<PAGE>
As filed with the Securities and Exchange Commission on November 27, 1996
Registration No. 333-11015
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
AMPLIDYNE, INC.
(Name of small business issuer in its charter)
Delaware 3679 22-3440510
-------- ---- ----------
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)
144 Belmont Drive
Somerset, New Jersey 08873
(908) 271-8473
(Address and telephone number
of principal executive offices and principal place of business)
Devendar S. Bains
Chief Executive Officer
144 Belmont Drive
Somerset, New Jersey 08873
(908) 271-8473
(Name, address and telephone number of agent for service)
Copies to:
Stuart Neuhauser, Esq. Gerald A. Kaufman, Esq.
Bernstein & Wasserman, LLP 33 Walt Whitman Road
950 Third Avenue Suite 233
New York, NY 10022 Huntington Station, NY 11746
(212) 826-0730 (516) 271-2055
(212) 371-4730 (Fax) (516) 271-2488(Fax)
Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis, pursuant to Rule 415 under the Securities Act
of 1933, check the following box: / X / (continued overleaf)
---
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered(1) per Security(2) Price Registration Fee
================================================================================================
<S> <C> <C> <C> <C>
Common Stock, 1,610,000 $ 5.00 $ 8,050,000 $ 2,775.64
$.0001 par value
per Share(3)
- ------------------------------------------------------------------------------------------------
Warrants to 1,610,000 $ 0.10 $ 161,000 $ 55.51
purchase Common
Stock (3)
- ------------------------------------------------------------------------------------------------
Common Stock 1,610,000 $ 6.00 $ 9,660,000 $ 3,330.77
issuable upon
exercise of
Warrants
- ------------------------------------------------------------------------------------------------
Representative's 140,000 $ .001 $ 140 $ .05
Purchase
Option(4)
- ------------------------------------------------------------------------------------------------
Common Stock 140,000 $ 7.50 $ 1,050,000 $ 362.04
underlying
Representative's
Purchase
Option(4)
- ------------------------------------------------------------------------------------------------
Warrants 140,000 $ 0.15 $ 21,000 $ 7.24
underlying
Representative's
Purchase Option
- ------------------------------------------------------------------------------------------------
Common Stock 140,000 $ 6.00 $ 840,000 $ 289.63
issuable upon
exercise of
Warrants
underlying
Representative's
Purchase Option
- ------------------------------------------------------------------------------------------------
Common Stock 550,000 $ 5.00 $ 2,750,000 $ 948.20
underlying
Options Offered
by Selling
Securityholders(5)
- ------------------------------------------------------------------------------------------------
Total Registration $22,532,140 $ 7,769.08(6)
and Fee
================================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933 (the "Act"), this
Registration Statement covers such additional indeterminate number of
shares of Common Stock as may be issued by reason of adjustments in the
number of shares of Common Stock pursuant to anti-dilution provisions
contained in the Warrant Agreement governing the Warrants and
Representative's Purchase Option (defined below). Because such additional
shares of Common Stock will, if issued, be issued for no additional
consideration, no registration fee is required.
<PAGE>
(2) Estimated solely for purposes of calculating registration fee. It is
anticipated that the initial public offering prices of the Common Stock
and Warrants will be $5.00 per share and $.10 per Warrant. The exercise
price of the Warrants will be $6.00.
(3) Includes 210,000 shares of Common Stock and 210,000 Warrants subject to
the Underwriters' over-allotment option (the "Over-Allotment Option").
(4) The Representative's Purchase Option entitles the Representative to
purchase up to 140,000 shares of Common Stock at 150% of the public
offering price per share of Common Stock and 140,000 Warrants at 150% of
the public offering price per Warrant (the Representative's Purchase
Option").
(5) Common Stock underlying options owned by stockholders of the Company.
(6) $1,037.71 paid herewith. $6,731.37 has been previously paid.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Explanatory Note
This registration statement covers the primary underwritten offering
("Offering") of shares of Common Stock, par value $.0001 ("Common Stock") and
Redeemable Common Stock Purchase Warrants ("Warrants") of Amplidyne, Inc. (the
"Company"), and the concurrent offering of securities by certain selling
securityholders ("Selling Securityholders"). The primary prospectus ("Company
Prospectus"), covers the 1,610,000 shares of Common Stock and 1,610,000 Warrants
being offered by the Company. An alternate prospectus ("Selling Securityholders
Prospectus"), will be used by the Selling Securityholders in connection with an
offering by them for their accounts of up to 550,000 shares of Common Stock
underlying certain options ("Selling Securityholders Options"). The Selling
Securityholders Prospectus is identical to the Company Prospectus, except for:
alternative cover and back pages (to be substituted for the cover and back pages
of the Company Prospectus), and the sections entitled "Selling Securityholders"
and "Plan of Distribution" (to be inserted in lieu of the section entitled
"Underwriting" in the Company Prospectus) all which substitute sections follow
the Company Prospectus. All references contained in the Selling Securityholders
Prospectus to "the Offering" or "this Offering" shall refer to the Company's
Offering as referenced in the Company Prospectus.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH AN OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 27, 1996
PROSPECTUS
AMPLIDYNE, INC.
1,400,000 Shares of Common Stock
1,400,000 Redeemable Common Stock Purchase Warrants
------------------
Amplidyne, Inc., a Delaware corporation (the "Company" or "Amplidyne"), is
hereby offering ("Offering") 1,400,000 shares of common stock, par value $.0001
per share ("Common Stock" or "Shares") and 1,400,000 Redeemable Common Stock
Purchase Warrants ("Warrants", collectively with the Common Stock, the
"Securities"). The Securities may be purchased in the Offering only together, on
the basis of one Share and one Warrant. Each Warrant entitles the holder to
purchase one (1) Share for $6.00 during the four (4) year period commencing one
(1) year from the date of this Prospectus. Commencing one (1) year from the date
of this Prospectus, the Company may redeem the Warrants at a price of $.01 per
Warrant, at any time upon not less than 30 days prior written notice if the
average closing price or bid price of the Common Stock as reported by the
principal exchange on which the Common Stock is traded, the Nasdaq SmallCap
Market or the National Quotation Bureau, Incorporated, as the case may be,
equals or exceeds $9.00 per Share for any twenty (20) consecutive trading days
ending within five (5) days prior to the date on which notice of redemption is
given. See "Description of Securities."
Prior to this Offering, there has been no public market for the Securities
and there can be no assurance that any such market will develop. It is currently
anticipated that the initial public offering price per share will be $5.00 and
that the initial offering price per Warrant will be $0.10. For information
regarding the factors considered in determining the initial public offering
prices of the Securities and the exercise price of the Warrants, see
"Underwriting." The Company has applied to have the Common Stock and Warrants
approved for quotation on the Nasdaq SmallCap Market under the symbols "AMPD"
and "AMPDW", respectively, although there can be no assurances that an active
trading market will develop even if the Securities are accepted for quotation or
that the Company will maintain certain minimum criteria established by Nasdaq
for continued quotation.
The registration statement of which this prospectus forms a part also
relates to the resale of 550,000 shares of Common Stock underlying options
("Selling Securityholder Options") exercisable at $2.50 per share which were
issued to certain persons ("Selling Securityholders") in connection with the
Company's Bridge Financings in January 1996 and April 1996 (sometimes
collectively referred to as "Bridge Financing"). See "Selling Securityholders."
Patterson Travis, Inc. is acting as representative (the "Representative") of the
several underwriters of this Offering ("Underwriters"). The Underwriters are not
offering any of the 550,000 Shares in this Offering and the Company will not
receive any of the proceeds derived from the resale of the securities by the
Selling Securityholders. The Selling Securityholders have agreed not to sell
their securities until twelve months from the date of this Prospectus, which
period is not subject to earlier release.
------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK
<PAGE>
FACTORS" WHICH BEGIN ON PAGE ___ AND "DILUTION."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Price Proceeds
To Underwriting Discounts To
Public And Commissions (1) Company (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..... $5.00 $ .50 $4.50
- --------------------------------------------------------------------------------
Per Warrant... $ .10 $ .01 $ .09
- --------------------------------------------------------------------------------
Total (3)..... $7,140,000 $714,000 $6,426,000
- --------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Does not reflect additional compensation to be received by the
Representative in the form of: (i) a non-accountable expense allowance
equal to 3% of the gross proceeds of the Offering in the amount of
$214,200 ($246,330 if the Over-Allotment Option (defined below) is
exercised in full), and (ii) an option to purchase 140,000 shares of
Common Stock at $7.50 per Share and 140,000 Warrants at $.15 per Warrant
(the "Representative's Purchase Option"). The Company and the
Representative have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act"). See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company
(including the Representative's non-accountable expense allowance)
estimated at $514,200 ($546,330 if the Over-Allotment Option is exercised
in full).
(3) The Company has granted the Underwriters an option exercisable within 30
days of the date of this Prospectus ("Over-Allotment Option") to purchase
up to 210,000 additional Shares and 210,000 Warrants on the same terms as
set forth above solely to cover over-allotments, if any. If the
Over-Allotment Option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$8,211,000, $821,100, and $7,389,900, respectively. See "Underwriting."
The Securities are being offered hereby by the Underwriters on a "firm
commitment" basis, when, as and if delivered to and accepted by the
Underwriters, and subject to their right to reject orders in whole or in part,
to the approval of certain legal matters by counsel and to certain other
conditions. It is expected that the delivery of the certificates representing
the Securities will be made against payment therefor at the offices of the
Representative on or about ____________ ___, 1996.
PATTERSON TRAVIS, INC.
