personally
came ___________________________________ , to me know, who being by me duly
sworn, deposes and say that he resides at No. ________________________________:
that he is the ____________________________ of ______________________________,
the aforementioned corporation, which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; and that it was so affixed by order the Board of Directors
of said corporation; and that he signed his name thereto by like order.
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<PAGE> 16
-----------------------------------
Notary Public
My Commission Expires:
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF )
) ss.:
COUNTY OF )
On this ________ day of _________________, 1996, before me personally
came ___________________________________ , one of the members of the firm of
________________________________________, to me known and known to me to be the
individual who executed the foregoing instrument and acknowledged that he
executed, and was duly authorized to execute, the same as and for the act and
deed of said firm.
-----------------------------------
Notary Public
My Commission Expires:
------------------------------------------
Unless prior to 5:00 p.m. Eastern Time, on the date immediately
preceding the proposed public offering date, the Syndicate Department of Barron
Chase Securities, Inc., 7700 West Camino Real, Suite 200, Boca Raton, Florida
33433 receives a telegram or letter from you revoking the Power of Attorney,
the power and authority granted by such Power of Attorney may be exercised in
accordance with the terms thereof.
16
<PAGE> 1
EXHIBIT 1(c)
CABLE-SAT SYSTEMS, INC.
1,000,000 Shares of Common Stock and
1,000,000 Common Stock Purchase Warrants
SELECTED DEALER AGREEMENT
Boca Raton, Florida
_______________, 1996
Gentlemen:
1. Barron Chase Securities, Inc. (the "Representative") and the
other Underwriters named in the Prospectus (collectively the "Underwriters"),
acting through us as the Representative, are severally offering for sale an
aggregate of 1,000,000 Shares of Common Stock (the "Shares") and 1,000,000
Warrants (the "Warrants") (collectively the "Firm Securities") of Cable-Sat
Systems, Inc. (the "Company"), which we have agreed to purchase from the
Company, and which are more particularly described in the Registration
Statement, Underwriting Agreement and Prospectus. In addition, the several
Underwriters have been granted an option to purchase from the Company up to an
additional 150,000 Shares and an additional 150,000 Warrants (the "Option
Securities") to cover overallotments in connection with the sale of the Firm
Securities. The Firm Securities and any Option Securities purchased are herein
called the "Securities". The Securities and the terms under which they are to
be offered for sale by the several Underwriters are more particularly described
in the Prospectus.
2. The Securities are to be offered to the public by the several
Underwriters at the price per Share and price per Warrant set forth on the
cover page of the Prospectus (the "Public Offering Price"), in accordance with
the terms of offering set forth in the Prospectus.
3. Some or all of the several Underwriters are severally
offering, subject to the terms and conditions hereof, a portion of the
Securities for sale to certain dealers who are actually engaged in the
investment banking or securities business and who are either (a) members in
good standing of the National Association of
1
<PAGE> 2
Securities Dealers, Inc. (the "NASD"), or (b) dealers with their principal
places of business located outside the United States, its territories and its
possessions and not registered as brokers or dealers under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), who have agreed not to make
any sales within the United States, its territories or its possessions or to
persons who are nationals thereof or residents therein (such dealers who shall
agree to sell Securities hereunder being herein called "Selected Dealers") at
the public offering price, less a selling concession (which may be changed) of
not in excess of $______ per Share and/or $_________ per Warrant payable as
hereinafter provided, out of which concession an amount not exceeding
$__________ per Share and/or $_________ per Warrant may be reallowed by
Selected Dealers to members of the NASD or foreign dealers qualified as
aforesaid. The Selected Dealers who are members of the NASD agree to comply
with all of the provisions of Article III of the Rules of Fair Practice of the
NASD. Foreign Selected Dealers agree to comply with the provisions of Section
24 of Article III of the Rules of Fair Practice of the NASD, and, if any such
dealer is a foreign dealer and not a member of the NASD, such Selected Dealer
also agrees to comply with the NASD's Interpretation with Respect to
Free-Riding and Withholding, and to comply, as though it were a member of the
NASD, with the provisions of Sections 8 and 36 of Article III of such Rules of
Fair Practice, and to comply with Section 25 of Article III thereof as that
section applies to non-member foreign dealers. Some or all of the Underwriters
may be included among the Selected Dealers. Each of the Underwriters has
agreed that, during the term of this Agreement, it will be governed by the
terms and conditions hereof whether or not such Underwriter is included among
the Selected Dealers.
4. Barron Chase Securities, Inc. shall act as Representative on
behalf of the Underwriters and shall have full authority to take such action as
we may deem advisable in respect to all matters pertaining to the public
offering of the Securities.
5. If you desire to act as a Selected Dealer, and purchase any of
the Securities, your application should reach us promptly by telefax or
telegraph at the offices of Barron Chase Securities, Inc., 7700 West Camino
Real, Suite 200, Boca Raton, Florida 33433. We reserve the right to reject
subscriptions in whole or in part, to make allotments, and to close the
subscription books at any time without notice. The Securities allotted to you
will be confirmed,
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<PAGE> 3
subject to the terms and conditions of this Agreement.
6. The privilege of subscribing for the Securities is extended to
you only on behalf of such of the Underwriters, if any, as may lawfully sell
the Securities to Selected Dealers in your state or other applicable
jurisdiction.
7. Any Securities to be purchased by you under the terms of this
Agreement may be immediately reoffered to the public in accordance with the
terms of offering as set forth herein and in the Prospectus, subject to the
securities or Blue Sky laws of the various states or other jurisdictions.
You agree to pay us on demand for the accounts of the several
Underwriters an amount equal to the Selected Dealer concession as to any
Securities purchased by you hereunder which, prior to the completion of the
public offering as defined in paragraph 8 below, we may purchase or contract to
purchase for the account of any Underwriter and, in addition, we may charge you
with any broker's commission and transfer tax paid in connection with such
purchase or contract to purchase. Certificates for Securities delivered on
such repurchases need not be the identical certificates originally purchased.
You agree to advise us from time to time, upon request, of the number
of Securities purchased by you hereunder and remaining unsold at the time of
such request, and, if in our opinion any such Securities shall be needed to
make delivery of the Securities sold or overallotted for the account of one or
more of the Underwriters, you will, forthwith upon our request, grant to us for
the account or accounts of such Underwriter or Underwriters the right,
exercisable promptly after receipt of notice from you that such right has been
granted, to purchase, at the Public Offering Price less the selling concession
or such part thereof as we shall determine, such number of Securities owned by
you as shall have been specified in our request.
No expenses shall be charged to Selected Dealers. A single transfer
tax, if payable, upon the sale of the Securities by the respective Underwriters
to you will be paid when such Securities are delivered to you. However, you
shall pay any transfer tax on sales of Securities by you and you shall pay your
proportionate share of any transfer tax (other than the single transfer tax
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<PAGE> 4
described above) in the event that any such tax shall from time to time be
assessed against you and other Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Securities other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate
when we shall have determined that the public offering of the Securities has
been completed and upon telefax notice to you of such termination, but, if not
theretofore terminated, they will terminate at the close of business on the
30th full business day after the date hereof; provided, however, that we shall
have the right to extend such provisions for a further period or periods, not
exceeding an additional 30 days in the aggregate upon telefax notice to you.
9. For the purpose of stabilizing the market in the Securities,
we have been authorized to make purchases and sales of the Securities of the
Company, in the open market or otherwise, for long or short account, and, in
arranging for sales, to overallot.
10. On becoming a Selected Dealer, and in offering and selling the
Securities, you agree to comply with all the applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the 1934 Act. You
confirm that you are familiar with Rule 15c2-8 under the 1934 Act relating to
the distribution of preliminary and final prospectuses for securities of an
issuer (whether or not the issuer is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act) and confirm that you have complied and
will comply therewith.
We hereby confirm that we will make available to you such number of
copies of the Prospectus (as amended or supplemented) as you may reasonably
request for the purposes contemplated by the 1933 Act or the 1934 Act, or the
rules and regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Securities are qualified
for sale under the respective securities or Blue Sky laws of such states and
other jurisdictions, but
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neither we nor any of the Underwriters assume any obligation or responsibility
as to the right of any Selected Dealer to sell the Securities in any state or
other jurisdiction or as to the eligibility of the Securities for sale therein.
We will, if requested, file a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York.
12. No Selected Dealer is authorized to act as our agent or as
agent for the Underwriters, or otherwise to act on our behalf or on behalf of
the Underwriters, in offering or selling the Securities to the public or
otherwise or to furnish any information or make any representation except as
contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with the Underwriters, or with each other,
but you will be responsible for your share of any liability or expense based on
any claim to the contrary. We and the several Underwriters shall not be under
any liability for or in respect of value, validity or form of the Securities,
or the delivery of the certificates for the Securities, or the performance by
anyone of any agreement on its part, or the qualification of the Securities for
sale under the laws of any jurisdiction, or for or in respect of any other
matter relating to this Agreement, except for lack of good faith and for
obligations expressly assumed by us or by the Underwriters in this Agreement
and no obligation on our part shall be implied herefrom. The foregoing
provisions shall not be deemed a waiver of any liability imposed under the 1933
Act.
14. Payment for the Securities sold to you hereunder is to be made
at the Public Offering Price less the above-mentioned selling concession on
such time and date as we may advise, at the office of Barron Chase Securities,
Inc., 7700 West Camino Real, Suite 200, Boca Raton, Florida 33433, by a
certified or official bank check in current New York Clearing House funds,
payable to the order of Barron Chase Securities, Inc., as Representative,
against delivery of certificates for the Securities so purchased. If such
payment is not made at such time, you agree to pay us interest on such funds
at the prevailing broker's loan rate.
15. Notices to us should be addressed to us at the offices of
Barron Chase Securities, Inc., 7700 West Camino Real, Suite 200,
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Boca Raton, Florida 33433, Attention: Robert T. Kirk. Notices to you shall be
deemed to have been duly given if telephoned, telefaxed, telegraphed or mailed
to you at the address to which this letter is addressed.
16. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to the
choice of law or conflicts of law principles thereof.
17. If you desire to purchase any Securities and act as a Selected
Dealer, please confirm your application by signing and returning to us your
confirmation on the duplicate copy of this letter enclosed herewith, even
though you may have previously advised us thereof by telephone or telegraph.
Our signature hereon may be by facsimile.
Very truly yours,
BARRON CHASE SECURITIES, INC.
As Representative of the Several
Underwriters
BY:
---------------------------------
Authorized Officer
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<PAGE> 7
Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
We hereby subscribe for __________ Shares and/or ___________ Warrants
of Cable-Sat Systems, Inc. in accordance with the terms and conditions stated
in the foregoing Selected Dealers Agreement and letter. We hereby acknowledge
receipt of the Prospectus referred to in the Selected Dealers Agreement and
letter. We further state that in purchasing said Shares and/or Warrants we
have relied upon said Prospectus and upon no other statement whatsoever,
whether written or oral. We confirm that we are a dealer actually engaged in
the investment banking or securities business and that we are either (i) a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); or (ii) a dealer with its principal place of business located outside
the United States, its territories and its possessions and not registered as a
broker or dealer under the Securities Exchange Act of 1934, as amended, who
hereby agrees not to make any sales within the United States, its territories
or its possessions or to persons who are nationals thereof or residents
therein. As a member of the NASD, we hereby agree to comply with all of the
provisions of Article III of the Rules of Fair Practice of the NASD. If we are
a foreign Selected Dealer, we agree to comply with the provisions of Section 24
of the Rules of Fair Practice, and if we are a foreign dealer and not a member
of the NASD, we agree to comply with the NASD's interpretation with respect to
free-riding and withholding, and agree to comply, as though we were a member of
the NASD, with provisions of Sections 8 and 36 of Article III of such Rules of
Fair Practice, and to comply with Section 25 of Article III thereof as that
Section applies to non-member foreign dealers.
Firm:
------------------------------------
By:
------------------------------------
(Name and Position)
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Address:
--------------------------
--------------------------
Telephone No.:
--------------------------
Dated: , 1996
------------------
8
<PAGE> 1
EXHIBIT 3(a)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CABLE-SAT SYSTEMS, INC.
Pursuant to the provisions of the Florida Business Corporation Act,
the undersigned corporation adopts the following Amended and Restated Articles
of Incorporation, which amendments to the Corporation's Articles of
Incorporation, as amended, contained therein were adopted by the shareholders
of the Corporation on March 7, 1996 by the holders of the outstanding common
stock, the only voting group, and the number of shares adopting the Amended and
Restated Articles of Incorporation by such group was sufficient for approval.
1. The name of the Corporation is CABLE-SAT SYSTEMS, INC.
2. The Articles of Incorporation of the Corporation we hereby
amend to read in their entirety as follows:
ARTICLE 1
Name
The name of the corporation is CABLE-SAT SYSTEMS, INC.
ARTICLE 2
Purpose
The purpose or purposes of the Corporation shall be to engage in any
lawful act or activity for which corporations may be organized under the
Florida Business Corporation Act.
ARTICLE 3
Capital Stock
<PAGE> 2
The total amount of capital stock which this Corporation has the
authority to issue is as follows:
50,000,000 shares of common stock, $.001 par value per share; and
150,000 shares of Series A Preferred Stock, $.001 par value per share,
which shall have the powers, preferred rights, qualifications, limitations and
restrictions as follows:
(i) Dividends. The Series A Preferred Stock shall be
entitled to receive a dividend of $.21 per share on the twelfth month following
its original issuance and then $.21 per share each year on the anniversary of
the date which is twelve months following the date of its original issuance and
such dividend shall accumulate in each year it is not paid.
(ii) Mandatory Redemption. The Corporation shall purchase
and redeem, in the manner hereinafter provided, the shares of Series A
Preferred Stock outstanding out of the net proceeds of any underwritten public
offering or private placement of the Corporation's Common Stock. The
Redemption Price shall be $3.00 per share plus one (1) share of the
Corporation's Common Stock.
(iii) Liquidation. Upon dissolution, liquidation or
winding up of the Corporation, the holders of the Series A Preferred Stock
shall be entitled to receive, before any distribution is made to the holders of
shares of common stock of the Corporation, the sum of $3.00 per share plus
accrued but unpaid dividends and one share of common stock and no more.
(iv) Voting. The Series A Preferred Stock shall have no
voting rights.
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(v) Adjustment.
(a) The number of shares of Common Stock which
shall be issued in connection with a redemption or liquidation of Series A
Preferred Stock shall be subject to adjustment from time to time only as
follows:
(i) If after the date on which shares of Preferred
Stock are first issued the number of outstanding shares of Common Stock is
increased by a dividend declared payable in shares of Common Stock to all
holders of its Common Stock or by a subdivision of shares of Common Stock, the
number of shares of Common Stock into which a share of Series A Preferred Stock
is redeemable shall be increased in proportion to such increase in the
outstanding shares of Common Stock. Such adjustment shall become effective
immediately after the opening of business on the day following the date on
which the Corporation takes a record of the holders of Common Stock for the
purpose of entitling them to receive such dividend or the day upon which such
subdivision becomes effective.
(ii) If after the date on which shares of Series A
Preferred Stock are first issued the number of outstanding shares of Common
Stock is decreased by a combination of shares of Common Stock, the number of
shares of Common Stock into which a share of Series A Preferred Stock is
convertible or redeemable shall be decreased in proportion to such decrease in
the outstanding shares of Common Stock. Such adjustment shall become effective
immediately after the opening of business on the day upon which such
combination becomes effective.
(iii) For the purposes of making the adjustments
referred to in subparagraphs (i) and (ii) above, the books of the Corporation
shall control absolutely in
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determining the number of outstanding shares of Common Stock and the number of
additional shares issued or decrease in shares as a result of any stock
dividend, subdivision or combination.
(iv) In case the Corporation shall distribute to all
holders of its Common Stock any assets, other than any distribution payable out
of retained earnings or any cash dividend, any rights to subscribe or any
evidences of indebtedness or other securities of the Corporation, other than
Common Stock, then in each such case the number of shares of Common Stock into
which each share of Series A Preferred Stock shall be redeemable shall
thereafter be determined as follows: the number of shares of Common Stock into
which each share of Series A Preferred Stock was convertible or redeemable on
the date immediately preceding the record date for such distribution shall be
multiplied by a fraction, the numerator of which shall be the current exercise
price, as determined and provided below, of the Common Stock on such record
date and of which the denominator shall be such current market price per share
less the then fair market value (as determined in a resolution adopted by the
Board of Directors, which shall be conclusive evidence of such fair market
value) of the portion of the assets or evidences of indebtedness or securities
so distributed or of such subscription rights applicable to one share of Common
Stock. Such adjustment shall become effective retroactively immediately after
the record date for the determination of shareholders entitled to receive such
distribution. For purposes of the computation specified above, the current
exercise price per share of Common Stock shall be deemed to be $1.00 per share
adjusted proportionately hereinafter to reflect any adjustments required by
Sections (i) and (ii) above and as adjusted pursuant to the above provisions.
(v) In case of any consolidation or merger of the Corporation
with or into another corporation or in case of any sale or conveyance to
another corporation of all or substantially all
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the assets of the Corporation or in case the Corporation issues by
reclassification or recapitalization of its Common Stock any shares of the
Corporation, the holder of each share of Series A Preferred Stock then
outstanding shall have the right thereafter, so long as his redemption right
hereunder shall exist, to convert such share into the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, sale, conveyance, reclassification or recapitalization by a holder of
the number of shares of Common Stock into which such share might have been
converted immediately prior to such consolidation, merger, sale, conveyance,
reclassification or recapitalization and shall have no other conversion rights
under these provisions; provided, that effective provision shall be made, in
the Articles or Certificate of Incorporation of the resulting or surviving
corporation or otherwise, so that the provisions set forth herein for the
protection of the Redemption rights of the shares of Series A Preferred Stock
shall thereafter be applicable, as nearly as reasonably may be, to any such
other shares of stock and other securities and property deliverable upon
redemption of the shares of Series A Preferred Stock remaining outstanding or
other redemption securities received by the holders in place thereof; and
provided further that any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon the exercise of the redemption
privilege, such shares, other securities or property as the holders of the
shares of Series A Preferred Stock remaining outstanding, or other securities
received by the holders in place thereof, shall be entitled to receive pursuant
to these provisions, and to make provisions for the protection of the
redemption right as above provided. In case securities or property other than
Common Stock shall be issuable or deliverable upon redemption, then all
references in this Section (v) shall be deemed to apply, so far as appropriate
and as nearly as may be, to such other securities or property.
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<PAGE> 6
(vi) No fractional share of Common Stock shall be
issued upon any redemption but, in lieu thereof, there shall be paid to the
holder of the shares of Series A Preferred Stock surrendered for conversion as
soon as practicable after the date such shares are surrendered for redemption,
an amount in cash equal to the same fraction of the current market price per
share of Common Stock, unless the Board of Directors shall determine to adjust
fractional shares in some other manner.
(vii) Whenever any adjustment is required in the
shares into which each share of Series A Preferred Stock is redeemable, the
Corporation shall forthwith (i) file with the transfer agent, if any, for the
Series A Preferred Stock a statement describing in reasonable detail the
adjustment and the method of calculation used and (ii) cause a copy of such
notice to be mailed to the holders of record of the shares of Series A
Preferred Stock.
(c) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares the full number of shares
into which all shares of Series A Preferred Stock from time to time outstanding
are redeemable.
(d) The Corporation will pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock or redemption of shares of Series A Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of Common Stock
in a name other than that in which the shares of Series A Preferred Stock is
redeemed were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Corporation the
amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
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<PAGE> 7
ARTICLE 4
Indemnification of Directors, Officers and
Other Authorized Representatives
1. Indemnification. The Corporation shall indemnify its
officers, Directors, employees and agents against liabilities, damages,
settlements and expenses (including attorneys' fees) incurred in connection
with the Corporation's affairs, and shall advance such expenses to any such
officers, directors, employees and agents, to the fullest extent permitted by
law.
2. Effect of Modification. Any repeal or modification of any
provision of this Article 4 by the shareholders of the Corporation shall not
adversely affect any right to protection of a Director, officer, employee or
agent of the Corporation existing at the time of the such repeal or
modification.
3. Liability Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a Director, officer, employee or agent to
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against liability under the provision of
this Article 4.
4. No Rights of Subrogation. Indemnification hereunder and under
the Bylaws shall be a personal right and the Corporation shall have no
liability under this Article 4 to any insurer or any person, corporation,
partnership, association, trust or other entity (other than the heirs,
executors or administrators of such person) by reason of subrogation,
assignment or succession
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by any other means to the claim of any person to indemnification hereunder or
under the Corporation's Bylaws.
ARTICLE 5
Right to Amend or Repeal Article
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Amended and Restated Articles of Incorporation
or any amendment hereto, in the manner now or hereafter prescribed by statute,
and all rights and powers herein conferred on shareholders are granted subject
to this reserved power.
ARTICLE 6
Severability
In the event any provision (including any provision within a single
article, section, paragraph or sentences) of these Articles should be
determined by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, the remaining provisions and parts hereof shall
not be in any way impaired and shall remain in full force and effect and
enforceable to the fullest extent permitted by law.
Dated: March ___, 1996 CABLE-SAT SYSTEMS, INC.
By:
-----------------------------
Mrs.
8
<PAGE> 1
EXHIBIT 3(b)
BY-LAWS
OF
CABLE-SAT SYSTEMS, INC.
(a Florida corporation)
ARTICLE I
STOCK CERTIFICATES
1.1 Issuance. Every holder of shares in this corporation shall be
entitled to have a certificate representing all shares to which he is entitled.
No certificate shall be issued for any share until such share is fully paid.
1.2 Form. Certificates representing shares in this corporation shall
be numbered and registered in the order in which they are issued and shall be
signed by the president or vice president and secretary or an assistant
secretary and may be sealed with the seal of this corporation or facsimiles if
the certificate is manually signed on behalf of a transfer agent or registrar,
other than the corporation itself or an employee of the corporation. In case
any officer who signed or whose facsimile signature has been placed upon such a
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer at the date of its issuance.
Every certificate representing shares which are restricted as to sale,
disposition or other of such shares shall state that such shares are restricted
as to transfer and shall set forth or unfairly summarize upon the certificate,
or shall state that the corporation will furnish to any shareholder, upon
request and without charge, a full statement of such restrictions.
<PAGE> 2
Each certificate representing shares shall state upon the face
thereof: the name of the corporation; that the corporation is organized under
the laws of this State; the name of the person or persons to whom it is issued;
the number and class of shares, and the designation of the series, if any,
which such certificate represents; and the par value of each share represented
by such certificate, or statement that the shares are without par value.
1.3 Transfer of Stock. The stock of the corporation shall be
assignable and transferable on the books of the corporation only by the person
in whose name it appears on said books, his legal representatives or by his
duly authorized agent. In case of transfer by attorney, the power of attorney,
duly executed and acknowledged, shall be deposited with the secretary. In all
cases of transfer, the former certificate must be surrendered and cancelled
before a new certificate is issued.
1.4 Lost, Stolen or Destroyed Certificates. If a shareholder has
claimed to have lost or destroyed a certificate or certificates of stock issued
by the corporation, the Board of Directors may direct, at its discretion, a new
certificate or certificates issued, upon the making of an affidavit of the fact
by the person claiming the certificate of stock to be lost or destroyed, and
upon the deposit of a bond or other indemnity in such amount and with such
surety, if any, as the Board may require.
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<PAGE> 3
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Annual Meeting. The annual meeting of the shareholders of this
corporation shall be held sixty (60) days after the receipt of the financial
statements of the preceding fiscal year at a place designated by the Board of
Directors of the corporation. The annual meeting of the shareholders for any
year shall be held no later than thirteen (13) months after the last preceding
annual meeting of shareholders. Business transacted at the annual meeting
shall include the election of directors of the corporation.
2.2 Special Meetings. Special meetings of the shareholders shall be
held when directed by the president or the Board of Directors or when requested
in writing by the holders of not less than ten percent (10%) of the shares
entitled to vote at the meeting. A meeting requested by shareholders shall be
called for a date not less than ten (10) nor more than sixty (60) days after
the request is made, unless the shareholders requesting the meeting designate a
later date. The call for the meeting shall be issued by the secretary, unless
the president or the Board of Directors shall designate another person to do so.
2.3 Place. Both annual and special meetings of shareholders may be
held within or without the State of Florida.
2.4 Notice. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the meeting, either personally or by first class
mail, by or at the direction of the president, the secretary or the officer or
the person
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<PAGE> 4
calling the meeting to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
2.5 Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting to which the adjournment is taken, and at the
adjournment meeting, any business may be transacted that might have been
transacted on the original date of the meeting. If, however, after the
adjournment, the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in this
section to each shareholder of record on the new record date entitled to vote
at such meeting.
2.6 Closing of Transfer Books and Fixing Record Date. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend or in order to make a determination of shareholders for any other
purpose, the Board of Directors may provide that the stock transfer books shall
be closed for a stated period but not to exceed, in any case, sixty (60) days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such books shall be closed for at least ten (10) days immediately preceding
such meeting.
In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any determination of
shareholders, such date in any case to be not more
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than sixty (60) days and, in case of a meeting of shareholders, not less than
ten (10) days prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders.
Once a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.
2.7 Shareholder Quorum and Voting. The majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. When a specified item of business is required to
be voted on by a class or series of stock, a majority of the shares of such
class or series shall constitute a quorum for the transaction of such items of
business by that class or series.
If a quorum is present, an affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders unless otherwise provided by law.
After a quorum has been established at the shareholders' meetings, the
subsequent withdrawal of shareholders, so as to reduce the number of
shareholders entitled to vote at the
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meeting below the number required for a quorum, shall not affect the validity
of any action taken at the meeting or any adjournment thereof.
2.8 Conduct of Meeting. The meeting of the shareholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting, the chairman of the board, if any; the president; a vice
president; or, if none of the foregoing is in office, present and acting, by a
chairman to be chosen by the shareholders. The secretary of the corporation,
or in his absence, an assistant secretary, shall act as secretary of every
meeting, but if neither the secretary nor an assistant secretary is present,
the chairman of the meeting shall appoint a secretary of the meeting.
2.9 Voting of Shares. Except as otherwise provided in the Articles of
Incorporation, each outstanding share, regardless of class, shall be entitled
to one (1) vote on each matter submitted to a vote at the meeting of
shareholders. Treasury shares, shares of stock of this corporation owned by
another corporation (the majority of the voting stock of which is owned or
controlled by this corporation), and shares of stock of this corporation held
by it in a fiduciary capacity shall not be voted, directly or indirectly, at
any such meeting and shall not be counted in determining the total number of
outstanding shares at any given time.
A shareholder may vote either in person or by proxy executed in
writing by the shareholder or his duly authorized attorney-in-fact.
At each election for directors, every shareholder entitled to vote at
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote.
6
<PAGE> 7
Such shareholder shall not have the right to accumulate his votes by
giving one candidate as many votes as the number of directors to be elected at
that time multiplied by the number of his shares, or by distributing such votes
on the same principle among any number of such candidates.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent or proxy designated by the by-laws
of the corporate shareholder; or in the absence of any applicable by-laws, by
such person as the Board of Directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a
certified copy of the by-laws or other instrument of the corporate shareholder.
In the absence of any such designation, or in the case of conflicting
designation by the corporate shareholder, the chairman of the board, president,
any vice president, secretary and treasurer of the corporate shareholder shall
be presumed to possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be continued in an appropriate order of the court by which such receiver was
appointed.