2
<PAGE>
The date of this Prospectus is ________________, 1996
3
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ SMALLCAP MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SPECIAL STANDARDS FOR SECURITIES SOLD IN CALIFORNIA
EACH CALIFORNIA INVESTOR MUST HAVE AN ANNUAL GROSS INCOME OF AT LEAST
$65,000 AND A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, OF AT
LEAST $250,000, OR IN THE ALTERNATIVE, A NET WORTH, EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES, OF AT LEAST $500,000. IN ADDITION, AN INVESTOR'S
TOTAL PURCHASE MAY NOT EXCEED 10% OF SUCH INVESTOR'S NET WORTH.
4
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. In
addition, unless otherwise indicated to the contrary, the information appearing
herein does not give effect to (a) the exercise of the Over-Allotment Option,
the Representative's Purchase Option, Selling Securityholders Options or the
Warrants offered hereby, (b) 350,000 Shares reserved for issuance upon exercise
of warrants exercisable at $2.50 per share ("701 Warrants"), (c) 187,500 shares
of Common Stock reserved for issuance upon exercise of warrants exercisable at
$2.50 per share ("Bridge Warrants"), (d)1,267,000 Shares reserved for issuance
upon the exercise of options exercisable at $4.00 per Share ("Employee Options")
granted pursuant to the Company's 1996 Incentive Option Plan ("Incentive Option
Plan"), (e) 233,000 Shares reserved for issuance upon the exercise of options
which may be granted pursuant to the Incentive Option Plan, and (f) 30,000
Shares reserved for issuance upon the exercise of options exercisable at $1.00
per Share ("Key Employee Options"). See "Description of Securities",
"Underwriting" and "Certain Transactions." See "Glossary of Terms" for the
definition of certain terms used in this Prospectus. Each prospective investor
is urged to read this Prospectus in its entirety.
The Company
Amplidyne designs, manufactures and sells ultra linear power amplifiers
and related subsystems to the worldwide wireless, local loop and satellite
uplink telecommunications market. These power amplifiers, which are a key
component in cellular base stations, increase the power of radio frequency
("RF") and microwave signals with low distortion, enabling the user to
significantly increase the quality and quantity of calls processed by new and
existing cellular base stations. The Company's wireless telecommunications
products consist of solid-state, RF and microwave, single and multi-carrier
power amplifiers that support a broad range of analog and digital transmission
protocols. The products are marketed to the cellular, wireless local loop and
personal communication systems ("PCS") segments of the wireless
telecommunications industry. The PCS segment of the market is one of the fastest
growing segments and the Company has devoted significant resources in 1996 to
develop products for this market. The Company's largest wireless
telecommunications customers are AT&T, DSC Communications, Samsung and Goldstar,
each of which is an OEM.
Amplidyne has several products with a patent application pending (for
which a notice of allowance has been issued by the United States Patent and
Trademark Office) for Pre-Distortion and Pre-Distortion Linearization which, the
Company believes, is more effective in reducing distortion than other currently
available technology. In addition to its presence in the wireless
telecommunications industry, the Company designs and manufactures products for
uplink satellite communications and for audio and TV transmission links.
In addition to the Company's product line of single channel power
amplifiers which are currently utilized by the wireless communications industry,
the Company has developed a Multicarrier Linear Power Amplifier ("MCLPA"). MCLPA
combines the performance capabilities of up to 25 single carrier amplifiers into
one unit, eliminating the need for numerous single carrier amplifiers and the
corresponding unnecessary space occupied by the cavity filters encasing the
amplifiers. Management believes that with its (i) proprietary technology (which
effectively reduces distortion), (ii) technological expertise and (iii)
established product line consisting of ultra linear single channel power
amplifiers, the Company can achieve similar performance with its MCLPAs. The
Company's linear power amplifiers and MCLPAs utilizes the Company's patent
pending predistortion and proprietary feed forward technology which amplifies
many
5
<PAGE>
channels with minimal distortion at the same time with one product.
The market for wireless communication services has grown substantially
during the past decade. Cellular service has been one of the fastest growing
segments of the wireless telecommunications market. The worldwide wireless
revolution exploded in 1994, adding 24 million new subscribers bringing the
total global subscriber count in 1995 to approximately 55 million, a growth rate
of more than 70%. However, this represents a worldwide penetration of only
1.35%. Industry officials project a worldwide market penetration of 8% going
into the next century, a 50% compounded annual growth rate ("CAGR"). The growth
in cellular communications has required, and will continue to require,
substantial investment by cellular service providers in wireless infrastructure
equipment.
The PCS market is also one of the fastest growing segments in the wireless
telecommunications market. Recently, major OEMs such as AT&T have announced
digital PCS services nationwide; such service is expected to begin in early
1997. PCS service providers are attracting more subscribers than analysts had
projected. The attraction to consumers is lower prices than cellular and as well
as the fact that PCS phones use more powerful digital technology, which improves
call quality compared with cellular service. This result is due to the fact that
PCS transmits at a higher radio frequency. It is also easier to program PCS
phones for advanced features (i.e., sending electronic mail and news headlines).
Amplydine has developed PCS linear amplifiers and PCS MCLPAs. Management
believes that these products will produce a significant portion of its sales
during the next few years.
In addition to cellular and PCS system operators' need for base station
equipment, in many developing countries, where access to the public switch
telephone network ("PSTN") by the general population is significantly less than
in developed countries, the Company believes that wireless telecommunications
systems are the most economic means to provide basic telephone service. The
expense, difficulty and time requirements of building and maintaining a cellular
or PCS network is generally less than the cost of building and maintaining a
comparable wireline network. Thus, in many less developed countries, wireless
service may provide the primary service platform for both mobile and fixed
telecommunications applications.
The Company's business strategy focuses primarily on the wireless
communication market and consists of the following elements:
Increase Penetration of Wireless Equipment Manufacturers. Since 1991, the
Company has positioned itself as a supplier of amplifier products to large
wireless telecommunications OEMs, such as AT&T, DSC Communications, Samsung and
Goldstar. Amplidyne seeks to capitalize on its existing customer relationships
and become a more significant source of its customers' amplifiers by working
closely with OEM customers to offer innovative solutions to technical
requirements and problems.
Develop Relationships with Emerging Wireless Equipment Manufacturers. The
Company anticipates that emerging wireless equipment manufacturers will make an
increasingly significant contribution to the growth of the wireless
telecommunications industry, particularly the PCS and cellular segments.
Management believes that its linear power amplifiers and MCLPAs will assist
these equipment manufacturers in providing high capacity, low distortion low
cost per channel products and has already begun to sell amplifiers to several
emerging wireless equipment manufacturers.
6
<PAGE>
Develop Products for Multiple Protocols. The Company intends to continue
to invest resources in the research and development of new products for various
protocols. Amplidyne is continuing to develop products that incorporate
protocols which it believes will address the needs of established and emerging
wireless systems, such as the emerging PCS market.
Maintain a Technology Leadership Position. The Company, with its
innovative products, has been addressing the needs of its customers for products
that solve significant technical problems. The Company believes its interference
cancellation technologies are among the most advanced that are commercially
available in the industry, both in performance and diversity of methodology. The
Company intends to continue to invest substantial resources in research and
development associated with its interference cancellation technologies. See
"Technology". The Company has emphasized research and development on PCS
products during 1996 which management believes will be a major growth area for
the Company during 1997.
The Company believes that its products, particularly the ultra linear
MCLPAs have several features which differentiate them from those of its
competitors, such as:
The Predistortion Solution. Utilizing its proprietary technology the
Company can obtain significant distortion reduction in its core amplifiers. This
enables the predistorted amplifier to have feed forward correction (See
"Business-Technology") applied to it to achieve distortion cancellation. The
Company believes that its competitors are only able to obtain this level of
distortion cancellation by use of complex and component intensive "Dual Feed
Forward Loops" resulting in the use of more components within the amplifier
unit.
Superior Distortion and Spurious Cancellation Resulting in Ultra Linear
High Power Amplifiers. The Company believes the use of MCLPAs is critical in the
implementation of new cellular and PCS systems and upgrade of older analog
systems. Amplidyne has developed proprietary interference cancellation
technology using multiple methods to achieve high suppression of spurious output
and distortion typically associated with higher power amplifiers.
High Quality and Reliability. Amplidyne believes that it has consistently
provided high quality, reliable products to its customers. Management believes
that its reputation for quality and reliability will enable Amplidyne to attract
new customers and maintain existing customers for all its products.
Linearity, Low Distortion and High Amplification. Wireless service
providers' ability to manage scarce spectrum resources more effectively and
accommodate a larger number of subscribers is largely dependent on their ability
to broadcast signals with high linearity, which pertains to the ability of a
component to amplify a wave form without altering its characteristics in
undesirable ways. The Company has several products with a patent pending (for
which a notice of allowance has been issued by the United States Patent and
Trademark Office) which it believes gives it a significant advantage over its
competitors. These features for Pre-distortion and Pre-Distortion Linearization
designs significantly reduces distortion below that which is currently available
in the marketplace.
Multicarrier Designs. Multicarrier amplification, in which all channels
are amplified together by a MCLPA, rather than each channel using a separate
amplifier, allows for instantaneous electronic channel allocation. By virtue of
the Company's very high linearity products which incorporates pre-distortion and
feed forward technology achieving, in management's belief, the lowest distortion
in the industry, the
7
<PAGE>
MCLPA amplified signal remains within their prescribed band and spectrum with
low interference of adjacent channels thus providing flexibility to accommodate
any frequency plan. Management believes that its leading technology in MCLPAs
will enable Amplidyne to attract new customers.