7
<PAGE> 8
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter, the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which written notice of redemption or
redeemable shares has been mailed to the holders thereof in a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the
holders thereof upon surrender of certificates therefore, such shares shall not
be entitled to vote on any matter and shall not be deemed to be outstanding
shares.
2.10 Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting or a
shareholder's duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
A signed proxy is presumed valid. No proxy shall be valid after the expiration
of eleven (11) months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or such death is received by the corporate officer responsible for
maintaining the list of shareholders.
If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one is present, then that one may exercise all the powers
conferred by the proxy; but if the proxy holders present at the
8
<PAGE> 9
meeting are equally divided as to the right and manner of voting in any
particular case, the voting of such shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing
a substitute to act in his place.
2.11 Action by Shareholders Without a Meeting. Any action required by
law, these By-laws or the Articles of Incorporation of this corporation, to be
taken at any annual or special meeting of shareholders of the corporation, or
any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and without
vote, if a consent in writing setting forth the action so taken shall be signed
by the shareholders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon as a class, such written
consent shall be required by the holders of a majority of the shares of each
class of shares entitled to vote as a class thereon and of the total shares
entitled to vote thereon.
Within ten (10) days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation or sale or
exchange of assets for which the dissenters' rights are provided for by law,
the notice shall contain a clear statement of the right of shareholders
dissenting therefrom to be paid the fair value of their shares upon compliance
with the further provisions of law regarding the rights of dissenting
shareholders.
9
<PAGE> 10
ARTICLE III.
DIRECTORS
3.1 Function. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be managed
under the direction of the Board of Directors ("Board" or "Board of
Directors").
3.2 Qualification. Directors need not be residents of this state or
shareholders of this corporation.
3.3 Compensation. The Board of Directors shall have the authority to
fix the compensation of directors.
3.4 Duties of Directors. A director shall perform his duties as a
director, including his duties as a member of any committee of the Board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the corporation and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements
and other financial data, in each case prepared or presented by:
a. One or more officers or employees of the corporation
whom the director reasonable believes to be reliable
and competent in the matter presented;
b. Counsel, public accountants or other persons as to
matters which the director reasonable believes to be
within such person's professional or expert
competence; or
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<PAGE> 11
c. A committee of the Board upon which he does not
serve, duly designated in accordance with the
provisions of the Articles of Incorporation or the
By-laws, as to matters within its designated
authority, which committee the director reasonable
believes to merit competence.
A director shall not be considered to be acting in good faith if he
has knowledge of the matter in question that would cause such reliance
described above to be unwarranted.
A person who performs his duties in compliance with this section shall
have no liability by reason of being or having been a director of this
corporation.
3.5 Number. This corporation shall have a minimum of one (1) director
and a maximum of fifteen (15) directors. The number of directors may be
increased or decreased from time to time by amendment to these By-laws, but no
decrease shall have the effect of shortening the terms of any incumbent
director.
3.6 Election and Term. Each person named in the Articles of
Incorporation or by the Incorporator as a member of the initial Board of
Directors shall hold office until the first annual meeting of shareholders, and
until a successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
At the first annual meeting of the shareholders and at each annual
meeting thereafter, the shareholders shall elect directors to hold office until
the next succeeding annual meeting. Each director shall hold office for the
term for which he is elected and until his successor shall have been elected
and qualified or until his earlier resignation, removal from office or death.
3.7 Vacancies. Any vacancies occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote
11
<PAGE> 12
of the majority of the remaining directors though less than a quorum of the
Board of Directors. A director elected to fill a vacancy shall hold office
only until the next election of directors by the shareholders.
3.8 Removal of Directors. At a meeting of the shareholders called
expressly for that purpose, any director or the entire Board of Directors may
be removed, with or without cause, by a vote of the holders of a majority of
the shares then entitled to vote at an election of directors.
3.9 Quorum in Voting. A majority of the number of directors fixed by
these By-laws shall constitute a quorum for the transaction of business. The
act of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
3.10 Board Committees. The Board of Directors may, by resolution
adopted by a majority of the Board, designate and appoint one or more of the
following committees, which shall be comprised of member so the Board of
Directors:
a. Executive Committee. The Board of Directors may elect
from among its members an Executive Committee to whom may be delegated, from
time to time and until further order of the Board of Directors, any or all of
the powers of said Board in connection with the affairs of the corporation.
b. Standing and Other Committees. The Board of Directors may
appoint standing or such other committees of directors, officers or otherwise
as deemed desirable including, but not limited to: (1) Nominating Committee;
(2) Finance Committee; (3) Audit Committee; (4) Compensation Committee.
Standing committees shall have the responsibilities and duties as set
forth by the Board and shall have their members appointed by the Board of
Directors from within or without its own
12
<PAGE> 13
membership, at any meeting held for that purpose. In every case, standing
committees shall be subject to the general supervision of the Board of
Directors to whom each of them shall make a report not less often than
annually, containing such recommendations as its membership deems necessary,
appropriate or desirable. Other committees, temporary or continuing, shall act
with respect to such special or general problems as the Board of Directors may,
from time to time, determine. Any or all of such other committee or committees
may be terminated at any time by the Board of Directors.
3.11 Place of Meetings. Regular and special meetings by the Board of
Directors may be held within or without the State of Florida. Meeting shall be
held at such place as shall be fixed by the Board.
3.12 Time, Notice and Call of Meetings. Regular meetings of the Board
of Directors shall be held immediately following the annual shareholders
meeting. Written notice of the time and place of special meetings of the Board
of Directors shall be given to each director by either personal delivery,
facsimile, telegram or cablegram at least two (2) days before the meeting or by
notice mailed to the director at least five (5) days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all obligations to the place of the meeting,
the time of the meeting or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
13
<PAGE> 14
Neither the business to be transacted at nor the purpose of any
regular or special meeting of the Board of Directors need be specified in the
notice of waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of
the adjourned meeting are announced at the time of the adjournment, to the
other directors.
Meetings of the Board of Directors may be called by the chairman of
the board, by the president of the corporation or by any one or more directors.
Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
3.13 Action Without a Meeting. Any action required to be taken at a
meeting of the directors of the corporation, or any action which may be taken
at a meeting of the directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken,
signed by all of the directors or all the members of the committee, as the case
may be, is filed in the minutes of the proceedings of the Board or of the
committee. Such consent shall have the same effect as a unanimous vote.
ARTICLE IV
INDEMNIFICATION
14
<PAGE> 15
Each person who at any time is, or shall have been, a director,
officer, employee or agent of the corporation, and is threatened to be or is
made a party of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is, or was, a director, officer, employee or agent of the
corporation, or served at the request of the corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any such action,
suit or proceeding to the full extent allowed under the Florida Statutes and
such expenses shall be advanced as incurred upon receipt of an undertaking to
repay such amount if such person is found not to be entitled to such
indemnification pursuant to such Section. The foregoing right of
indemnification shall in no way be exclusive of any other rights or
indemnification to which any such director, officer, employee or agent may be
entitled under any other bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
ARTICLE V
OFFICERS
5.1 Officers. The officers of this corporation consist of a president,
one or more vice presidents, a secretary and a treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers
and agents as may be deemed necessary may be elected or appointed by the Board
of Directors from time to time. Any two or more offices may be held
15
<PAGE> 16
by the same person. The failure to elect a president, vice president,
secretary or treasurer shall not affect the existence of this corporation.
5.2 Duties. The officers of the corporation shall have the following
duties:
a. President. The president shall be the chief executive
officer of the corporation, shall have general and active management of
business and affairs of the corporation subject to the directions of the Board
of Directors, and shall preside at all meetings of the shareholders.
b. Vice President. The vice presidents shall perform such
duties as shall, from time to time, be prescribed by the Board of Directors or
the president, and in the absence of the president shall act in the order of
their seniority, unless otherwise prescribed by the Board.
c. Secretary. The secretary shall have custody of, and shall
maintain, all of the corporate records except the financial records, shall
record the minutes of all meetings of the shareholders and Board of Directors,
send out all notices of meetings, and perform such other duties as may be
prescribed by the Board of Directors or the president.
d. Treasurer. The treasurer shall have custody of all
corporate funds and financial records, shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the annual meetings
of the shareholders and whenever else required by the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the president.
5.3 Removal of Officers. Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board of Directors whenever, in
its judgment, the best interests of the corporation will be served thereby.
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<PAGE> 17
Any officer or agent elected by the shareholders may be removed only
by vote of the shareholders, unless the shareholders shall have authorized the
directors to remove such officer or agent.
Any vacancy, however occurring, in any office may be filled by the
Board of Directors, unless the By-laws shall have expressly reserved such
powers to the shareholders.
Removal of any officer shall by without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of
an officer or agent shall not of itself create contract rights.
5.4 Compensation of Officers. The officers shall receive such salary
or compensation as may be determined by the Board of Directors.
ARTICLE VI
BOOKS AND RECORDS
6.1 Books and Records. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceeding
s of its shareholders, Board of Directors and committees of directors.
This corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of its shareholders, giving the names and addresses of all the
shareholders and the number, or class and series, if any, of the shares held by
each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
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<PAGE> 18
6.2 Shareholders' Inspection Rights. Any person who shall have been a
holder of record of shares or of voting trust certificates therefore at least
six (6) months immediately preceding his demand or shall be the holder of
record of, or the holder of record of voting trust certificates for, at least
five percent (5%) of the outstanding shares of any class or series of the
corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent or attorney, at any reasonable time or
times, for any purposes if relevant, books and records of account, minutes and
records of shareholders and to make extracts therefrom.
6.3 Financial Information. Not later than four (4) months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial conditions of the corporation as the
close of its fiscal year, and a profit and loss statement showing the results
of the operations of the corporation during its fiscal year.
Upon written request of any shareholder or holder of voting
trust certificates for shares of the corporation, the corporation shall mail
to such shareholder or holder of voting trust certificates a copy of the most
recent such filed balance sheet and profit and loss statement.
The balance sheets and profit and loss statements shall be filed in
the registered office of the corporation in this State, shall be kept for at
least five (5) years and shall be subject to inspection during the business
hours by any shareholder or holder of voting trust certificates, in person or
by agent.
ARTICLE VII
DIVIDENDS
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<PAGE> 19
The Board of Directors of this corporation may, from time to time,
declare, and the corporation may pay, dividends on its shares in cash, property
or its own shares, except when the corporation is insolvent or when the payment
thereof would be contrary to any restrictions contained in the Articles of
Incorporation and shall be subject to the provisions of Chapter 607, Florida
Statutes.
ARTICLE VIII
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of this
corporation and the year and state of its incorporation.
ARTICLE IX
AMENDMENT
These By-Laws may be repealed or amended, and new by-laws may
be adopted by either the Board of Directors or the shareholders, but the Board
of Directors may not amend or repeal any By-law adopted by the shareholders if
the shareholders specifically provide that such By-law is not subject to
amendment or repeal by the directors. No such amendment may terminate the
right to indemnification and advancement of expenses provided for herein to any
person covered at any time by such provisions.
19
<PAGE> 1
EXHIBIT 4.1
[FORM OF FACE OF WARRANT CERTIFICATE]
No. WA- Warrants
Cusip No.
--------------
VOID AFTER
---------
REDEEMABLE COMMON STOCK PURCHASE WARRANT CERTIFICATE
Cable-Sat Systems, Inc.
This certifies that FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Common Stock Purchase Warrants ("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 nonassessable share of Common
Stock, $.001 par value per share (a "Share") of Cable-Sat Systems, Inc., a
Florida corporation (the "Company"), at any time until 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, 40 Wall
Street, New York, New York 10005, as Warrant Agent, or its successor (the
"Warrant Agent"), accompanied by payment of six dollars ($6.00) (the "Purchase
Price") in lawful money of the United States of America in cash or by official
bank or certified check made payable to Cable-Sat Systems, Inc.
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 ________, by
and among the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant Agreement,
the Purchase Price and/or the number of Shares 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 Shares will be issued. In the case of the exercise
of less than all the Warrants represented hereby, the Company shall cancel
this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
<PAGE> 2
The term "Expiration Date" shall mean 5:00 P.M. (Eastern time) on ___________
or such earlier date as the Warrants shall be redeemed. If 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 Certificate unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to
become effective and to kcep such registration statement current while any of
the Warrants are outstanding. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would be unlawful.
The Company, upon 30 days written notice to all registered holders of the
Warrants of the Company, shall have the right to reduce the exercise price
and/or extend the term of the Warrants. Upon written notice from the Company
that the Company has given the aforementioned written notice, and receipt by
the Warrant Agent from the Company of a copy of such written notice, the
Warrant Agent may, if upon consultation with the Company it deems appropriate,
effect the issuance of new Warrant Certificates to replace the outstanding
Warrant Certificates so as to evidence the reduced exercise price and/or
extended term.
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 with a $7.00
transfer fee per certificate in addition to any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered Holder
shall not be entitled to any rights of a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a redemption
price of $.25 per
<PAGE> 3
Warrant during the exercise period hereof on 30 days' prior written notice if
the closing bid price for the Company's Common Stock, as reported on The Nasdaq
SmallCap Market ("Nasdaq"), or the closing sale price as reported on a national
or regional securities exchange, as applicable, for 30 consecutive trading days
ending within 10 days of the notice of redemption of the Warrants, averages in
excess of $12.00. 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
$0.25 per Warrant upon surrender of this Certificate. This Warrant may not be
redeemed during the first year following its issuance without the consent of
Barron Chase Securities, Inc.
Prior to due presentment for registration of transfer hereof, the Company and
the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance with
the laws of the State of Florida. This Warrant Certificate is not valid unless
countersigned by the Warrant Agent
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
CABLE-SAT SYSTEMS, INC.
Dated: By:
By:
[seal]
Countersigned:
<PAGE> 4
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By-
Authorized Officer
{BACK OF WARRANT CERTIFICATE]
NOTE: IN ORDER TO EXERCISE THIS WARRANT, THE "FORM OF EXERCISE" BELOW MUST BE
COMPLETED BY THE REGISTERED HOLDER AND DELIVERED TOGETHER WITH THE
FULL PURCHASE PRICE FOR THE SECURITIES TO BE PURCHASED. TO THE
CORPORATION'S WARRANT AGENT, AMERICAN STOCK TRANSFER COMPANY, 40 WALL
STREET, NEW YORK, N.Y. 10005
Cable-Sat Systems, Inc.
c/o American Stock Transfer Company
FORM OF EXERCISE - REDEEMABLE STOCK PURCHASE WARRANT
(To be executed by the holder desiring to exercise the right to purchase
Shares evidenced by the within Warrant certificate)
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock evidenced by the within Warrant Certificate according to the terms
and conditions thereof and herewith makes payment of the purchase price in
full. Kindly issue all shares in accordance with the instructions given below.
Instructions for registration of stock
- --------------------------------------
Name (Please print in block letters)
- ------------------------------------------------------------------
Signature(s)
- ------------------------------------------------------------------
Street City State Zip Code
- -----------------------------------------------------
Social Security or Taxpayer I. D. Number of Purchaser
- -----------------------------------------
Signature(s) Guaranteed
ASSIGNMENT
<PAGE> 5
(To be executed by the registered holder to effect a transfer of the within
Warrant)
FOR VALUE RECEIVED hereby sell, assign, and transfer unto
-------------------
- ----------------------------------
(Name)
- --------------------------------------------------------
(Address)
the right to purchase Common Stock evidenced by the within Warrant, and do
hereby irrevocably constitute and appoint to transfer
----------------------------
the said right on the books of the Corporation with full power of substitution.
Dated : Signature
-----------------------------
Signature
-----------------------------
Signature(s) Guaranteed:
NOTICE: The signature to assignment or the subscription form must correspond
with the name(s) as written upon the face of the within Warrant Certificate in
every particular, without alteration or enlargement, or any change whatsoever
and must be guaranteed by an eligible guarantor institution which is a
participant in a securities transfer association recognized program with a bond
limit of $500.00 or more.
<PAGE> 1
EXHIBIT 4.2
[FORM OF COMMON STOCK CERTIFICATE]
Incorporated under the laws of the State of Florida
CABLE-SAT SYSTEMS, INC.
Authorized common stock
50,000,000 shares, $.001 par value
NUMBER SHARES
------------ ------------
CUSIP NO.
--------------
THIS CERTIFIES THAT
----------------------
IS THE RECORD HOLDER OF SHARES OF COMMON STOCK
-----------------
CABLE-SAT SYSTEMS, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duy authorized officers.
Dated:
--------------------
- --------------------------
President
- --------------------------
Secretary
[BACK OF STOCK CERTIFICATE]
THE COMPANY WILL SUPPLY THE HOLDER WITH A FULL STATEMENT OF THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO
EACH CLASS OF THE COMPANY'S STOCK ON REQUEST AND WITHOUT CHARGE.
<PAGE> 2
ASSIGNMENT
FOR VALUE RECEIVED hereby sell, assign, and transfer unto
------------------
----------------------------------
(Name)
----------------------------------------------------------
(Address)
the Common Stock evidenced by the within certificate and do hereby irrevocably
constitute and appoint to transfer the
--------------------------------------
said certificated on the books of the Corporation with full power of
substitution.
Dated: Signature
-----------------------------
Signature
-----------------------------
Signature(s) Guaranteed:
NOTICE: The signature to assignment form must correspond with the name(s) as
written upon the face of the within Certificate in every particular, without
alteration or enlargement, or any change whatsoever and must be guaranteed by an
eligible guarantor institution which is a participant in a securities transfer
association recognized program with a bond limit of $500.00 or more.
<PAGE> 1
EXHIBIT 10.1
FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of the _____ day of
___________, 1996, between Cable-Sat Systems, Inc. (the "Company") and Barron
Chase Securities, Inc. (the "Financial Advisor").
W I T N E S S E T H :
WHEREAS, The Company has engaged the Financial Advisor to act as the
Representative of the Underwriters in connection with the public offering of
the Company's securities; and
WHEREAS, the Financial Advisor has experience in providing financial
and business advice to public and private companies; and
WHEREAS, the Company is seeking and the Financial Advisor is willing
to furnish business and financial related advice and services to the Company on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of, and for the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
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<PAGE> 2
1. PURPOSE. The Company hereby engages the Financial Advisor on
a non-exclusive basis for the term specified in this Agreement to render
financial advisory and consulting advice to the Company as an investment banker
relating to financial and similar matters upon the terms and conditions set
forth herein.
2. REPRESENTATIONS OF THE FINANCIAL ADVISOR AND THE COMPANY. The
Financial Advisor represents and warrants to the Company that (i) it is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD") and that it is engaged in the securities brokerage business; (ii) in
addition to its securities brokerage business, the Financial Advisor provides
consulting advisory services; and (iii) it is free to enter into this Agreement
and the services to be provided pursuant to this Agreement are not in conflict
with any other contractual or other obligation to which the Financial Advisor
is bound. The Company acknowledges that the Financial Advisor is in the
business of providing financial services and consulting advice (of the type
contemplated by this Agreement) to others and that nothing herein contained
shall be construed to limit or restrict the Financial Advisor in conducting
such business with respect to others, or rendering such advice to others.
3. DUTIES OF THE FINANCIAL ADVISOR. During the term of this
Agreement, the Financial Advisor will provide the Company with
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<PAGE> 3
consulting advice as specified below at the request of the Company, provided
that the Financial Advisor shall not be required to undertake duties not
reasonably within the scope of the consulting advisory service in which the
Financial Advisor is engaged generally. In performance of these duties, the
Financial Advisor shall provide the Company with the benefits of its best
judgment and efforts. It is understood and acknowledged by the parties that
the value of the Financial Advisor's advice is not measurable in any
quantitative manner, and that the amount of time spent rendering such
consulting advice shall be determined according to the Financial Advisor's
discretion.
The Financial Advisor's duties may include, but will not necessarily
be limited to:
1) Advice relating to corporate financing activities;
2) Recommendations relating to specific business
operations and investments;
3) Advice relating to financial planning; and
4) Advice regarding future financings involving
securities of the Company or any subsidiary.
4. TERM. The term of this Agreement shall be for thirty-six (36)
months commencing on the first day of the month following the Company's receipt
of the proceeds from the contemplated public offering (the "Commencement
Date"); provided, however, that this
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<PAGE> 4
Agreement may be renewed or extended upon such terms and conditions as may be
mutually agreed upon by the parties hereto.
5. FEE. The Company shall pay the Financial Advisor a fee of
$108,000 for the financial services to be rendered pursuant to this Agreement,
all of which shall be payable at the Closing Date of the Company's proposed
public offering.
6. EXPENSES. In addition to the fees payable hereunder,
the Company shall reimburse the Financial Advisor, within five (5) business
days of its request, for any and all reasonable out-of-pocket expenses incurred
in connection with the services performed by the Financial Advisor and its
counsel pursuant to this Agreement, including (i) reasonable hotel, food and
associated expenses; (ii) reasonable charges for travel; (iii) reasonable
long-distance telephone calls; and (iv) other reasonable expenses spent or
incurred on the Company's behalf. All such expenses in excess of $500 shall be
pre-approved by the Company.
7. INTRODUCTION OF CUSTOMERS, ORIGINATION OF LINE OF CREDIT AND
SIMILAR TRANSACTIONS. In the event the Financial Advisor originates a line of
credit with a lender or a corporate partner, the Company and the Financial
Advisor will mutually agree on a satisfactory fee and the terms of payment of
such fee. In the event the Financial Advisor introduces the Company to a joint
venture partner or customer and sales develop as a result of the
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<PAGE> 5
introduction, the Company agrees to pay a fee of five percent (5%) of total
sales generated directly from this introduction during the first two years
following the date of the first sale. Total sales shall mean cost receipts
less any applicable refunds, returns, allowances, credits and shipping charges
and monies paid by the Company by way of settlement or judgment arising out of
claims made by or threatened against the Company. Commission payments shall be
paid on the 15th day of each month following the receipt of customers'
payments. In the event any adjustments are made to the total sales after the
commission has been paid, the Company shall be entitled to an appropriate
refund or credit against future payments under this Agreement.
All fees to be paid pursuant to this paragraph, except as otherwise
specified, are due and payable to the Financial Advisor in cash at the closing
or closings of any transaction specified in this paragraph. In the event that
this Agreement shall not be renewed or if terminated for any reason,
notwithstanding any such non-renewal or termination, the Financial Advisor
shall be entitled to a full fee as provided under this paragraph for any
transaction for which the discussions were initiated during the term of this
Agreement and which is consummated within a period of twelve months after
non-renewal or termination of this Agreement. Nothing herein shall impose any
obligation on the part of the Company to
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<PAGE> 6
enter into any transaction or to use any services of the Financial Advisor
offered pursuant to this paragraph or this Agreement.
8. USE OF ADVICE BY THE COMPANY; PUBLIC MARKET FOR THE COMPANY'S
SECURITIES. The Company acknowledges that all opinions and advice (written or
oral) given by the Financial Advisor to the Company in connection with the
engagement of the Financial Advisor are intended solely for the benefit and use
of the Company in considering the transaction to which they relate, and the
Company agrees that no person or entity other than the Company shall be
entitled to make use of or rely upon the advice of the Financial Advisor to be
given hereunder, and no such opinion or advice shall be used for any other
purpose or reproduced, disseminated, quoted or referred to at any time, in any
manner or for any purpose, nor may the Company make any public references to
the Financial Advisor, or use of the Financial Advisor's name in any annual
reports or any other reports or releases of the Company without the prior
written consent of the Financial Advisor.
The Company acknowledges that the Financial Advisor makes no
commitment whatsoever as to making a public trading market in the Company's
securities or to recommending or advising its clients to purchase the Company's
securities. Research reports or corporate finance reports that may be prepared
by the Financial Advisor will, when and if prepared, be done solely on the
merits or judgment and
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<PAGE> 7
analysis of the Financial Advisor or any senior corporate finance personnel of
the Financial Advisor.
9. COMPANY INFORMATION; CONFIDENTIALLY. The Company recognizes
and confirms that, in advising the Company and in fulfilling its engagement
hereunder, the Financial Advisor will use and rely on data, material and other
information furnished to the Financial Advisor by the Company. The Company
acknowledges and agrees that in performing its services under this engagement,
the Financial Advisor may rely upon the data, material and other information
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same. In addition, in the performance of its
services, the Financial Advisor may look to such others for such factual
information, economic advice and/or research upon which to base its advice to
the Company hereunder as the Financial Advisor shall in good faith deem
appropriate.
Except as contemplated by the terms hereof or as required by
applicable law, the Financial Advisor shall keep confidential all non-public
information provided to it by the Company, and shall not disclose such
information to any third party without the Company's prior written consent,
other than such of its employees and advisors as the Financial Advisor
determines to have a need to know.
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<PAGE> 8
10. INDEMNIFICATION.
The Company shall indemnify and hold harmless the Financial Advisor
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Securities Act of
1933, (the "Act"), the Securities Exchange Act of 1934, as amended (the "1934
Act") or any other federal or state statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including costs, expenses,
awards and/or judgments) arise out of or are in connection with the services
rendered by the Financial Advisor or any transactions in connection with this
Agreement, except for any liabilities, claims and lawsuits (including awards
and/or judgments), arising out of willful misconduct or willful omissions of
the Financial Advisor. In addition, the Company shall also indemnify and hold
harmless the Financial Advisor against any and all reasonable costs and
expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Financial Advisor shall give the Company prompt notice of any such
liability, claim or lawsuit which the Financial Advisor contends is the subject
matter of the Company's indemnification and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right
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<PAGE> 9
to settle, compromise and dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
The Financial Advisor shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the 1934
Act or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are based upon willful misconduct or willful
omissions of the Financial Advisor. In addition, the Financial Advisor shall
also indemnify and hold the Company harmless against any and all reasonable
costs and expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Company shall give the Financial Advisor prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject matter of
the Financial Advisor's indemnification and the Financial Advisor thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim
or lawsuit, excepting therefrom any and all
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<PAGE> 10
proceedings or hearings before any regulatory bodies and/or authorities.
11. THE FINANCIAL ADVISOR AS AN INDEPENDENT CONTRACTOR. The
Financial Advisor shall perform its services hereunder as an independent
contractor and not as an employee of the Company or an affiliate thereof. It
is expressly understood and agreed to by the parties hereto that the Financial
Advisor shall have no authority to act for, represent or bind the Company or
any affiliate thereof in any manner, except as may be agreed to expressly by
the Company in writing from time to time.
12. MISCELLANEOUS.
(a) This Agreement between the Company and the Financial Advisor
constitutes the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder
shall be in writing and shall be deemed sufficiently given if hand-delivered or
sent postage prepaid by certified or registered mail, return receipt requested,
to the respective parties as set forth below, or to such other address as
either party may notify the other in writing: If to the Company:
Abraham Ostrovsky, Chairman
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<PAGE> 11
Cable-Sat Systems, Inc.
2105 Hamilton Avenue, Suite 140
San Jose, California 95125
With a copy to: Joel Bernstein, Esq.
9701 Biscayne Blvd.
Miami, Florida 33138
If to the
Financial Advisor: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
(c) This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors, legal
representatives and assigns.
(d) This Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or
waived, except in a writing signed by all of the parties hereto.
(f) This Agreement shall be construed in accordance with and
governed by the laws of the State of Florida, without giving effect to conflict
of law principles. The parties hereby agree that any dispute which may arise
between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in Palm Beach County, Florida, and they
hereby submit to
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<PAGE> 12
the exclusive jurisdiction of the courts of the State of Florida located in
Palm Beach County, Florida and of the federal courts in the Southern District
of Florida with respect to any action or legal proceeding commenced by any
party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any such action or proceeding brought in such a court
or respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Agreement, and consent to the service of process in any
such action or legal proceeding by means of registered or certified mail,
return receipt requested, in care of the address set forth in paragraph 12(b)
hereof.