The Company was incorporated on December 14, 1995 pursuant to the laws of
the State of Delaware as the successor to Amplidyne, Inc., a New Jersey
corporation ("Amplidyne-NJ"), which was incorporated in October 1988. The
Company was organized to effectuate a reincorporation of Amplidyne-NJ with and
into the Company on December 22, 1995. The Company maintains its executive
offices at 144 Belmont Drive, Somerset, New Jersey 08873 and its telephone
number is (908) 271-8473.
8
<PAGE>
The Offering
<TABLE>
<S> <C>
Securities Offered by the
Company (1)................... 1,400,000 shares of Common Stock, and
1,400,000 Warrants which may be purchased
only together on the basis of one share of
Common Stock and one Warrant. Each Warrant
entitles the registered holder thereof to
purchase, at any time during the four (4)
year period commencing one (1) year from the
date of this Prospectus, one share of Common
Stock at a price of $6.00 per share. At any
time after one (1) year from the date of
this Prospectus, the Company may redeem the
Warrants at a price of $.01 per Warrant on
30 days prior written notice if the average
closing price or bid price of the Common
Stock as reported by the principal exchange
on which the Common Stock is traded, the
Nasdaq SmallCap Market or the National
Quotation Bureau, Incorporated, as the case
may be, equals or exceeds $9.00 per Share
for any twenty (20) consecutive trading days
ending within five (5) days prior to the
date on which notice of redemption is given.
See "Description of Securities."
Securities Outstanding
Prior to the Offering......... 2,850,000 shares
Securities Outstanding
Subsequent to the Offering.... 4,250,000 Shares
1,400,000 Warrants
Use of Proceeds.................. Purchase of test equipment, research and
development, the purchase of manufacturing
machinery, the repayment of indebtedness,
and for working capital purposes. See "Use
of Proceeds."
Risk Factors..................... The Common Stock offered hereby involves a
high degree of risk and immediate and
substantial dilution. See "Risk Factors" and
"Dilution."
Proposed Nasdaq SmallCap
Market Symbols.................. Shares - AMPD; Warrants - AMPDW
</TABLE>
- ----------
(1) Concurrently with this Offering, the Company is registering the resale of
the 550,000 shares of Common Stock underlying the Selling Securityholder
Options, which may not be sold until twelve (12) months from the date of
this Prospectus, which period is not subject to earlier release. See
"Selling Securityholders."
Summary Financial Information
(in thousands except per share data)
The following table sets forth certain summary information concerning the
Company and is qualified by reference to the financial statements and notes
thereto included elsewhere in this Prospectus. The results for the nine months
ended September 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
Statement of Operations Data:
9
<PAGE>
<TABLE>
<CAPTION>
Nine Months ended
Year ended December 31 September 30,
---------------------- -------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 3,575 $ 1,810 $ 1,558 $ 1,957
Cost of goods sold 2,713 1,756 1,332 1,889
Gross profit 862 54 226 68
Selling, general and administrative 722 527 436 922
Research, engineering and development 333 372 122 701
------- ------- ------- -------
Operating Loss (193) (845) (332) (1,555)
Stock compensation and financing costs 1,180 2,553
------- -------
Provision for income taxes (15)
=======
Net loss $ (178) $(2,025) $ (332) $(4,108)
======= ======= ======= =======
Net loss per share $ (.05) $ (.62) $ (.10) $ (1.26)
======= ======= ======= =======
Shares outstanding(1) 3,258 3,258 3,258 3,258
------- ------- ------- -------
Balance Sheet Data:
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996 September 30, 1996
----------------- ------------------ ------------------
As Adjusted (2)
---------------
<S> <C> <C> <C>
Working capital (deficit) $ (578) $ (1,469) $4,443
Total assets 722 1,467 5,869
Total liabilities 1,276 2,881 1,371
Stockholders' equity (deficit) (554) (1,414) 4,498
</TABLE>
(1) All shares, warrants and options issued or granted within the past twelve
months from the most current period presented are considered to be
outstanding for all periods presented.
(2) Adjusted for the sale of 1,400,000 shares of Common Stock at an assumed
offering price of $5.00 per share and 1,400,000 Warrants at an offering
price of $ 0.10 per Warrant and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds."
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk. Prospective purchasers, prior to making an investment,
should carefully consider the following risks as well
10
<PAGE>
as other information set forth elsewhere in this Prospectus.
Recent History of Losses; Working Capital Deficit; Stockholder Deficit.
The Company incurred a net loss of $2,025,000 in the year ended December 31,
1995 and a net loss of $4,108,000 for the nine months ended September 30, 1996,
although a substantial portion of the net loss for the year ended December 31,
1995 and the nine months ended September 30, 1996 is due to a nonoperating
charge to earnings and research, engineering and development costs. The Company
expects that losses will increase and continue until such time, if ever, as the
Company can manufacture and market a new line of linear power amplifiers
including multicarrier linear power amplifiers (sometimes referred to as
"MCLPA"). In addition, the Company had a working capital deficit of $578,000 and
$1,469,000 at December 31, 1995 and September 30, 1996, respectively, and a
stockholders deficit of $554,000 and $1,414,000 at December 31, 1995 and
September 30, 1996, respectively. In addition, the Company had an accumulated
deficit of $1,739,126 at December 31, 1995 and $5,847,468 at September 30, 1996,
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."
Uncertainty of Future Revenues; Limited Experience in the Multicarrier
Linear Power Amplifier Business; Uncertainty of Market Acceptance. Revenues for
the first nine months of 1996 increased 26% compared to the first nine months of
1995 and revenues for the year ended December 31, 1995 decreased 49% compared to
the year ended December 31, 1994. The Company believes that the decrease was due
primarily to the Company's shift in product emphasis from single channel power
amplifiers to linear power amplifiers including MCLPAs. The Company anticipates
that a substantial portion of the Company's future revenues will be derived from
sale of its new linear amplifiers and MCLPAs. Even though the Company has
substantial experience in the commercial cellular amplifier business, having
been involved in the business since 1989, the MCLPA is a relatively recent
development in the marketplace and the Company has focused on the business only
since early 1995. As a result, the Company is subject to all of the risks
associated with a new business enterprise, including without limitation, failed
product development efforts, the lack of market acceptance and duplication of
the Company's proprietary technology. The Company has sold prototypes of its
MCLPAs and believes that it will commence production orders in the fourth
quarter of 1996, although no assurances can be made that the Company will be
successful in these endeavors. The Company has received purchase orders for
linear power amplifiers which purchase orders may in the future include MCLPAs.
Market acceptance of the Company's linear amplifiers and MCLPAs will depend in
large part upon the public demand for power amplifiers in general and the
Company's ability to demonstrate its linear amplifiers and MCLPAs advantages,
including its performance features and cost-effectiveness. There can be no
assurance that the linear amplifiers and MCLPAs will be accepted by the market,
and if so accepted, whether it will result in increased revenues for the Company
in the future. See "Business-Products."
Possible Need For Additional Financing. The Company believes that the
proceeds of this Offering together with cash flow from operations will be
adequate to fund its operations for at least twelve months following this
Offering. There can be no assurance, however, that the Company will not require
additional financing prior to or after such time. There can be no assurance that
any additional financing will be available to the Company on acceptable terms,
or at all. If adequate funds are not available, the Company may be required to
delay, scale back or eliminate its research, engineering and development or
manufacturing programs or obtain funds through arrangements with partners or
others that may require the Company to relinquish rights to certain of its
technologies or potential products or other assets. Accordingly, the inability
to obtain such financing could have a material adverse effect on the Company's
business,
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financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
Reliance upon Growth of Wireless Telecommunications Services. Demand for
the Company's products will depend in large part upon continued and growing
demand within the wireless telecommunications industry for power amplifiers.
Although demand for power amplifiers has grown in recent years, there can be no
assurance that the quantity and variety of wireless telecommunications services
will continue to grow, or that such services will create a demand for the
Company's products. See "Business - Industry."
Need to Implement Automated Manufacturing Processes; Dependence on
Contract Manufacturers; Limited Number of Suppliers. The Company is in the
process of establishing a fully automated manufacturing facility so that it can
manufacture its products. The Company believes that such manufacturing facility
will be completed in the second quarter of 1997, although no assurances can be
made that the Company will be successful in these endeavors. The Company has
allocated $600,000 from the proceeds of this Offering towards the establishment
of such facility. See "Use of Proceeds." Until the manufacturing facilities are
completed, the Company expects to be dependent on contract manufacturing. There
can be no assurance that the Company's contract manufacturers will be able to
fulfill the Company's production commitments. There are no written agreements
with such contract manufacturers. Any inability to obtain timely deliveries of
finished assemblies of acceptable quality could delay the Company's ability to
deliver its products to its customers, which in turn would have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, in the event that production costs for the Company's
contract manufacturers increase, the Company may suffer losses due to an
inability to recover such cost increases under its fixed price commitments with
its original equipment manufacturer ("OEM") customers. See "Business -
Manufacturing."
Power transistors and certain other key components used in the Company's
products are currently available from only a limited number of sources. Certain
of the Company's limited source suppliers have limited operating histories and
limited financial and other resources and, therefore, they may prove to be
unreliable sources of supply. The Company's principal suppliers of components
are NEC, Ericcson, Mini Circuits and Penny Technologies. The Company has no
written agreements with such suppliers. Further, the Company has generally not
previously purchased key components in large volume. If the Company were unable
to obtain sufficient quantities of components, particularly power transistors,
delays or reductions in product shipments could occur which would have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, delays in filling orders may have a material
adverse effect on the Company's relationships with its OEM customers, which may
result in the termination of material orders from its OEM customers and/or cause
a permanent loss of future sales. See "Business Manufacturing."