(g) This Agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Financial Advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
Very truly yours,
CABLE-SAT SYSTEMS, INC.
BY:
-------------------------------------
Wil F. Zarecor, President
BARRON CHASE SECURITIES, INC.
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<PAGE> 13
BY:
-------------------------------
Robert T. Kirk, President
For itself and as Representative
of the several Underwriters
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<PAGE> 1
EXHIBIT 10.2
MERGER AND ACQUISITION AGREEMENT
_____________, 1996
Wil F. Zarecor, President
Cable-Sat Systems, Inc.
2105 Hamilton Avenue, Suite 140
San Jose, California 95125
RE: MERGER AND ACQUISITION AGREEMENT
Gentlemen:
You have agreed that Barron Chase Securities, Inc., (the "Finder") may act as
a non-exclusive finder or financial consultant for you in various transactions
in which Cable-Sat Systems, Inc. (the "Company") may be involved, such as
mergers, acquisitions, joint ventures, debt or equity placements and similar or
other on-balance or off-balance sheet corporate finance transactions. The
Company hereby agrees that in the event that the Finder shall first introduce to
the Company another party or entity, in writing, and that as a result of such
introduction, a transaction between such entity and the Company is consummated
("Consummated Transaction"), then the Company shall pay to the Finder a finder's
fee as follows:
a. Five percent (5%) of the first $1,000,000 of the consideration paid
in such transaction;
b. Four percent (4%) of the consideration in excess of $1,000,000 and
up to $2,000,000;
c. Three percent (3%) of the consideration in excess of $2,000,000 and
up to $3,000,000;
d. Two percent (2%) of any consideration in excess of $3,000,000 and
up to $4,000,000; and
e. One percent (1%) of any consideration in excess of $4,000,000.
The fee due the Finder shall be paid by the Company in cash and/or in stock
at the closing of the Consummated Transaction as
<PAGE> 2
mutually agreed between the Company and the Finder, without regard to
whether the Consummated Transaction involves payments in cash, in stock, or
a combination of stock and cash, or is made on an installment sale basis.
By way of example, if the Consummated Transaction involves securities of
the acquiring entity (whether securities of the Company, if the Company
is the acquiring party, or securities of another entity, if the Company is
the selling party) having a value of $5,000,000, the consideration to be
paid by the Company to the Finder at closing shall be $150,000.
In the event that for any reason the Company shall fail to pay to the Finder
all or any portion of the finder's fee payable hereunder when due, interest
shall accrue and be payable on the unpaid balance due hereunder from the date
when first due through and including that date when actually collected by the
Finder, at a rate equal to two (2) points over the prime rate of Citibank,
N.A. in New York, New York, computed on a daily basis and adjusted as announced
from time to time.
This agreement shall be effective on the date hereof and shall expire on the
fifth anniversary of the date hereof.
Notwithstanding anything herein to the contrary, if the Company shall,
within 180 days immediately following the termination of the five year
period provided above, conclude a Consummated Transaction with any party
introduced by the Finder to the Company prior to the termination of said
five year period, the Company shall also pay the Finder the fee determined
above.
The Company represents and warrants to the Finder that the engagement of the
Finder hereunder has been duly authorized and approved by the Board of
Directors of the Company and this letter agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company.
This agreement has been executed and delivered in the State of Florida and
shall be governed by the laws of such state, without giving effect to the
conflicts of laws rules thereunder.
This agreement shall be binding upon, and enforceable against, the
successors and assigns of each of the undersigned.
Please sign this letter at the place indicated below, whereupon it will
constitute our mutually binding agreement with respect to the matters contained
herein.
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<PAGE> 3
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:_______________________________
Robert T. Kirk, President
Agreed to and Accepted:
CABLE-SAT SYSTEMS, INC.
By:________________________________
Wil F. Zarecor, President
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<PAGE> 1
EXHIBIT 10.4
REPRENTATIVE'S WARRANT AGREEMENT (the "Representative's Warrant
Agreement" or "Agreement"), dated as of ________________, 1996, between
CABLE-SAT SYSTEMS, INC. (the "Company"), and BARRON CHASE SECURITIES, INC.
(the "Representative").
W I T N E S S E T H:
WHEREAS, the Representative has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between
the Company and the Representative, to act as the Representative of the
Underwriters in connection with the Company's proposed public offering of
1,000,000 shares of the Company's Common Stock at $6.00 per share and 1,000,000
Warrants ("Public Warrants") at $.125 per warrant (the "Public Offering"); and
WHEREAS, the Company proposes to issue to the Representative and/or
persons related to the Representative as those persons are defined in Section
44(a)(6) of Article III of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "Holder"), 100,000 warrants
("Common Stock Representative Warrants") to purchase 100,000 shares of the
Company's Common stock (the "Shares") and 100,000 warrants ("Warrant
Representative Warrants") to purchase 100,000 Common Stock Purchase Warrants
("Underlying Warrants") exercisable to purchase 100,000 shares of the Company's
Common Stock. The "Common Stock Representative Warrants" and the "Warrant
Representative Warrants" are collectively referred to as the "Warrants". The
"Shares" and the "Underlying Warrants" are collectively referred to as the
"Warrant Securities"; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Holders in consideration for, and as part of
the compensation in connection with, the Representative acting as
Representative pursuant to the Underwriting Agreement.
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<PAGE> 2
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of TEN DOLLARS AND NO CENTS ($10.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant and Period.
The Public Offering has been registered under a Registration Statement
on Form S-1 (File No. 33-________) and declared effective by the Securities and
Exchange Commission (the "SEC" or "Commission") on ___________, 1996 (the
"Effective Date"). This Agreement, relating to the purchase of the Warrants,
is entered into pursuant to the Underwriting Agreement between the Company and
the Representative, as representative of the Underwriters, in connection with
the Public Offering.
Pursuant to the Warrants, the Holders are hereby granted the right to
purchase from the Company, at any time during the period commencing on the
Effective Date and expiring five (5) years thereafter (the "Expiration Time"),
up to 100,000 Shares at an initial exercise price (subject to adjustment as
provided in Article 8 hereof) of $7.20 per share (120% of the public offering
price) and/or 100,000 non-redeemable Underlying Warrants at an initial exercise
price of $.15 per warrant (120% of the public offering price) (the "Exercise
Price" or "Purchase Price"), subject to the terms and conditions of this
Agreement. Each Underlying Warrant is exercisable to purchase one (1) share of
Common Stock at $7.20 per share during the three (3) year period commencing on
the Effective Date.
Except as specifically otherwise provided herein, the Shares and the
Underlying Warrants constituting the Warrant Securities shall bear the same
terms and conditions as such securities described under the caption
"Description of Securities" in the Registration Statement, and as designated in
the Company's Articles of Incorporation and any amendments thereto, and the
Underlying Warrants shall be governed by the terms of the Warrant Agreement
executed in connection with the Company's public offering (the "Warrant
Agreement"), except as provided herein, and the Holders shall have registration
rights under the Securities Act of 1933, as amended (the "Act"), for the
Warrants, the Shares, the Underlying Warrants, and the shares of Common Stock
underlying the Underlying Warrants, as more fully described in paragraph seven
(7) of this
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<PAGE> 3
Representative's Warrant Agreement. In the event of any extension of the
expiration date or reduction of the exercise price of the Public Warrants, the
same such changes to the Underlying Warrants shall be simultaneously effected,
except that the Underlying Warrants shall expire no later than five (5) years
from the Effective Date.
2. Warrant Certificates.
The warrant certificates (the "Warrant Certificate") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth in the
form of Warrant Certificate, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Full Exercise.
(i) The Holder hereof may effect a cash exercise of the
Common Stock Representative Warrants and/or the Warrant Representative
Warrants and/or the Underlying Warrants by surrendering the Warrant
Certificate, together with a Subscription in the form of Exhibit "A"
attached thereto, duly executed by such Holder to the Company, at any
time prior to the Expiration Time, at the Company's principal office,
accompanied by payment in cash or by certified or official bank check
payable to the order of the Company in the amount of the aggregate
purchase price (the "Aggregate Price"), subject to any adjustments
provided for in this Agreement. The aggregate price hereunder for
each Holder shall be equal to the exercise price as set forth in
Section six (6) hereof multiplied by the number of Warrants,
Underlying Warrants or Shares that are the subject of each Holder's
Warrant (as adjusted as hereinafter provided).
(ii) The Holder hereof may effect a cashless exercise of
the Common Stock Representative Warrants and/or the Underlying
Warrants by delivering the Warrant Certificate to the Company together
with a Subscription in the form of Exhibit "B" attached thereto, duly
executed by such Holder, in which case no payment of cash will be
required. Upon such cashless
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<PAGE> 4
exercise, the number of Shares to be purchased by each Holder hereof
shall be determined by dividing: (i) the number obtained by
multiplying the number of Shares that are the subject of each Holder's
Warrant Certificate by the amount, if any, by which the then Market
Value (as hereinafter defined) exceeds the Purchase Price; by (ii) the
then per share Market Value or purchase price, whichever is greater.
In no event shall the Company be obligated to issue any fractional
securities and, at the time it causes a certificate or certificates to
be issued, it shall pay the Holder in lieu of any fractional
securities or shares to which such Holder would otherwise be entitled,
by the Company check, in an amount equal to such fraction multiplied
by the Market Value. The Market Value shall be determined on a per
Share basis as of the close of the business day preceding the
exercise, which determination shall be made as follows: (a) if the
Common Stock is listed for trading on a national or regional stock
exchange or is included on the NASDAQ National Market or Small-Cap
Market, the average closing sale price quoted on such exchange or the
NASDAQ National Market or Small-Cap Market which is published in
The Wall Street Journal for the ten (10) trading days immediately
preceding the date of exercise, or if no trade of the Common Stock
shall have been reported during such period, the last sale price so
quoted for the next day prior thereto on which a trade in the Common
Stock was so reported; or (b) if the Common Stock is not so listed,
admitted to trading or included, the average of the closing highest
reported bid and lowest reported ask price as quoted on the National
Association of Securities Dealer's OTC Bulletin Board or in the "pink
sheets" published by the National Daily Quotation Bureau for the
first day immediately preceding the date of exercise on which the
Common Stock is traded.
3.2 Partial Exercise. The securities referred to in paragraph
3.1 above also may be exercised from time to time in part by surrendering the
Warrant Certificate in the manner specified in Section 3.1 hereof, except that
with respect to a cash exercise the Purchase Price payable shall be equal to
the number of securities being purchased hereunder multiplied by the per
security Purchase Price, subject to any adjustments provided for in this
Agreement. Upon any such partial exercise, the Company, at its expense, will
forthwith issue to the Holder hereof a new Warrant Certificate or
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<PAGE> 5
Warrants of like tenor calling in the aggregate for the number of securities
(as constituted as of the date hereof) for which the Warrant Certificate shall
not have been exercised, issued in the name of the Holder hereof or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
direct.
4. Issuance of Certificates.
Upon the exercise of the Warrants and/or the Underlying Warrants, the
issuance of certificates for the shares of Common Stock and/or other securities
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock and/or other securities shall be executed on behalf of the
Company by the manual or facsimile signature of the then present Chairman or
Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or Assistant Secretary of
the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants.
The Holder of a Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the Effective
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<PAGE> 6
Date of the Public Offering, except (a) to officers of the Representative or to
officers and partners of the other Underwriters or Selected Dealers
participating in the Public Offering; (b) by will; or (c) by operation of law.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Prices.
The initial exercise price of each Common Stock Representative Warrant
shall be $7.20 per share (120% of the public offering price). The initial
exercise price of each Warrant Representative Warrant shall be $.15 per
Underlying Warrant (120% of the public offering price). The initial exercise
price of each Underlying Warrant shall be $7.20 per share. The adjusted
exercise price shall be the price which shall result from time to time from any
and all adjustments of the initial exercise price in accordance with the
provisions of Section 8 hereof. The Warrant Representative Warrants and the
Underlying Warrants are exercisable during the three (3) year period commencing
on the Effective Date.
6.2 Exercise Price.
The term "Exercise Price" herein shall mean the initial exercise price
or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933.
The Warrants, the Shares, the Underlying Warrants and the shares of
Common Stock issuable upon exercise of the Underlying Warrants (collectively
the "Registrable Securities") have been registered under the Securities Act of
1933, as amended (the "Act"). Upon exercise, in part or in whole, of the
Warrants, certificates representing the Shares, the Underlying Warrants and/or
the shares of Common Stock issuable upon exercise of the Underlying Warrants
shall bear the following legend in the event there is no current registration
statement effective with the Securities and Exchange Commission at such time as
to such securities:
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<PAGE> 7
The securities represented by this certificate may not be offered or
sold except pursuant to (i) an effective registration statement under
the Act, (ii) to the extent applicable, Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an exemption
from registration under such Act and applicable state securities laws
is available.
7.2 Piggyback Registration.
If, at any time commencing after the Effective Date of the offering
and expiring seven (7) years thereafter, the Company prepares and files a
post-effective amendment to the Registration Statement, or a new Registration
Statement, under the Act, or files a Notification on Form 1-A or otherwise
registers securities under the Act, or files a similar disclosure document with
the Commission (collectively the "Registration Documents") as to any of its
securities under the Act (other than under a Registration Statement pursuant to
Form S-8), it will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such Registration Document, to the
Representative and to all other Holders of the Registrable Securities of its
intention to do so. If the Representative and/or other Holders of the
Registrable Securities notify the Company within twenty (20) days after receipt
of any such notice of its or their desire to include any such Registrable
Securities in such proposed Registration Documents, the Company shall afford
the Representative and such Holders of such Registrable Securities the
opportunity to have any Registrable Securities registered under such
Registration Documents.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of
any such securities shall have been made) to elect not to file any such
proposed registration statement, or to withdraw the same after the filing but
prior to the effective date thereof.
7.3 Demand Registration.
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(a) At any time commencing one (1) year after the Effective Date
of the Public Offering, and expiring four (4) years thereafter, the Holders of
Registrable Securities representing more than 50% of such securities at that
time outstanding shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission, on one
occasion, a registration statement and/or such other documents, including a
prospectus, and/or any other appropriate disclosure document as may be
reasonably necessary in the opinion of both counsel for the Company and counsel
for the Representative and Holders, in order to comply with the provisions of
the Act, so as to permit a public offering and sale of their respective
Registrable Securities for nine (9) consecutive months (or such longer period
of time as permitted by the Act) by such Holders and any other Holders of any
of the Registrable Securities who notify the Company within ten (10) days after
being given notice from the Company of such request. A Demand Registration
shall not be counted as a Demand Registration hereunder until such Demand
Registration has been declared effective by the SEC and maintained continuously
effective for a period of at least nine months or such shorter period when all
Registrable Securities included therein have been sold in accordance with such
Demand Registration, provided that a Demand Registration shall be counted as a
Demand Registration hereunder if the Company ceases its efforts in respect of
such Demand Registration at the request of the majority Holders making the
demand for a reason other than a material and adverse change in the business,
assets, prospects or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by the majority of the Holders to
all other registered Holders of any of the Registrable Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing one (1) year after
the Effective Date of the offering, and expiring four (4) years thereafter, the
Holders of a majority of the Registrable Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file, on one occasion, with the Commission a registration statement or any
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<PAGE> 9
other appropriate disclosure document so as to permit a public offering and
sale for nine (9) consecutive months (or such longer period of time as
permitted by the Act) by any such Holder of Registrable Securities; provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders participating in the offering
pro-rata.
(d) Any written request by the Holders made pursuant to this
Section 7.3 shall:
(i) specify the number of Registrable Securities which
the Holders intend to offer and sell and the minimum price at which
the Holders intend to offer and sell such securities;
(ii) state the intention of the Holders to offer such
securities for sale;
(iii) describe the intended method of distribution of such
securities; and
(iv) contain an undertaking on the part of the Holders to
provide all such information and materials concerning the Holders and
take all such action as may be reasonably required to permit the
Company to comply with all applicable requirements of the Commission
and to obtain acceleration of the effective date of the registration
statement.
(e) In the event the Company receives from the Holders of any
Registrable Securities representing more than 50% of such securities at that
time outstanding, a request that the Company effect a registration on Form S-3
with respect to the Registrable Securities and if Form S-3 is available for
such offering, the Company shall, as soon as practicable, effect such
registration as would permit or facilitate the sale and distribution of the
Registrable Securities as are specified in the request. All expenses incurred
in connection with a registration requested pursuant to this Section shall be
borne by the Company. Registrations effected pursuant to this Section 7.3(e)
shall not be counted as registrations pursuant to Section 7.3(a) and 7.3(c)
hereof.
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7.4 Covenants of the Company With Respect to Registration.
In connection with any registration under Section 7.2 or 7.3 hereof,
the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand pursuant to
Section 7.3, and shall use its best efforts to have any such registration
statement declared effective at the earliest practicable time. The Company
will promptly notify each seller of such Registrable Securities and confirm
such advice in writing, (i) when such registration statement becomes effective,
(ii) when any post-effective amendment to such registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement
to such registration statement or any prospectus relating thereto or for
additional information.
The Company shall furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of each
such amendment and supplement thereto (in each case including each preliminary
prospectus and summary prospectus) in conformity with the requirements of the
Act, and such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities by such seller.
(b) The Company shall pay all costs (excluding transfer taxes, if
any, and fees and expenses of Holder(s)' counsel and the Holder's pro-rata
portion of the selling discount or commissions), fees and expenses in
connection with all registration statements filed pursuant to Sections 7.2 and
7.3(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses. The Holder(s) will pay
all costs, fees and expenses in connection with any registration statement
filed pursuant to Section 7.3(c). If the Company shall fail to comply with
the provisions of Section 7.3(a), the Company shall, in addition to any other
equitable or other relief available to the Holder(s), be liable for any or all
special and consequential damages sustained by the Holder(s) requesting
registration of their Registrable Securities.
(c) The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the
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<PAGE> 11
prospectus used in connection therewith as may be reasonably necessary to keep
such registration statement effective for at least nine months (or such longer
period as permitted by the Act), and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the seller or sellers of Registrable Securities set forth in
such registration statement. If at any time the SEC should institute or
threaten to institute any proceedings for the purpose of issuing a stop order
suspending the effectiveness of any such registration statement, the Company
will promptly notify each seller of such Registrable Securities and will use
all reasonable efforts to prevent the issuance of any such stop order or to
obtain the withdrawal thereof as soon as possible. The Company will use its
good faith reasonable efforts and take all reasonably necessary action which
may be required in qualifying or registering the Registrable Securities
included in a registration statement for offering and sale under the securities
or blue sky laws of such states as reasonably are required by the Holder(s),
provided that the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction. The Company shall use its
good faith reasonable efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities of the United States or any State thereof
as may be reasonably necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(d) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement and each person,
if any, who controls such Holders within the meaning of Section 15 of the Act
or Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act,
the Exchange Act or otherwise, arising from such registration statement but
only to the same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Representative as contained
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in the Underwriting Agreement.
(e) If requested by the Company prior to the filing of any
registration statement covering the Registrable Securities, each of the
Holder(s) of the Registrable Securities to be sold pursuant to a registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from written
information furnished by such Holder, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in the Underwriting Agreement
pursuant to which the Representative has agreed to indemnify the Company,
except that the maximum amount which may be recovered from each Holder pursuant
to this paragraph or otherwise shall be limited to the amount of net proceeds
received by the Holder from the sale of the Registrable Securities.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants or Underlying Warrants prior
to the filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Registrable Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof without the prior written
consent of the Holders of the Registrable Securities representing a majority of
such securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten
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public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a
report on the Company's financial statements included in such registration
statement, in each case covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities.
(i) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times and as often as any such
Holder shall reasonably request.
(j) With respect to a registration statement filed pursuant to
Section 7.3, the Company, if requested, shall enter into an underwriting
agreement with the managing underwriter, reasonably satisfactory to the
Company, selected for such underwriting by Holders holding a majority of the
Registrable Securities requested to be included in such underwriting. Such
agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders, if required by the Underwriter to be parties to any underwriting
agreement relating to an underwritten sale of their Registrable Securities,
may, at their option, require that any or all the representations, warranties
and
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<PAGE> 14
covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders and their
intended methods of distribution.
(k) Notwithstanding the provisions of paragraph 7.2 or paragraph
7.3 of this Agreement, the Company shall not be required to effect or cause the
registration of Registrable Securities pursuant to paragraph 7.2 or paragraph
7.3 hereof if, within thirty (30) days after its receipt of a request to
register such Registrable Securities (i) counsel for the Company delivers an
opinion to the Holders requesting registration of such Registrable Securities,
in form and substance satisfactory to counsel to such Holder(s), to the effect
that the entire number of Registrable Securities proposed to be sold by such
Holder(s) may otherwise be sold, in the manner proposed by such Holder(s),
without registration under the Securities Act, or (ii) the SEC shall have
issued a no-action position, in form and substance satisfactory to counsel for
the Holder(s) requesting registration of such Registrable Securities, to the
effect that the entire number of Registrable Securities proposed to be sold by
such Holder(s) may be sold by it, in the manner proposed by such Holder(s),
without registration under the Securities Act.
(l) After completion of the Public Offering, the Company shall
not, directly or indirectly, enter into any merger, business combination or
consolidation in which (a) the Company shall not be the surviving corporation
and (b) the stockholders of the Company are to receive, in whole or in part,
capital stock or other securities of the surviving corporation, unless the
surviving corporation shall, prior to such merger, business combination or
consolidation, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the Holders would
be entitled to receive in exchange for Registrable Securities under any such
merger, business combination or consolidation, provided that to the extent such
securities to be received are convertible into shares of Common Stock of the
issuer thereof, then any such shares of Common Stock as are issued or issuable
upon conversion of said convertible securities shall also be included within
the definition of
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"Registrable Securities".
8. Adjustments to Exercise Price and Number of Securities.
8.1 Adjustment for Dividends, Subdivisions, Combinations or
Reclassifications.
In case the Company shall (a) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (b) subdivide its outstanding shares of Common Stock into
a greater number of shares, (c) combine its outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company; then, and in each
such case, the per share Exercise Price and the number of Warrant Securities in
effect immediately prior to such action shall be adjusted so that the Holder of
this Warrant thereafter upon the exercise hereof shall be entitled to receive
the number and kind of shares of the Company which such Holder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this Section, the Holder of this Warrant shall
become entitled to receive shares of two or more classes of capital stock of
the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such class of capital stock.
Immediately upon any adjustment of the Exercise Price pursuant to this
Section, the Company shall send written notice thereof to the Holder of Warrant
Certificates (by first class mail, postage prepaid), which notice shall state
the Exercise Price resulting from such adjustment, and any increase or decrease
in the number of Warrant Securities to be acquired upon exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
8.2 Adjustment For Reorganization, Merger or Consolidation.
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<PAGE> 16
In case of any reorganization of the Company or consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the
number of shares of Common Stock of the Company for which such warrant might
have been exercised immediately prior to such reorganization, consolidation,
merger, conveyance, sale or transfer. Such supplemental Warrant agreement
shall provide for adjustments which shall be identical to the adjustments
provided in Section 8 and such registration rights and other rights as provided
in this Agreement. The Company shall not effect any such consolidation,
merger, or similar transaction as contemplated by this paragraph, unless prior
to or simultaneously with the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or merger or the
corporation purchasing, receiving, or leasing such assets or other appropriate
corporation or entity shall assume, by written instrument executed and
delivered to the Holders, the obligation to deliver to the Holders, such shares
of stock, securities, or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase, and to perform the other
obligations of the Company under this Agreement. The above provision of this
Subsection shall similarly apply to successive consolidations or successively
whenever any event listed above shall occur.
8.3 Dividends and Other Distributions.
In the event that the Company shall at any time prior to the exercise
of all of the Warrants and/or Underlying Warrants distribute to its
stockholders any assets, property, rights, evidences of indebtedness,
securities (other than a distribution made as a cash dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of
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the jurisdictions of incorporation of the Company), whether issued by the
Company or by another, the Holders of the unexercised Warrants shall thereafter
be entitled, in addition to the shares of Common Stock or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Warrants, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such distribution as if the Warrants had been exercised
immediately prior to such distribution. At the time of any such distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this subsection or an adjustment to the Exercise Price, which
shall be effective as of the day following the record date for such
distribution.
8.4 Adjustment in Number of Securities.
Upon each adjustment of the Exercise Price pursuant to the provisions
of this Section 8, the number of securities issuable upon the exercise of each
Warrant and/or Underlying Warrant shall be adjusted to the nearest full amount
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of securities issuable upon exercise of the
Warrants and/or the Underlying Warrants immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
8.5 No Adjustment of Exercise Price in Certain Cases.
No adjustment of the Exercise Price shall be made if the amount of
said adjustment shall be less than 5 cents ($.05) per Share, 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 which, together with any adjustment so
carried forward, shall amount to at least 5 cents ($.05) per Share.
8.6 Accountant's Certificate of Adjustment.
In each case of an adjustment or readjustment of the Exercise Price or
the number of any securities issuable upon exercise of the Warrants and/or
Underlying Warrants, the Company, at its expense, shall cause independent
certified public accountants of recognized
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standing selected by the Company (who may be the independent certified public
accountants then auditing the books of the Company) to compute such adjustment
or readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to any Holder of the Warrants and/or Underlying Warrants
at the Holder's address as shown on the Company's books. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based including, but not limited to, a
statement of (i) the Exercise Price at the time in effect, and (ii) the number
of additional securities and the type and amount, if any, of other property
which at the time would be received upon exercise of the Warrants and/or
Underlying Warrants.
8.7 Adjustment of Underlying Warrant Exercise Price.
With respect to any of the Underlying Warrants whether or not the
Underlying Warrants have been exercised (or are exercisable) and whether or not
the Underlying Warrants are issued and outstanding, the Underlying Warrant
exercise price and the number of shares of Common Stock underlying such
Underlying Warrants shall be automatically adjusted in accordance with the
Warrant Agreement between the Company and the Company's transfer agent, upon
occurrence of any of the events relating to adjustments described therein.
Thereafter, the Underlying Warrants shall be exercisable at such adjusted
Underlying Warrant exercise price for such adjusted number of underlying shares
of Common Stock or other securities, properties or rights.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or
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destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Warrants, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interest.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants and/or
Underlying Warrants, nor shall it be required to issue script or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding
any fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights, or in lieu thereof paying cash equal to such
fractional interest multiplied by the current value of a share of Common Stock.
11. Reservation and Listing.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Underlying Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable
upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and/or the Underlying Warrants, and payment of the
Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants and/or Underlying Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants and the Underlying Warrants to be listed and
quoted (subject to official notice of issuance) on all securities Exchanges and
Systems on which the Common Stock and/or the Public Warrants may then be listed
and/or quoted, including NASDAQ.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as
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conferring upon the Holders of the Warrants and/or Underlying Warrants the
right to vote or to consent or to receive notice as a stockholder in respect of
any meetings of stockholders for the election of directors or any other matter,
or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Warrants and/or Underlying
Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business
as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date of the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notices shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
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13. Underlying Warrants.