Reliance on a Small Number of Customers; Possible Fluctuations in
Operating Results. In 1994, approximately 66% of net revenues were derived from
sales to one customer (AT&T). In 1995, approximately 61% of net revenues were
derived from four customers (Allen Telecom - 18%; Kentrox Industries - 17%; DSC
Communications - 15%; and AT&T - 11%). For the period ended September 30, 1996,
approximately 70% of net revenues were derived from sales to three customers
(DSC Communications-36%; Samsung-21%; and Airnet -13%). The Company anticipates
that sales of its
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products to relatively few customers (wireless telecommunications OEMs) will
account for a majority of the Company's revenues in 1997. The reduction, delay
or cancellation of orders from one or more significant customers would
materially and adversely affect the Company's financial condition and results of
operation. Moreover, as a result of the uncertainty of such sales, the Company
may in the future experience significant fluctuations in net sales, gross
margins and operating results. See "Business - Markets."
Limited Marketing Experience. The Company will be required to develop a
marketing and sales network that will effectively demonstrate the advantages of
its products over competing products. The Company's marketing experience with
its new products is limited as the Company has only sold prototypes of MCLPAs (a
product which the Company believes will represent a majority of its future
revenues) and has only recently received purchase orders for its linear power
amplifiers. The Company is engaged actively in expanding its in-house marketing
forces. There can be no assurance that the Company will be successful in its
marketing efforts or that it will be able to establish sales and distribution
capabilities. See "Business Customers, Sales and Marketing."
Substantial Portion of Proceeds To Satisfy Indebtedness, Including
Indebtedness Owed to Executive Officer and Director. Approximately 26% of the
net proceeds of the Offering will be used to repay indebtedness, including
approximately 6% to repay the Company's President for loans extended by him to
the Company. See "Use of Proceeds."
Broad Discretion in Application of Proceeds. Approximately $2,816,800 or
48% of the net proceeds of this Offering, have been allocated to working capital
of the Company, which funds will be utilized for general corporate purposes
including accounts payable, payroll and the purchase of material for the
Company's purchase orders. The allocation of proceeds described in "Use of
Proceeds" represents the Company's best estimate of its allocation based upon
the current state of its business, operations and plans, current business
conditions and the Company's evaluation of its industry. Future events,
including problems, delays, expenses and complications which may be encountered,
changes in economic or competitive conditions and the results of the Company's
sales and marketing activities may make shifts in the allocation of funds
necessary or desirable. Management of the Company will have broad discretion in
the application of such proceeds. See "Use of Proceeds."
Control by Management; Compensation and Audit Committees. Upon completion
of this Offering, officers and directors and persons who may be deemed
affiliates will beneficially own, in the aggregate, and will have the right to
vote approximately 53% of the then issued and outstanding Common Stock (not
including any options they may own) of the Company (approximately 50% if the
Over-Allotment Option is exercised in full). The Chairman and Chief Executive
Officer of the Company will own approximately 47% of the issued and outstanding
Common Stock after the Offering. Accordingly, such holders will be in a position
to elect all of the directors and thereby control the Company. See "Principal
Stockholders".
Currently, the Board of Directors consist of three members, two of which
(Devendar S. Bains and Tarlochan Bains) are insiders and principal stockholders.
In addition, such individuals comprise a majority of the Compensation Committee
and Audit Committee. Accordingly, such individuals will be in a position to
control the actions and decisions of the Board of Directors and such committees.
See "Management."
No Prior Public Market; Potential Limited Trading Market; Possible
Volatility of Stock Price. Prior to this Offering, there has been no public
market for the Securities and there can be no assurance that
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an active trading market in the Company's Securities will develop or be
maintained. In the absence of such a market, an investor may find it more
difficult to sell the Securities offered hereby. The initial public offering
price of the Common Stock and Warrants and the exercise price of the Warrants
were determined by negotiation between the Company and the Representative, and
may not be indicative of the market price for such securities in the future, and
does not necessarily bear any relationship to the Company's assets, book value,
net worth or results of operations of the Company or any other established
criteria of value. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have particularly affected the market
prices of many smaller companies. The trading price of the Securities is
expected to be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts' earnings estimates,
announcements of technological innovations by the Company or its competitors,
general conditions in the wireless communications industry and other factors.
These fluctuations, as well as general economic and market conditions, may have
a material adverse effect on the market price of the Company's Securities. See
"Underwriting - Determination of Public Offering Price," "Description of
Securities" and "Financial Statements."
Dilution. This Offering involves immediate substantial dilution to
investors of $3.94 per share (or approximately 79% of the assumed per-Share
Offering price of $5.00), representing the difference between the pro forma net
tangible book value per Share immediately after the completion of this Offering
and the Offering price per Share. See "Dilution".
No Assurance of Successful Expansion of Operations. Recently, the Company
has substantially increased the scale of its operations significantly increasing
its operating expenses. The Company anticipates that its operating expenses will
continue to increase significantly after the Offering as a result of expansion
of its operations in anticipation of the full scale production of its linear
amplifiers and MCLPAs and to meet customers' orders. If the Company's net sales
do not correspondingly increase or the Company does not adequately manage the
growth of its operations, the Company's results of operations will be materially
adversely affected. See "Business - Company Strategy."
Declining Average Sales Prices. If wireless telecommunications OEMs come
under increasing price pressure from cellular and PCS service providers, the
Company could expect to experience downward pricing pressure on its products. In
addition, competition among non-captive amplifier suppliers could increase the
downward pricing pressure on the Company's products. To date, such pressure has
not been experienced. As these manufacturers frequently negotiate supply
arrangements far in advance of delivery dates, the Company often must commit to
price reductions for its products before it is aware of how, or if, cost
reductions can be obtained. If the Company is unable to achieve cost reductions,
the Company's gross margins will decline, which will have a material adverse
effect on the Company's business, financial condition and results of operations.
Rapid Technological Change and Intense Competition. The wireless
telecommunications equipment industry is extremely competitive and is
characterized by rapid technological change, new product development, product
obsolescence and evolving industry standards. In addition, price competition in
this market is intense and characterized by significant price erosion over the
life of a product. Currently, the Company competes primarily with non-captive
suppliers of power amplification products. The Company believes that its
competition, and ultimately the success of the Company, will be based primarily
upon service, pricing, reputation, and the ability to meet delivery schedules of
its customers. The Company's
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existing and potential OEM customers continuously evaluate whether to
manufacture their own amplification products or to purchase such products from
outside sources. These customers and other large manufacturers of wireless
telecommunications infrastructure equipment could elect to enter the market and
compete directly with the Company. Many of the Company's competitors have
significantly greater financial, technical, manufacturing, sales and marketing
capabilities and research and development personnel and other resources than the
Company and have achieved greater name recognition of their existing products
and technologies. In order for the Company to successfully compete it must
continue to develop new products, keep pace with advancing technologies and
competitive innovations and successfully market its products to OEM customers
that will incorporate the Company's products into their systems. There can be no
assurance that the Company will be able to compete successfully. See "Business -
Competition."
In addition, there can be no assurance that new products or alternative
amplifier technology will not be developed that render the Company's current or
planned products obsolete or inferior. Rapid technological development by others
may result in the Company's products becoming obsolete before the Company
recovers a significant portion of the research, development and
commercialization expenses incurred with respect to those products.
Risks Associated with Sales Outside of the United States. International
sales represented approximately 8%, 30%, and 72% of the Company's net revenues
for the years ended December 31, 1994 and 1995 and for the nine months ended
September 30, 1996, respectively. The Company expects that international sales
will continue to account for a significant portion of its net revenues in the
future. To the extent that the Company does not achieve and maintain substantial
international sales, the Company's business, results of operations and financial
condition could be materially and adversely affected. There can be no assurance
that the Company will be able to maintain or increase its current level of
international sales. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
Sales of the Company's products outside of the United States are
denominated in US dollars. An increase in the value of the U.S. dollar relative
to foreign currencies would make the Company's products more expensive and,
therefore, potentially less competitive outside the United Sates. Additional
risks inherent in the Company's sales abroad include the impact of recessionary
environments in economies outside the United States, generally longer
receivables collection periods, unexpected changes in regulatory requirements,
tariffs and other trade barriers, potentially adverse tax consequences,
restrictions on the repatriation of earnings, reduced protection for
intellectual property rights in some countries, and the burdens of complying
with a wide variety of foreign laws. There can be no assurance that such factors
will not have an adverse effect on the Company's future international sales and,
consequently, on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation."
Dependence Upon Management and Technical Personnel. The success of the
Company is highly dependent upon the continued services of Devendar Bains, the
Company's President and Chief Executive Officer. The Company has entered into a
five year employment agreement with Mr. Bains which terminates April 30, 2001
and contains a covenant not to compete against the Company for a two year period
following termination of employment. The Company is in the process of obtaining
key man insurance on the life of Mr. Bains in the amount of $1,000,000. There
can be no assurances that the Company will be able to replace Mr. Bains in the
event his services become unavailable or that the proceeds of such insurance
would be adequate to compensate the Company for the loss of his services. See
"Management."