The form of the certificate representing the Underlying Warrants (and
the form of election to purchase shares of Common Stock upon the exercise of
the Underlying Warrants and the form of assignment printed on the reverse
thereof) shall be substantially as set forth in the exhibits to the Warrant
Agreement. Subject to the terms of this Agreement, one (1) Underlying Warrant
shall evidence the right to initially purchase one (1) fully-paid and
non-assessable share of Common Stock at an initial purchase price of $7.20
during the three (3) year period commencing on the Effective Date of the
Registration Statement, at which time the Underlying Warrants, unless the
exercise period has been extended, shall expire. The exercise price of the
Underlying Warrants and the number of shares of Common Stock issuable upon the
exercise of the Underlying Warrants are subject to adjustment, whether or not
the Warrants have been exercised and the Underlying Warrants have been issued,
in the manner and upon the occurrence of the events set forth in the Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of
this Agreement and upon issuance of the Underlying Warrants, each registered
holder of such Underlying Warrant shall have the right to purchase from the
Company (and the Company shall issue to such registered holders) up to the
number of fully-paid and non-assessable shares of Common Stock (subject to
adjustment as provided in the Warrant Agreement) set forth in such Warrant
Certificate, free and clear of all preemptive rights of stockholders, provided
that such registered Holder complies with the terms governing exercise of the
Underlying Warrant set forth in the Warrant Agreement, and pays the applicable
exercise price, determined in accordance with the terms of the Warrant
Agreement. Upon exercise of the Underlying Warrants, the Company shall
forthwith issue to the registered Holder of any such Underlying Warrant in his
name or in such name as may be directed by him, certificates for the number of
shares of Common Stock so purchased. Except as otherwise provided herein and
in this Agreement, the Underlying Warrants shall be governed in all respects by
the terms of the Warrant Agreement. The Underlying Warrants shall be
transferrable in the manner provided in the Warrant Agreement, and upon any
such transfer, a new Underlying Warrant certificate shall be issued promptly to
the transferee. The Company covenants to send to each Holder, irrespective of
whether or not the Warrants have been exercised, any and all
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notices required by the Warrant Agreement to be sent to holders of Underlying
Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given when personally
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of any of the Registrable
Securities, to the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth below or
to such other address as the Company may designate by notice to the
Holders.
Abraham Ostrovsky, Chairman
Cable-Sat Systems, Inc.
2105 Hamilton Avenue, Suite 140
San Jose, California 95125
With a copy to: Joel Bernstein, Esq.
9701 Biscayne Blvd.
Miami, Florida 33138
15. Entire Agreement: Modification.
This Agreement (and the Underwriting Agreement and Warrant Agreement
to the extent applicable) contain the entire understanding between the parties
hereto with respect to the subject matter hereof, and the terms and provisions
of this Agreement may not be modified, waived or amended except in a writing
executed by the Company and the Holders of at least a majority of Registrable
Securities (based on underlying numbers of shares of Common Stock). Notice of
any modification, waiver or amendment shall be promptly provided to any Holder
not consenting to such modification, waiver or amendment.
16. Successors.
All the covenants and provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, the Holders
22
<PAGE> 23
and their respective successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at the close of business on
_____________, 2003. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination.
18. Governing Law; Submission to Jurisdiction.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Florida and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws. The
Company, the Representative and the Holders hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in the Fifteenth Judicial Circuit Court in and for
Palm Beach County, Florida or the United States District Court for the Southern
District of Florida, West Palm Beach Division, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company, the
Representative and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to
be served upon any of the Company, the Representative and the Holders (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
14 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the party so served in any action, proceeding or claim.
19. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
20. Captions.
The caption headings of the Sections of this Agreement are for
23
<PAGE> 24
convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
21. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Representative and any other
registered Holder(s) of the Warrant Certificates or Registrable Securities any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Representative and any other Holder(s) of the Warrant Certificates or
Registrable Securities.
22. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
CABLE-SAT SYSTEMS, INC.
By:
-------------------------
Wil F. Zarecor, President
Attest:
- -----------------------------
Benjamin T. Maltby, Secretary
BARRON CHASE SECURITIES, INC.
By:
-------------------------
24
<PAGE> 25
Robert Kirk, President
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M, EASTERN TIME ON __________, 2001
NO. W-
----- -------- Common Stock
Representative
Warrants and/or
-------- Warrant
Representative
Warrants
25
<PAGE> 26
This Warrant Certificate certifies that ________________, or
registered assigns, is the registered holder of _______ Common Stock
Representative Warrants and/or _______ Warrant Representative Warrants. Each
Common Stock Representative Warrant permits the Holder hereof to purchase
initially, at any time from __________, 1996 ("Purchase Date") until 5:30 p.m.
Eastern Time on _________, 2001 ("Expiration Date"), one (1) share of Cable-Sat
Systems, Inc. (the "Company") Common Stock at the initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of $7.20 per
share (120% of the public offering price). Each Warrant Representative
Warrant permits the Holder hereof to purchase initially, at any time from the
Purchase Date until three (3) years from the Purchase Date, one (1) Underlying
Warrant at the Exercise Price of $.15 per Underlying Warrant. Each Underlying
Warrant permits the Holder thereof to purchase, at any time from the Purchase
Date until three (3) years from the Purchase Date, one (1) share of the
Company's Common Stock at the Exercise Price of $7.20 per share.
Any exercise of Common Stock Representative Warrants and/or Warrant
Representative Warrants shall be effected by surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the
Representative's Warrant Agreement dated as of __________, 1996, between the
Company and Barron Chase Securities, Inc. (the "Representative's Warrant
Agreement"). Payment of the Exercise Price shall be made by certified check or
official bank check in New York Clearing House funds payable to the order of
the Company in the event there is no cashless exercise pursuant to Section
3.1(ii) of the Representative's Warrant Agreement. The "Common Stock
Representative Warrants" and the "Warrant Representative Warrants" are
collectively referred to as "Warrants". The Underlying Warrants shall be
exercised pursuant to the provisions of the Representative's Warrant Agreement
and pursuant to the Warrant Agreement entered into by the Company relating to
the Public Warrants, unless there is a cashless exercise pursuant to Section
3.1(ii) of the Representative's Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., Eastern Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
26
<PAGE> 27
a duly authorized issue of Warrants issued pursuant to the Representative's
Warrant Agreement, which Representative's Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation or rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
The Representative's Warrant Agreement provides that upon the
occurrence of certain events, the Exercise Price and the type and/or number of
the Company's securities issuable thereupon may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Exercise Price
and the number and/or type of securities issuable upon the exercise of the
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Representative's Warrant
Agreement.
Upon due presentment for registration or transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Representative's Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
27
<PAGE> 28
All terms used in this Warrant Certificate which are defined in the
Representative's Warrant Agreement shall have the meanings assigned to them in
the Representative's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of , 1996
---------
CABLE-SAT SYSTEMS, INC.
By:
-------------------------
Wil F. Zarecor, President
(Seal)
Attest:
- -----------------------------
Benjamin T. Maltby, Secretary
EXHIBIT "A"
FORM OF SUBSCRIPTION (CASH EXERCISE)
28
<PAGE> 29
(To be signed only upon exercise of Warrant)
TO: Cable-Sat Systems, Inc.
2105 Hamilton Avenue, Suite 140
San Jose, California 95125
The undersigned, the Holder of Warrant Certificate number ___
(the "Warrant"), representing _________ Common Stock Representative Warrants
and/or _______________ Warrant Representative Warrants of Cable-Sat Systems,
Inc. (the "Company"), which Warrant Certificate is being delivered herewith,
hereby irrevocably elects to exercise the purchase right provided by the
Warrant Certificate for, and to purchase thereunder, ___________ Shares and/
or ___________ Underlying Warrants of the Company, and herewith makes payment
of $__________________ therefor, and requests that the certificates for such
securities be issued in the name of, and delivered to,
__________________________________________________, whose address is,
_____________________________________________________________________________
___________________ __________________, all in accordance with the
Representative's Warrant Agreement and the Warrant Certificate.
Dated:
-----------------------
----------------------------------------
(Signature must conform in all
respects to name of Holder as specified
on the face of the Warrant Certificate)
----------------------------------------
----------------------------------------
(Address)
29
<PAGE> 30
EXHIBIT "B"
FORM OF SUBSCRIPTION (CASHLESS EXERCISE)
TO: Cable-Sat Systems, Inc.
2105 Hamilton Avenue, Suite 140
San Jose, California 95125
The undersigned, the Holder of Warrant Certificate number ____(the
"Warrant"), representing _________ Common Stock Representative Warrants and/or
__________ Underlying Warrants of Cable-Sat Systems, Inc. (the "Company"),
which Warrant is being delivered herewith, hereby irrevocably elects the
cashless exercise of the purchase right provided by the Representative's
Warrant Agreement and the Warrant Certificate for, and to purchase thereunder,
Shares of the Company in accordance with the formula provided at Section three
(3) of the Representative's Warrant Agreement. The undersigned requests that
the certificates for such Shares be issued in the name of, and delivered to,
_______________________________________________________________________________,
whose address is,_______________________
________________________________________________________________________________
___________, all in accordance with the Warrant Certificate.
Dated:
-----------------------
---------------------------
(Signature must conform in
all respects to name of
Holder as
30
<PAGE> 31
specified on the face of
the Warrant Certificate)
---------------------------
---------------------------
(Address)
(FORM OF ASSIGNMENT)
(To be exercised by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________________________________________ hereby
sells, assigns and transfers unto
(Print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
____________________ Attorney, to transfer the within Warrant Certificate on
the books of the within-named Company, and full power of substitution.
Dated: Signature:
- ----------------------- ------------------------------
(Signature must conform in all
31
<PAGE> 32
respects to name of holder as
specified on the fact of the
Warrant Certificate)
------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
32
<PAGE> 1
EXHIBIT 10.5
CABLE-SAT SYSTEMS, INC.
INCENTIVE STOCK OPTION PLAN
1. Introduction. The CABLE-SAT SYSTEMS, INC. INCENTIVE STOCK
OPTION PLAN (the "Plan") is intended to provide incentives to employees of
CABLE-SAT SYSTEMS, INC. (the "Company") and its affiliates, by providing them
with opportunities to purchase shares of common stock of the Company pursuant
to options which are incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Eligibility. Incentive Stock Options may be granted only to
employees of the Company or a parent or subsidiary corporation of the Company.
The granting of any option to any person under the Plan shall neither entitle
such person to, nor disqualify such person from, participation in any other
grant of options or in any other incentive plan of the Company.
3. Administration.
(a) The Plan shall be administered by the Board of
Directors of the Company (the "Board") or by a committee (the "Committee") of
not less than three (3) directors of the Company selected by, and serving at
the pleasure of, the Board, all of whom, to the extent necessary to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, shall be
"disinterested" within the meaning of such Rule.
(b) In the event that the Board shall appoint the
Committee, the Board shall designate one of the members of the Committee as its
chairman. A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by
<PAGE> 2
the affirmative vote of a majority of its members. Any decision or
determination reduced to writing and signed by all the members of the committee
shall be as fully effective as if it had been made by a majority vote of the
members at a meeting duly called and held. The Committee shall make such other
rules and regulations for the conduct of its business as it shall deem
advisable.
(c) Whether or not the Committee is appointed, all powers
and functions of the Committee may at any time and from time to time be
exercised by the Board.
(d) The Board or the Committee shall have the authority,
subject to the terms of the Plan to determine the persons to whom options shall
be granted, the number of shares of common stock to be covered by each option,
the time or times at which options may be granted and exercised, and the terms
and provisions of the instruments by which options shall be evidenced; to
interpret the Plan; to establish, amend and rescind rules and guidelines for
administering the Plan; and make all determinations necessary or advisable, in
its sole discretion, for the administration of the Plan.
(e) The Board or the Committee may designate any officer
of the Company to assist it in the administration of the Plan and may grant
authority to any such officer to execute agreements or other documents and
otherwise take action on behalf of the Board or the Committee, as the case may
be.
(f) The Board or the Committee may employ legal counsel
and such other professional advisors as it may deem desirable for the
administration of the Plan and may rely on any opinion received from such
counsel or advisor.
4. Shares Subject to the Plan. The maximum number of shares of
Company common stock, which may be issued upon the exercise of options granted
under the Plan shall be Seven Hundred Eighty Thousand (780,000) shares. Upon
the exercise of options, the Company may
2
<PAGE> 3
either issue reserved but unissued shares of common stock or transfer shares of
common stock held in its treasury.
5. Terms and Conditions of Option. All options granted pursuant
to this Plan must be granted within ten (10) years from the date the Plan is
adopted by the Board.
Options shall be evidenced by instruments which shall conform to the
following terms and conditions or such other terms and conditions or others
approved by the Board or the Committee:
(a) Option Price. The option price per share shall not
be less than the fair market value (determined by the Board or the Committee
subject to compliance with the principles, if any, enunciated by the Internal
Revenue Service with respect to the determination of fair market value for
purposes of Incentive Stock Options) of a share of common stock on the date of
grant thereof, but in any event not less than the par value of a share of
common stock on such date.
(b) Option Period. Each option shall expire no later
than the day before the fifth (5th) anniversary of the date of its grant.
(c) Exercisability. Options granted under the plan may
be exercised from time-to-time until the termination thereof as provided
therein as follows:
(i) No exercise may be made in the first year
following the Date of Grant.
(ii) After the first year following the date of
Grant, up to 1/3 of the shares may be purchased.
(iii) After the second year following the date of
Grant, an additional 1/3 of the shares may be purchased.
3
<PAGE> 4
(iv) After the third year following the Date of
Grant, all of the shares may be purchased.
(d) Payment. Each instrument evidencing an option shall
provide for the terms of payment of the option price. Subject to any
limitations in such instrument, the holder of an option may pay the option
price in cash, shares of common stock or any other property acceptable to the
Board or the Committee, or any combination thereof, provided that the holder of
an option may not pay the option price in shares of common stock received upon
the exercise of any option under the Plan or any option under another stock
option plan of the Company if such shares have been held by such holder for
less than one (1) year prior to such payment.