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Due to the specialized nature of the Company's business, the Company is
highly dependent on the continued service of, and on its ability to attract and
retain, qualified technical and marketing personnel, particularly highly skilled
radio-frequency ("RF") and microwave design engineers involved in the
development of new products and processes and test technicians involved in the
manufacture and enhancement of existing products. In addition, as part of the
Company's team-based sales approach, the Company dedicates specific design
engineers to service the requirements of individual customers. The loss of any
such engineer could adversely affect the Company's ability to obtain future
purchase orders from the customers to which such engineer is dedicated. The
Company has employment or non-competition agreements with most of its current
design engineers or test technicians. The competition for such personnel is
intense, and the loss of any such persons, as well as the failure to recruit
additional key technical personnel in a timely manner, would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Proprietary Technology; Risk of Third Party Claims of Infringement. The
Company's ability to compete successfully and achieve future revenue growth will
depend, in part, on its ability to protect its proprietary technology and
operate without infringing upon the rights of others. Although there are no
pending lawsuits against the Company regarding its technology or notices that
the Company is infringing upon intellectual property rights of others, there can
be no assurance that litigation or infringement claims will not occur in the
future. Such litigation or claims could result in substantial costs, and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition, and results of operations. The Company generally
enters into confidentiality and non-disclosure agreements with its employees and
limits access to and distribution of its proprietary information. However, there
can be no assurance that such measures will provide adequate protection for the
Company's trade secrets or other proprietary information, or that the Company's
trade secrets or proprietary technology will not otherwise become known or be
independently developed by competitors. The failure of the Company to protect
its proprietary technology could have a material adverse effect on its business,
financial condition and results of operations.
Presently, the Company has a patent application pending (No. 081508,163)
with respect to its Pre-Distortion and Pre-Distortion Linearzation technology
used in its products (for which a notice of allowance has been issued by the
United States Patent and Trademark Office. Such proprietary technology, the
Company believes, is more effective in reducing distortion than other currently
available technology. No assurance can be made that the Company's patent
application will be fully granted or, if granted, will protect the Company's
technology. The Company believes that the success of its amplifier business,
however, depends more on its specifications, computer-aided engineering design,
modeling tools, technical processes and employee expertise than on patent
protection.
No Dividends. The Company has not paid any dividends on its Common Stock
since its inception and does not intend to pay dividends on its Common Stock in
the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. See
"Dividend Policy."
Governmental Regulations and Environmental Regulations. The Company's
customers must obtain regulatory approval to operate their base stations. The
United States Federal Communications Commission ("FCC") recently adopted new
regulations that impose more stringent RF and microwave
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emissions standards on the telecommunications industry. There can be no
assurance that the Company's customers will comply with such regulations which
could materially adversely affect the Company's business, financial condition
and results of operations. The Company manufactures its products according to
specifications provided by its customers, which specifications are given to
comply with applicable regulations. The Company does not believe that costs
involved with manufacturing to meet specifications will have a material impact
on its operations. There can be no assurances that the adoption of future
regulations would not have a material adverse affect on the Company's business.
See "Business - Governmental Regulations."
The Company is subject to Federal, state and local governmental
regulations relating to the storage, discharge, handling, emissions, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture the Company's products. The Company believes that it is currently in
compliance in all material respects with such regulations. Failure to comply
with current or future regulations could result in the imposition of substantial
fines on the Company, suspension of production, alteration of its manufacturing
process, cessation of operations or other actions which could materially and
adversely affect the Company's business, financial condition and results of
operations. See "Business - Environmental Regulations."
Nasdaq Listing and Continued Listing Requirements. Under prevailing rules
of the National Association of Securities Dealers, Inc ("NASD"), in order to
qualify for initial quotation of securities on The Nasdaq Small Cap Market, a
company, among other things, must have at least $4,000,000 in total assets,
$2,000,000 in total capital and surplus, $1,000,000 in market value of public
float and a minimum bid price of $3.00 per share. Although the Company may upon
the completion of this Offering qualify for initial quotation of its securities
on The Nasdaq Small Cap Market, for continued listing on The Nasdaq Small Cap
Market, a company, among other things, must have $2,000,000 in total assets,
$1,000,000 in total capital and surplus, $1,000,000 in market value of public
float and a minimum bid price of $1.00 per share. If the Company is unable to
satisfy the requirements for quotation on The Nasdaq Small Cap Market, trading,
if any, in the Common Stock and Warrants offered hereby would be conducted in
the over-the-counter market in what are commonly referred to as the "pink
sheets" or on the NASD OTC Electronic Bulletin Board. As a result, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the price of, the securities offered hereby. The above-described rules may
materially adversely affect the liquidity of the market for the Company's
securities. See "Underwriting."
Penny Stock Regulations May Impose Certain Restrictions on Marketability
of Securities. The Securities and Exchange Commission (the "Commission") has
adopted regulations which generally define a "penny stock" to be any equity
security that has a market price (as defined) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions.
Since it is intended that the shares of Common Stock and Warrants offered hereby
will be authorized for quotation on The Nasdaq Small Cap Market, such securities
will initially be exempt from the definition of "penny stock." If the shares of
Common Stock and Warrants offered hereby are removed from listing by The Nasdaq
Small Cap Market at any time following the Effective Date, the Company's Common
Stock and Warrants may become subject to rules that impose additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with their spouse). For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase of
such securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the rules require the delivery, prior
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to the transaction, of a risk disclosure document mandated by the Commission
relating to the penny stock market. The broker-dealer must also disclose the
commission payable to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of broker-dealers to sell the Company's
securities and may affect the ability of purchasers in this Offering to sell the
Company's securities in the secondary market and the price at which such
purchasers can sell any such securities.
Current Prospectus and State Blue Sky Registration Required to Exercise
Warrants. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such Common Stock and only if such Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws of the jurisdictions
in which the various holders of the Warrants reside. The Company has undertaken
and intends to file and keep current a prospectus which will permit the purchase
and sale of the Common Stock underlying the Warrants, but there can be no
assurance that the Company will be able to do so. Although the Company intends
to seek to qualify for sale the shares of Common Stock underlying the Warrants
in those states in which the securities are to be offered, no assurance can be
given that such qualification will occur. The Warrants may be deprived of any
value and the market for the Warrants may be limited if a current prospectus
covering the Common Stock issuable upon the exercise of the Warrants is not kept
effective or if such Common Stock is not qualified or exempt from qualification
in the jurisdictions in which the holders of the Warrants then reside. See
"Underwriting"
Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company at any time at a redemption price of $.01 per Warrant
upon not less than 30 days prior written notice if the average closing price or
bid price of the Common Stock as reported by the principal exchange on which the
Common Stock is traded, the Nasdaq SmallCap Market or the National Quotation
Bureau, Incorporated, as the case may be, equals or exceeds $9.00 per Share for
any twenty (20) consecutive trading days ending within five (5) days prior to
the date on which notice of redemption is given. Notice of redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for them to do so, to sell the
Warrants at the current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price which would be substantially less
than the market value of the Warrants at the time of redemption. See
"Description of Securities - Warrants."
Anti-Takeover Provisions. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors may issue up to 1,000,000 shares of
Preferred Stock in the future with such preferences, limitations and relative
rights as the Board may determine without stockholder approval. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of delaying or preventing a change in control of the Company without
further action by the stockholders. The Company has no present plans to issue
any shares of Preferred Stock. See "Description of Securities - Preferred
Stock." In addition, following this Offering the Company will become subject to
the anti-takeover
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provisions of Section 203 of the Delaware General Corporation Law, which will
prohibit the Company 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 persons became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying or preventing a change of
control of the Company. See "Description of Securities - Delaware Anti-Takeover
Law Provisions."
Restrictions on Marketmaking Activities During Warrant Solicitation May
Affect Liquidity of Securities. Although they have no legal obligation to do so,
the Underwriters from time to time may act as market makers and may otherwise
effect and influence transactions in the Company's securities. However, there is
no assurance that the Underwriters will continue to effect and influence
transactions in the Company's securities. The prices and liquidity of the
Company's securities may be significantly affected by the degree, if any, of the
Underwriters' participation in the market. The Underwriters may voluntarily
discontinue such participation at any time. Further, the market for, and
liquidity of, the Company's securities may be adversely effected by the fact
that a significant amount of the securities may be sold to customers of the
Underwriters.
To the extent that the Underwriters solicit the exercise of Class A
Warrants, the Underwriters may be prohibited pursuant to the requirements of
Rule 10b-6 under the Exchange Act from engaging in marketmaking activities
during such solicitation and for a period of up to nine days preceding such
solicitation. As a result, the Underwriters may be unable to continue to provide
a market for the Company's securities during certain periods while the Class A
Warrants are exercisable. The Underwriters are not obligated to act as a
marketmaker. See "Underwriting."
Additional Authorized Shares of Common Stock and Preferred Stock Available
for Issuance May Adversely Affect the Market. The Company is authorized to issue
25,000,000 shares of its Common Stock, $.0001 par value. If all of the 1,400,000
Shares offered hereby are sold, there will be a total of 4,250,000 shares of
Common Stock issued and outstanding. However, the total number of shares of
Common Stock issued and outstanding does not include the exercise of up to
1,400,000 Warrants to purchase up to 1,400,000 shares of Common Stock, 210,000
Shares included in the Over-Allotment Option to purchase 210,000 shares of
Common Stock, 210,000 Warrants to purchase up to 210,000 shares of Common Stock
included in the Over-Allotment Option, the option granted to the Representative
to purchase up to 140,000 Shares and 140,000 Warrants to purchase 140,000 shares
of Common Stock in connection with this offering, 550,000 shares of Common Stock
issuable upon exercise of the Selling Securityholder Options, 350,000 shares of
Common Stock issuable upon exercise of the 701 Warrants, 187,500 shares of
Common Stock issuable upon exercise of the Bridge Warrants, 1,500,000 shares of
Common Stock issubale upon exercise of options granted pursuant to the Incentive
Option Plan (1,267,000 of which have been granted) and 30,000 shares of Common
Stock issuable upon exercise of Key Employee Options. After reserving a total of
4,717,500 shares of Common Stock for issuance upon the exercise of all options
and warrants, the Company will have at least 16,032,500 shares of authorized but
unissued Common Stock available for issuance without further shareholder
approval. As a result, any issuance of additional shares of Common Stock may
cause current shareholders of the Company to suffer significant dilution which
may adversely affect the market. The Company has no present plans to issue any
shares of Common Stock. The Company has agreed with the Representative that it
will not issue any of its capital stock for a period of 18 months from the
Effective Date without the prior written consent of the Representative.