(e) Termination of Employment. If the holder of an
option ceases to be employed by the Company other than by reason of death, no
further installments of such option will become exercisable, and such option
shall terminate no later than three (3) months from the date of termination of
such employment; provided that, in the case of termination of employment due to
a disability within the meaning of Section 105(d)(4) of the Code, such option
shall terminate no later than one (1) year from the date of termination of
employment (or directorship of officership), but in any event no later than its
specified expiration date. Notwithstanding the foregoing, if the employment of
the holder of an option is terminated for a reason other than disability or
death all unexercised options of such holder shall immediately be cancelled
upon the Company mailing a notice of such cancellation to the holder at his or
her last known address.
(f) Death. If the holder of an option dies, such option
may be exercised, to the extent of the number of shares of common stock with
respect to which such holder could have exercised such option on the date of
death, by such holder's estate personal representative or beneficiary who
acquires such option by will or by the laws of descent and distribution, at any
4
<PAGE> 5
time prior to the earlier of such option's specified expiration date or the
first anniversary of such holder's death. On the earlier of such dates, such
option shall terminate.
(g) Assignability. No option may be assigned or
transferred by the holder thereof, except by will or by the laws of descent and
distribution, and during the lifetime of any holder of an option, such option
my be exercised only by such holder. At the request of the holder of an
option, shares of common stock purchased upon the exercise of such option may
be issued in or transferred into the name of such holder and another person,
jointly with the right of survivorship.
(h) Withholding. The Company's obligation to deliver
shares of common stock or make any payment upon the exercise of any option
shall be subject to applicable federal, state and local tax withholding
requirements.
(i) Limitation. The aggregate fair market value
(determined at the time of the grant of an option as provided in subsection (a)
of this Section) of the shares of common stock covered by Incentive Stock
Options first exercisable by any person in any calendar year under the Plan
(and all other plans of the Company) shall not exceed One Hundred Thousand
Dollars ($100,000.00).
(j) Additional Provisions. Instruments evidencing
options may contain such other provisions, not inconsistent with the Plan, as
the Board or the Committee deems advisable. Among these provisions may be (i) a
requirement that the holder of an option represent to the Company in writing,
when the option is granted or when such holder purchases shares of common stock
on its exercise, that such holder is accepting such option, or purchasing such
shares (unless they are then covered by an effective registration statement
under the Securities Act of 1933), for such holder's own account for
investment; and (ii) a provision under which the Company may
5
<PAGE> 6
have either the right or the obligation, or both, to repurchase shares of
common stock sold under the Plan at a price not to exceed the fair market value
of the shares at the time of repurchase.
6. Capital Adjustments. In the event of any change in the
outstanding shares of common stock by reason of any stock dividend stock split,
combination or exchange of shares, recapitalization, reclassification, merger,
consolidation, reorganization or other similar transaction, the Board or the
Committee shall make appropriate adjustments in the number and purchase price
of shares of common stock covered by each option outstanding on the date of
such transaction (by means of a grant of a substitute option or an additional
option, or otherwise), and in the total number of shares of common stock
reserved for future grant of options under the Plan.
7. Termination and Amendment of the Plan. The Board may, at
anytime, suspend, amend, or terminate this Plan, provided that except as set
forth in Section 6 hereof, no amendment may be adopted that will: (a)
increase the number of shares reserved for options under the Plan: (b) change
the option price or the method of determining the option price; or (c) change
the provisions required for compliance with Section 422 of the Internal Revenue
Code and Regulations issued thereunder. The Board shall not amend the Plan so
as to materially increase the benefits accruing to participants under the Plan
or materially modify the requirements for eligibility for participation in the
Plan without the approval of the shareholders of the Company. The amendment or
termination of this Plan shall not, without the consent of the optionee, alter
or impair any rights or obligations under any option previously granted
hereunder.
8. Effective Date of Plan. This Plan shall not take effect until
approved by the holders of a majority of the outstanding shares of the common
stock of the Company. Options may be granted prior to that approval provided
that any options so granted shall be expressly made subject
6
<PAGE> 7
to termination if shareholder approval is not obtained prior to one (1) year
from adoption of this Plan by the Board of Directors.
9. Regulations. This Plan is intended to be an Incentive Stock
Option Plan under the Internal Revenue Code and Regulations thereunder. All
provisions required thereby are incorporated herein by this reference whether
or not specifically provided herein. In the event of any inconsistency between
the requirements of the Internal Revenue Code and Regulations and the terms and
conditions herein, the requirements of the Internal Revenue Code and
Regulations shall prevail.
7
<PAGE> 1
EXHIBIT 10.5(a)
AGREEMENT
THIS AGREEMENT ("Agreement") is made as of February __, 1996 between
CABLE-SAT SYSTEMS, INC., a Florida corporation (the "Corporation"), and
OSTROVSKY CONSULTING, INC., ("OCI"), an executive corporation organized to
market the services of Abe Ostrovsky ("Ostrovsky').
WHEREAS, the Corporation has been organized to engage in the
development, manufacturing, marketing and sale of high-end data compression
solutions; and
WHEREAS, OCI has been organized to market the executive services of
Ostrovsky; and
WHEREAS, the Corporation intends to undertake a private offering of
its common stock to raise $2,500,000 of working capital for its operations (the
"Offering"); and
WHEREAS, the Corporation desires to obtain Ostrovsky's services in
connection with its business and that of its subsidiaries and affiliates at the
completion of the minimum Offering (the "Closing");
THEREFORE, in consideration of the premises and covenants herein set
forth, it is agreed as follows:
1. Employment. Corporation hereby engages OCI to provide the
services of Ostrovsky to the Corporation on the terms and conditions set forth
herein.
1.1 Ostrovsky covenants to perform in good faith his
duties as outlined herein, devoting reasonable business time, energies and
abilities to the proper and efficient operation of the business of the
Corporation and its subsidiaries and affiliates and for their benefit.
<PAGE> 2
1.2 Ostrovsky shall not, without the prior written
consent of the Corporation, directly or indirectly, during the term of this
Agreement, engage in any activity competitive with or adverse to the
Corporation's business or welfare, whether alone, as a partner or member, or as
an officer, director, employee or 5% or greater shareholder of a corporation.
The Corporation hereby consents to the services of Ostrovsky as a director of
all corporations he now serves and the continuation of his affiliation with
Young Management Group.
2. Term. Subject to the provisions set forth herein, the term of
OCI's engagement hereunder shall continue for two (2) years.
3. Duties. Ostrovsky shall be appointed as Chairman, President
and Chief Executive Officer and perform such executive duties on behalf of the
Company and its subsidiaries and affiliates as requested by the Board of
Directors. Ostrovsky shall be appointed as director of the Corporation upon
completion of the Offering, shall be entitled to nominate two (2) additional
independent directors out of the Corporation's seven (7) person board and shall
be entitled to approve one of the other directors.
4. Compensation. For all services Ostrovsky may render to the
Corporation during the term of this Agreement, including services as officer,
director or member of any committee of the Board of Directors of the
Corporation and its subsidiaries, OCI shall receive the following compensation:
4.1 A base fee at the rate of $240,000 per year.
4.2 Additional compensation:
(a) An annual bonus as determined by the Board of
Directors.
4.3 Stock compensation.
2
<PAGE> 3
(a) The Corporation will establish a stock option
plan in order to assist the Corporation in hiring and retaining qualified
employees and will reserve 930,000 shares of its common stock for issuance
under the plan. All new and current employees of the Corporation will be
eligible for stock options.
(b) Ostrovsky shall be entitled to the following
stock compensation:
(i) 300,000 shares of the Corporation's
common stock shall be purchased at $.30 per share for a three year promissory
note with interest at 5% per annum with the shares securing such note.
(ii) Ostrovsky will be granted an
incentive stock option for 180,000 shares of common stock at the private
placement offering price (Incentive Stock Option).
(c) Up to 750,000 shares will be reserved under
the plan for high-level executive officers to be recruited, including 150,000
shares of restricted stock at $.30 per share with a two year vesting period.
4.4 OCI shall make all required FICA, FUTA and income tax
withholding payments due in connection with this Agreement.
5. Benefits. During the term of this Agreement, Ostrovsky shall
be entitled to the following executive benefits:
5.1 Ostrovsky shall be entitled to three (3) weeks
vacation time without reduction in salary. Unused vacation can be accrued but
will not be reimbursed.
5.2 During the period of his engagement, Ostrovsky shall
be reimbursed for reasonable traveling and other business expenses reasonably
incurred in connection with the performance of his duties hereunder, subject to
reasonable oversight and verification as required in order for the Corporation
to comply with applicable laws, regulations, accounting and
3
<PAGE> 4
management practices. Automobile lease and insurance expenses will be
reimbursed during the term hereof.
5.3 Ostrovsky shall be entitled to all other benefits
generally available to members of management of the Corporation and
participation in pension, stock option and other benefit plans established for
the Corporation's executives.
6. Termination.
6.1 This engagement may be terminated at any time by:
(i) Mutual agreement; or
(ii) Action of the Board of Directors, on thirty
days' prior written notice, in the event of illness or disability of Ostrovsky
resulting in failure to discharge his duties under this Agreement for ninety or
more consecutive days or for a total of one hundred eighty or more days in a
period of twelve consecutive months; or
(iii) Action of the Board of Directors for cause,
if it shall be established that OCI or Ostrovsky is in material default in the
performance of his obligations, services or duties hereunder (other than for
illness or incapacity), has breached any material provision of this Agreement
or has been otherwise unsatisfactory in providing his services hereunder.
7. Indemnification.
The Corporation shall indemnify Ostrovsky to the fullest extent
permitted under Florida law against expenses (including attorneys' fees and
costs of investigation), costs, judgments, fines and amounts paid in settlement
incurred by Ostrovsky in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, derivative, investigative
or administrative by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation or an affiliate of the Corporation or a
participant in another corporation, partnership
4
<PAGE> 5
or other enterprise at the request of the Corporation if he acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interest of the Corporation or such other entity, and with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. The Corporation shall pay the foregoing expenses as
incurred and Ostrovsky shall repay any such amounts upon the final
determination that he was not entitled to such indemnification, such
determination to be by a court of competent jurisdiction.
8. Insurance. Ostrovsky agrees that the Corporation may procure
insurance on his life, in such amounts as the Corporation may in its discretion
determine, and with the Company or any of its subsidiaries or affiliates named
as the beneficiary under such policy or policies. Ostrovsky agrees that upon
request from the Corporation he will submit to a physical examination and will
execute each such application or other documents as may be required for the
procurement of such insurance. Ostrovsky may purchase insurance in the same
amount purchased by the Corporation with the beneficiary of his choice. Such
insurance shall not exceed $1 million unless required by Corporation's
underwriter.
9. Trade Secrets. Ostrovsky agrees that he will not, during or
after the termination of his employment with the Corporation, furnish or make
accessible to any person, firm, corporation or any other entity any trade
secrets, technical data, customer list, sales representatives, or know-how
acquired by him during the term of his employment with the Corporation which
relates to the past and current business, practices, methods, processes,
programs, equipment or other confidential or secret aspects of the business of
the Company, or its subsidiaries, without the prior written consent of the
Corporation, unless such information shall have become public knowledge, other
than being divulged or made accessible by Ostrovsky.
5
<PAGE> 6
10. Non-disclosure. During the term of this agreement and for two
(2) years after its termination, Ostrovsky will not, directly or indirectly,
disclose the names of the Corporation's customers, prospects or sales
representatives or those of its subsidiaries and affiliates or attempt to
influence such customers or representatives to cease doing business with the
Company or its subsidiaries or affiliates.
11. Conflict of Interest. Ostrovsky agrees that during the term
of his employment and any extensions thereof, he will comply with the policy of
the Corporation with respect to the Corporation entering into, directly or
indirectly, any transactions with any business organization or other entity in
which he or any member of his family has a direct or indirect ownership
interest.
12. Miscellaneous.
12.1 The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. Any waivers shall be in a writing executed by the
parties. The rights granted both parties herein are cumulative and the
election of one shall not constitute a waiver of such party's right to assert
all other legal remedies available under the circumstances.
12.2 Any notice to be given to the Corporation under the
terms of this Agreement shall be addressed to the Corporation, at the address
of its principal place of business, and any notice to be given to Ostrovsky
shall be addressed to him at his home address last shown on the records of the
Corporation, or such other address as either party may hereafter designate in
writing to the other. Any notice shall be deemed duly given three (3) days
after mailing by registered or certified mail, postage prepaid, as provided
herein.
6
<PAGE> 7
12.3 The provisions of the Agreement are severable, and if
any provision of this Agreement shall be held to be invalid or otherwise
unenforceable, in whole or in part, the remainder of the provisions, or
enforceable parts thereof, shall not be affected thereby.
12.4 The rights and obligations of the Corporation under
this Agreement shall inure to the benefit of and be binding upon the successors
of the Corporation.
12.5 This Agreement supersedes all prior agreements and
understandings between the parties hereto, oral or written, and may not be
modified or terminated orally. No modification, termination or attempted
waiver shall be valid unless in writing, signed by the party against whom such
modification, termination or waiver is sought to be enforced.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CABLE-SAT SYSTEMS, INC.
By:
---------------------------
President
OSTROVSKY CONSULTING, INC.
By:
--------------------------
Abe Ostrovsky
The above is confirmed:
- ------------------------
Abe Ostrovsky
7
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As Independent Public Accountants, we consent to the use of our report dated May
31,1996 to all references to our firm included in or made a part of the Form S-1
of Cable-Sat Compression, Inc.
S/GRANT-SCHWARTZ ASSOCIATES,CPA'S
Boca Raton, Florida
June 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 380,523
<SECURITIES> 0
<RECEIVABLES> 93,462
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 473,985
<PP&E> 87,229
<DEPRECIATION> 15,308
<TOTAL-ASSETS> 573,564
<CURRENT-LIABILITIES> 43,473
<BONDS> 0
0
450,000
<COMMON> 1,006,223
<OTHER-SE> (926,132)
<TOTAL-LIABILITY-AND-EQUITY> 573,564
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 587,167
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (581,367)
<INCOME-TAX> 0
<INCOME-CONTINUING> (581,367)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (581,367)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