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In addition to the above-referenced shares of Common Stock which may be
issued without shareholder approval, the Company has 1,000,000 shares of
authorized preferred stock, the terms of which may be fixed by the Board of
Directors. The Company presently has no issued and outstanding shares of
preferred stock and while it has no present plans to issue any shares of
preferred stock, the Board of Directors has the authority, without shareholder
approval, to create and issue one or more series of such preferred stock and to
determine the voting, dividend and other rights of holders of such preferred
stock. The issuance of any of such series of preferred stock could have an
adverse effect on the holders of Common Stock. See "Description of Securities."
Shares Eligible for Future Sale May Adversely Affect the Market.
Immediately prior to the Effective Date, the Company will have 2,850,000 shares
of its Common Stock issued and outstanding all of which are "restricted
securities" and all of which are subject to lock-up restrictions described
below. 2,000,000 of such Shares may be sold pursuant to Rule 144 as described
below commencing 90 days after the date of this Prospectus, subject to an
18-month restriction against transfer described below; 300,000 Shares may be
sold pursuant to Rule 144 commencing December 1997, subject to an 18-month
restriction against transfer; and the remaining 550,000 Shares, which were
issued in the Bridge Financings, may be sold pursuant to Rule 144 commencing
January 1998, subject to a 12-month restriction against transfer described
below. The President of the Company (who owns 2,000,000 of the 2,850,000
outstanding Shares) and the directors and/or 5% stockholders of the Company who
own 250,000 of the 300,000 above-referenced Shares have agreed not to sell,
assign or transfer any securities of the Company owned by them for a period of
eighteen (18) months from the date of this Prospectus without the prior consent
of the Representative. The entity that owns the remaining 50,000 of the
above-referenced 300,000 Shares has agreed not to sell, assign or transfer any
of such Shares for a period of eighteen (18) months from the date of this
Prospectus, without the prior consent of the Representative. The Selling
Securityholders who own the above-referenced 550,000 Shares have agreed not to
sell, assign or transfer any securities of the Company owned by them for a
period of twelve (12) months from the date of this Prospectus, which period is
not subject to earlier release.
Rule 144 provides, in essence, that a person holding "restricted
securities" for a period of two years may sell only an amount every three months
equal to the greater of (a) one percent of the Company's issued and outstanding
shares, or (b) the average weekly volume of sales during the four calendar weeks
preceding the sale. The amount of "restricted securities" which a person who is
not an affiliate of the Company may sell is not so limited, since non-affiliates
may sell without volume limitation their shares held for three years if there is
adequate current public information available concerning the Company. In such an
event, "restricted securities" would be eligible for sale to the public at an
earlier date. The sale in the public market of such shares of Common Stock may
adversely affect prevailing market prices of the Common Stock.
Effect of Outstanding Options and Warrants. As of the date of this
Prospectus, there are outstanding stock options and warrants to purchase an
aggregate of 1,087,500 shares of Common Stock at an exercise price of $2.50 per
Share, and the Company has reserved 1,297,000 Shares of Common Stock for
issuance pursuant to outstanding Employee Options and Key Employee Options. The
550,000 Shares underlying Selling Securityholders Options are being registered
for resale by the Selling Securityholders as part of the Registration Statement
of which this Prospectus forms a part, subject to a twelve (12) month lock-up
restriction. The 350,000 Shares underlying the 701 Warrants (which were issued
pursuant to Rule 701 of the Act) are available for sale in the public market
commencing 90 days
20
<PAGE>
after the date of the Prospectus pursuant to Rule 701, subject to an eighteen
(18) month lock-up. The 187,500 shares of Common Stock underlying the Bridge
Warrants are exercisable for a period of three years commencing one year from
the date of this Prospectus. See "Principal Stockholders", "Certain
Transactions" and "Description of Securities." The exercise of such outstanding
options and warrants will dilute the percentage ownership of the Company's
stockholders, and any sales in the public market of shares of Common Stock
underlying such securities may adversely affect prevailing market prices for the
Common Stock. Moreover, the terms upon which the Company will be able to obtain
additional equity capital may be adversely affected since the holders of such
outstanding securities can be expected to exercise their respective rights
therein at a time when the Company would, in all likelihood, be able to obtain
any needed capital on terms more favorable to the Company than those provided in
such securities. See "Management -- Stock Option Plans and Agreements", "Certain
Transaction", "Description of Securities" and "Selling Securityholders".
Limitation on Director Liability. As permitted by Delaware law, the
Company's Certificate of Incorporation limits the liability of directors to the
Company or its stockholders for monetary damages for breach of a director's
fiduciary duty except for liability in certain instances. As a result of the
Company's charter provision and Delaware law, stockholders may have limited
rights to recover against directors for breach of fiduciary duty. See
"Description of Securities."
21
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,400,000 shares of
Common Stock and 1,400,000 Warrants offered hereby, are estimated to be
$5,911,800 ($6,843,570 assuming exercise of the Over-Allotment Option in full).
The Company will not receive any proceeds from the sale of securities by the
Selling Securityholders.
The Company intends to utilize such proceeds approximately as follows:
Approximate Approximate
Amount of Percentage(%)
Proceeds of Net Proceeds
-------- ---------------
Purchase of
Test Equipment (1) $ 410,000 6.94%
Research, Engineering
and Development(2) 550,000 9.30
Purchase of Manufacturing
Machinery(3) 600,000 10.15
Repayment of Indebtedness(4) 1,515,000 25.63
Working Capital(5) 2,836,800 47.99
----------- ------
Total................... $ 5,911,800 100%
- ----------
(1) Represents expenditures on test equipment which enables the Company to
adjust its products in order to meet customer specifications.
(2) Represents expenditures on software, computers and other material to
further develop the Company's products and to develop the Company's next
generation of products. See "Business - Research and Development."
(3) Represents expenditures on equipment necessary to manufacture the
Company's products and mechanically assemble components of the Company's
products for the establishment of the Company's fully automated
manufacturing facility.
(4) Represents the repayment of indebtedness incurred in the Bridge Financings
consisting of promissory notes in the aggregate principal amount of
$550,000 bearing interest at 8% per annum (or approximately $25,000 on the
date of this Prospectus) which is payable upon the earlier of (i) March
15, 1997 or (ii) the closing of the Company's initial public offering.
Also represents the repayment of indebtedness incurred in September 1996
consisting of promissory notes in the aggregate principal amount of
$375,000 bearing interest at 8% per
22
<PAGE>
annum (or approximately $5,000 on the date of this Prospectus) which is
payable upon the earlier of (i) March 15, 1997 or (ii) the closing of the
Company's initial public offering. The proceeds of the Bridge Financings
were used for working capital and as a source of funds to pay expenses
associated with this Offering. See "Certain Transactions." Also includes
payment to Devendar S. Bains, the Company's President, in the amount of
$350,000, which funds were loaned to the Company between January 1994 and
June 1996. These loans were made interest free and are payable on demand.
Such funds were used for working capital purposes. See "Certain
Transactions." Also includes payment of $210,000 to Chemical Bank bearing
interest at 1% over such bank's prime rate, representing the amount
outstanding on the Company's line of credit as of the date of this
Prospectus. Such funds were used for working capital purposes. See
Financial Statements.
(5) Represents expenditure for general corporate purposes including accounts
payable, payroll, and the purchase of materials for purchase orders.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of this offering based upon the current state of its business,
operations and plans, current business conditions and the Company's evaluation
of its industry. Future events, including problems, delays, expenses and
complications which may be encountered, changes in economic or competitive
conditions and the results of the Company's sales and marketing activities may
make shifts in the allocation of funds necessary or desirable. Management will
have broad discretion to determine the use of proceeds.
The Company believes that the net proceeds of this Offering, together with
the cash generated from operations, will be sufficient to support the Company's
anticipated growth, expansion and marketing efforts for at least 12 months
following the completion of this Offering. The Company may be required to obtain
additional equity or debt financing or otherwise fund its operations after such
12-month period. There can be no assurances that the Company will be able to
obtain such financing on a timely basis, on acceptable terms, or at all. In such
event, the Company may be unable to complete its current plans for expansion. If
the Company requires such financing and is unable to obtain it, the Company's
operations will be materially adversely effected. See "Risk Factors - Need for
Additional Financing."
Pending application of the net proceeds for the purposes described above,
the Company intends to invest the net proceeds primarily in the United States
government securities, short-term certificates of deposit, money market funds or
other short-term, interest-bearing, investment grade securities. All funds
received through the exercise of warrants and options will be applied towards
working capital.
23
<PAGE>
DILUTION
At September 30, 1996, the net tangible book value of the Company was
$(1,553,627) or $(.55) per share. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of outstanding shares of
Common Stock. Assuming the sale of the Securities offered hereby of 1,400,000
shares of Common Stock and 1,400,000 Warrants (at an assumed initial public
offering price of $5.00 per share and $.10 per Warrant) (less underwriting
discounts and commissions and estimated expenses of this Offering) the net
tangible book value of the Company at September 30, 1996 would have been
$4,498,173 or $1.06 per share, representing an immediate increase in net
tangible book value of $1.61 per share to the existing stockholders and an
immediate dilution of $3.94 per share (or 79%) to new investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
Initial Public offering price per share.............. $5.00
Net tangible book value deficit per share
before Offering............................. (.55)
Increase per share attributable to new investors 1.61
As adjusted net tangible book value after Offering 1.06
Dilution to new investors............................ $3.94
The following table sets forth, at September 30, 1996, with respect to the
Company's existing stockholders, including the Selling Securityholders, and new
investors, a comparison of the number of Shares of Common Stock acquired from
the Company and its former stockholders, the amount and percentage of total
consideration paid and the average price per share of Common Stock (at an
assumed initial public offering price of $5.00 per share).
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
---------------- ------------------- -------------
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 2,850,000 67.06 $1,275,000 15.41% $ .45
New Investors 1,400,000 32.94 $7,000,000 84.59% $ 5.00
--------- ----- ---------- -----
Total 4,250,000 100% $8,275,000 100%
========= ===== ========== =====
</TABLE>
24
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996, on an as adjusted basis to give effect to the sale of
1,400,000 shares of Common Stock and 1,400,000 Warrants offered by the Company
(at an assumed public offering prices of $5.00 per share and $0.10 per Warrant)
in this Offering, and the application of the estimated net proceeds to the
Company from this Offering. This table should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1996
------------------
Actual As Adjusted (1)
------ ---------------
(in thousands)
<S> <C> <C>
Debt:
Bank Line of Credit 210
Notes Payable 925
Stockholders' Loan 350
Stockholders' equity:
Preferred stock, no stated value, 1,000,000
shares authorized, no shares issued or
outstanding
Common stock, $.0001 par value, 25,000,000
shares authorized, 2,850,000 shares
outstanding actual and 4,250,000 shares
outstanding, as adjusted -- --
Additional paid-in capital 4,433 10,345
Accumulated deficit (5,847) (5,847)
Total stockholders' equity (deficit) $ (1,414) $ 4,498
-------- --------
Total capitalization $ 71 $ 4,498
======== ========
</TABLE>
(1) Adjusted for the sale of 1,400,000 shares of common stock and 1,400,000
Warrants and the application of the estimated net proceeds therefrom as
described under "Use of Proceeds."
25
<PAGE>
DIVIDEND POLICY
Holders of the Company's Preferred Stock or Common Stock are
entitled to dividends when, as and if declared by the Board of Directors out of
funds legally available therefore. The Company has not in the past and does not
currently anticipate the declaration or payment of any dividends in the
foreseeable future. The Company intends to retain earnings, if any, to finance
the development and expansion of its business. Future dividend policy will be
subject to the discretion of the Board of Directors and will be contingent upon
future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors. Therefore, there
can be no assurance that any dividends of any kind will ever be paid.
26
<PAGE>
SELECTED FINANCIAL DATA
(in thousands except per share data)
The selected financial data set forth below for the nine months
ended September 30, 1995 and 1996 are derived from the unaudited financial
statements of the Company, which include all adjustments which management of the
Company considers necessary for a fair presentation of the data for such
periods. The selected financial data set forth below for the years ended
December 31, 1994 and 1995 are derived from the audited financial statements of
the Company appearing elsewhere in the Prospectus. The results for the nine
months ended September 30, 1996 are not necessarily indicative of the results to
be expected for the full year. The data presented below should be read in
conjunction with such financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. See "Experts."
Statement of Operations Data
<TABLE>
<CAPTION>
Nine Months
Year ended December 31 ended September 30,
---------------------- -------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 3,575 $ 1,810 $ 1,558 $ 1,957
Cost of goods sold 2,713 1,756 1,332 1,889
Gross profit 862 54 226 68
Selling, general and 722 527 436 922
administrative
Research, engineering
and development 333 372 122 701
Operating loss (193) (845) (332) (1,555)
Stock compensation and
financing costs 1,180 -- 2,553
Loss before taxes (193) (2,025) (332) (4,108)
Provision for income taxes (15)
Net loss(1) $ (178) $(2,025) $ (332) $(4,108)
======= ======= ======= =======
Net loss per share $ (.05) $ (.62) $ (.10) $ (1.26)
Shares outstanding (2) 3,258 3,258 3,258 3,258
======= ======= ======= =======
</TABLE>
Balance Sheet Data
<TABLE>
<CAPTION>
Year ended December 31 September 30, As Adjusted
1995 1996 September 30, 1996(3)
---- ---- ---------------------
<S> <C> <C> <C>
Working capital (deficit) $ (578) $(1,469) $ 4,443
Total assets 722 1,467 5,869
Total liabilities 1,276 2,881 1,371
Stockholders' equity (deficit) (554) (1,414) 4,498
</TABLE>
(1) Net loss for the year ended 1995 and nine months ended September 30, 1996
include non-cash stock compensation expenses of $1,180,000 and $2,553,125,
respectively.
(2) All shares, warrants and options issued or granted within the past twelve
months from the most current period presented are considered to be
outstanding for all periods presented.
(3) Adjusted for the sale of 1,400,000 shares of Common Stock at an assumed
offering price of $5.00 per share and 1,400,000 Warrants at an offering
price of $0.10 per Warrant and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds."
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations
The following table sets forth certain operating data as percentage of
total revenue:
<TABLE>
<CAPTION>
Percentage of Total Net Sales
Years ended Nine months ended
December 31, September 30,
1994 1995 1995 1996
--------------- ---------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 75.9 97.0 85.5 96.5
Gross profit 24.1 3.0 14.5 3.5
Selling, general and
administrative 20.2 29.1 28.0 47.1
Research, engineering and
development 9.3 20.6 7.8 35.8
Total operating expenses 29.5 49.7 35.8 82.9
Stock compensation and
financing costs 65.2 130.4
Loss before income taxes (5.4) (111.9) (21.3) (209.8)
Provision (credit) for
income taxes (0.4)
Net loss (5.0)% (111.9)% (21.3)% (209.8)%
</TABLE>
Results of operations - Nine months ended September 30, 1996 compared to Nine
months ended September 30, 1995
Revenues for the first nine months of 1996 increased 26% compared to the
first nine months of 1995. The Company's principal business strategy since 1995
has been devoted to the engineering production of the linear power amplifiers
and Multicarrier Linear Power Amplifiers (MCLPA) prototypes for major
international OEM manufactures. As a result, the production of commercial
cellular amplifiers decreased significantly in 1995 replaced with minimal
revenues relating to the MCLPA. During the first nine months of 1996, the
Company's revenues relating to the MCLPA as compared to the same period in 1995
increased significantly as the MCLPA is further developed and nearing acceptance
by OEM manufacturers. During the first nine months of 1996, approximately 30% of
all product shipments were prototypes compared to about 7% for the same period
in 1995.
Cost of sales as a percentage of sales was 97% during the nine months
ended September 30, 1996, compared to 86% during the same period for 1995. This
increase can be attributed to the extensive engineering and direct labor costs
associated with the production of MCLPA prototypes.
28
<PAGE>
Selling, general and administrative expenses increased in 1996 by $485,806
to $922,266 from $436,460 in 1995. Expressed as a percentage of sales, the
selling, general and administrative expenses were 47% in 1996 and 28% in 1995.
The principle factors contributing to the increase in selling, general and
administrative expenses relate to consulting and professional fees in 1996 that
did not exist in 1995 and increased rent expense due to the Company leasing a
new larger facility. In addition, interest expense was higher in the third
quarter of 1996 because of the outstanding bank debt and lease obligations.
Research, engineering and development expenses increased to 36% of net
sales in 1996 compared to 8% in 1995. For the first nine months of 1996, the
principal activity of the business related to the design and production of
product prototypes for OEM manufacturers. The research, engineering and
development expenses consist principally of salary costs for engineers and the
expenses of equipment purchased specifically for the design and testing of the
prototype products.
Stock compensation expense in 1996 of $2,553,125 relates mainly to the
March and April 1996 issuance of stock and options at prices substantially lower
than the contemplated initial public offering price.
As a result of the foregoing, the Company incurred net losses of
($4,108,342) or ($1.26) per share for the nine months ended September 30, 1996
compared with net losses of ($332,364) or ($.10) per share for the same period
in 1995.
1995 Compared with 1994
In 1995 the Company began focusing its business on the MCLPA, a relatively
recent outgrowth in the market place. Since 1989 the Company had concentrated in
the commercial cellular amplifier business. The transition in the Company's
focus from a supplier of single channel amplifiers to the design of MCLPA
prototypes for large OEM wireless telecommunications manufacturers resulted in a
decrease in revenues of $1,764,910, or 49%, to $1,810,222 in 1995 from
$3,575,132 in 1994. Shipments of prototype products accounted for about 7% of
all shipments in 1994 whereas in 1995 they accounted for 21%. During 1995
approximately 61% of net sales were to four customers and (AllenTelecom - 18%,
Kentrox Industries - 17%, DSC Communications - 15% and AT&T - 11%) 30% of total
sales were export sales.
Cost of sales as a percentage of sales was 97% in 1995 compared to 76% in
1994. The increase is principally due to the change in the business. The
Company's focus on the MCLPA has required a substantial amount of direct labor
costs, principally engineering, to develop the MCLPA technology.
Selling, general and administrative expenses decreased in 1995 by $194,843
to $527,150 from $721,993 in 1994. Expressed as a percentage of sales, the
selling, general and administrative expenses were 29% in 1995 and 20% in 1994.
Selling, general and administrative expenses decreased as a result of lower
sales commissions, reduction in management bonuses and fewer staff. The
percentage increase in 1995 is attributed to fixed costs, such as rent, etc.,
representing a higher portion of net sales.
Research, engineering and development expenses as a percentage of net
sales increased to 21% in 1995 compared to 9% in 1994. This increase reflects
the changes in the business to design and production of prototypes for OEM
manufacturers. The research and development expenses consist principally of
salary costs for engineers and the expensing of equipment purchases acquired
specifically for the design and testing of the prototype products.
29
<PAGE>
Stock compensation and financing costs of $1,180,000 in 1995 relates to
the assignment of stock from the principal stockholder to a director and a law
firm.
Liquidity and Capital Resources
As of September 30, 1996, the Company had a current ratio of 0.40 to 1.
The bank line of credit outstanding totaled $210,000 in addition to stockholders
loans of $350,000. The funds from the credit line and stockholder's loan have
been used for working capital purposes. Additional loans totaling $925,000 were
incurred during the first nine months of 1996 as a result of the Bridge
Financings. The loans bear interest at 8% and are payable on the earlier of
March 1997 or the completion of the contemplated initial public offering. The
Company intends to use a portion of the proceeds from this Offering to repay all
of the stockholder loans outstanding and the aggregate amount outstanding under
the bank line of credit. See "Use of Proceeds."
The Company has several lease obligations for certain research,
engineering and development equipment used in the production processes requiring
minimum monthly payments of $19,444 through 1999.
The Company believes that the net proceeds of this Offering will permit it
to repay the outstanding short-term debt, to continue to meet its working
capital obligations and fund the further development of its business for the
next 12 months. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate its
research, engineering and development or manufacturing programs or obtain funds
through arrangements with partners or others that may require the Company to
relinquish rights to certain of its technologies or potential products or other
assets. Accordingly, the inability to obtain such financing could have a
material adverse effect on the Company's business, financial condition and
results of operations.
A substantial amount of the proceeds from this Offering will be used to
purchase manufacturing and test equipment ($1,010,000) and research, engineering
and development related expenditures ($550,000).
30
<PAGE>
BUSINESS
Amplidyne designs, manufactures and sells ultra linear power amplifiers
and related subsystems to the worldwide wireless, local loop and satellite
uplink telecommunications market. These power amplifiers, which are a key
component in cellular base stations, increase the power of radio frequency
("RF") and microwave signals with low distortion, enabling the user to
significantly increase the quality and quantity of calls processed by new and
existing cellular base stations. The Company's wireless telecommunications
products consist of solid-state, RF and microwave, single and multicarrier power
amplifiers that support a broad range of analog and digital transmission
protocols including advanced mobile phone services ("AMPS"), code division
multiple access ("CDMA"), time division multiple access ("TDMA"), total access
communication systems ("TACS"), extended total access communication systems
("ETACS"), nordic mobile telephone ("NMT"), global system for mobile
communications ("GSM") and digital communication service at 1800 MHz
("DCS-1800"). The products are marketed to the cellular, wireless local loop and
personal communication systems ("PCS") segments of the wireless
telecommunications industry. The PCS segment of the market is one of the fastest
growing segments and the Company has devoted significant resources in 1996 to
develop products for this market. The Company's largest wireless
telecommunications customers are AT&T, DSC Communications, Samsung and Goldstar,
each of which is an OEM.
Amplidyne has several products with a patent application pending (for
which a notice of allowance has been issued by the United States Patent and
Trademark Office) for Pre-Distortion and Pre-Distortion Linearization which, the
Company believes, is more effective in reducing distortion than other currently
available technology. In addition to its presence in the wireless
telecommunications industry, the Company designs and manufactures products for
uplink satellite communications and for audio and TV transmission links. The
Company also believes that its products have great potential opportunity for the
wireless communication industry in developing countries.
In addition to the Company's product line of single channel power
amplifiers which are currently utilized by the wireless communications industry,
the Company has developed a Multicarrier Linear Power Amplifier ("MCLPA"). MCLPA
combines the performance capabilities of up to 25 single carrier amplifiers into
one unit, eliminating the need for numerous single carrier amplifiers and the
corresponding unnecessary space occupied by the cavity filters encasing the
amplifiers. Management believes that with its (i) proprietary technology (which
effectively reduces distortion), (ii) technological expertise and (iii)
established product line consisting of ultra linear single channel power
amplifiers, the Company can achieve similar performance with its MCLPAs. The
Company's linear power amplifiers and MCLPAs utilizes the Company's patent
pending predistortion and proprietary feed forward technology which amplifies
many channels with minimal distortion at the same time with one product.
The Company intends to capitalize on its vast management experience
developing power amplifiers for worldwide markets by introducing more
sophisticated amplifiers for commercial applications. Amplidyne believes that
its core technological expertise should continue to enhance its ability to
introduce new products for the wireless telecommunications industry.
Industry Background
The market for wireless communication services has grown substantially
during the past decade. Cellular service has been one of the fastest growing
segments of the wireless telecommunications market. The worldwide wireless
revolution exploded in 1994, adding 24 million new subscribers bringing the
total global subscriber count in 1995 to approximately 55 million, a growth rate
of more than 70%. However, this
31
<PAGE>
represents a worldwide penetration of only 1.35%. Industry officials project a
worldwide market penetration of 8% going into the next century, a 50% compounded
annual growth rate ("CAGR"). The growth in cellular communications has required,
and will continue to require, substantial investment by cellular service
providers in wireless infrastructure equipment. Moreover, management believes
that intensified competition among cellular service providers is resulting in
declining costs to end-users as well as new types of service offerings. This
demand, coupled with unprecedented growth, will require new infrastructure
equipment and technology that will allow better coverage for higher-density
networks. Carriers also need to have the flexibility to place cell sites
anywhere, provide speedier deployment without regard to frequency allocation or
planning with lower installation, maintenance and operational costs. In order
for carriers to meet their demands, new technologies and base station equipment
must be deployed.
The PCS market is also one of the fastest growing segments in the wireless
telecommunications market. Recently major OEMs such as AT&T have announced
digital PCS services nationwide; such service is expected to begin in early
1997. PCS service providers are attracting more subcribers than analysts had
projected. The attraction to consumers is lower prices than cellular and as well
as the fact that PCS phones use more powerful digital technology, which improves
call quality compared with cellular service. This result is due to the fact that
PCS transmits at a higher radio frequency. It is also easier to program PCS
phones for advanced features (i.e., sending electronic mail and news headlines).
Amplidyne has developed PCS linear amplifiers and PCS MCLPAs. Managaement
believes that these products will produce significant sales for the Company
during the next few years.
A cellular system consists of a number of cell sites which are networked
to form a cellular system operator's geographic coverage area. Each cell site
has a base station which houses the equipment that transmits and receives
telephone calls between the cellular subscriber within the cell and the
switching office of the local wireline telephone system. Such base station
equipment includes an antenna and a series of transceivers, power amplifiers and
cavity filters. Large cell sites, which generally cover a geographic area of up
to five miles in radius, are commonly referred to as "macrocells."
Cellular system operators in densely populated areas are able to expand
the capacity of their existing cellular systems by incorporating smaller cells,
commonly referred to as "microcells," that divide macrocells into several
smaller cell sites, typically one to three miles in radius. The base stations
for microcells are substantially smaller physically than base stations for
macrocells. Microcells require less expensive equipment at each base station,
but require greater numbers of these smaller base stations to maintain service
quality and system capacity.
The ability of cellular system operators to increase system capacity
through the use of microcells is largely dependent on their ability to broadcast
multiple signals with acceptable levels of interference and distortion. In
cellular systems, the amplifier is generally the greatest source of signal
interference and distortion, particularly with multi carrier high power
amplifiers. Consequently, obtaining amplifiers which can transmit and receive
multiple signals with low distortion or interference from adjacent signals
("high spectral purity") is critical to a cellular system operator's ability to
increase system capacity. Substantial resources and technical expertise are
required to design and manufacture multi carrier power amplifiers with high
spectral purity. To achieve high spectral purity, multi carrier amplifier
systems must have high interference cancellation properties.
In addition to cellular/ PCS system operators' need for base station
equipment, in many developing countries, where access to the public switch
telephone network ("PSTN") by the general
32
<PAGE>
population is significantly less than in developed countries, the Company
believes that wireless telecommunications systems are the most economic means to
provide basic telephone service. The expense, difficulty and time requirements
of building and maintaining a cellular or PCS network is generally less than the
cost of building and maintaining a comparable wireline network. Thus, in many
less developed countries, wireless service may provide the primary service
platform for both mobile and fixed telecommunications applications. In a
wireless local loop system, use is made of wireless radio systems instead of
wireline networks to connect telephone subscribers to the PSTN. The Company
believes that the potential opportunities for wireless communication services in
countries without reliable or extensive wireline systems may be even greater
than in countries with developed telecommunication systems.
The Company's satellite amplifier products are used to amplify the signal
which is being transmitted from the ground up to the satellite. The
manufacturers of satellite communications equipment operate in commercial
markets such as television broadcast services and commercial military
communications. Amplidyne has also provided amplifiers for terrestrial radio
systems which are used for television and audio signal transmission.
Company Strategy
Utilizing its proprietary, patent-pending technology and experience in
interference cancellation, the Company is pursuing a strategy, focused on the
need of cellular, wireless local loop and PCS system operators, to develop
technologically advanced amplifier based products. The Company has recently
developed products which address the technical issues faced by such system
operators as a result of the rapid growth in wireless telephone use (cellular,
PCS and wireless local loop) and the resulting need to increase systems
capacity.
Since early 1995 the Company has been involved in research, design and
development of linear power amplifiers and MCLPAs for the wireless
communications industry and most recently for the emerging PCS industry. The
Company has a patent pending (for which a notice of allowance has been issued by
the United States Patent and Trademark Office) on its predistortion technology
which has enabled the Company to provide ultra linear amplifiers with its
proprietary feed forward technology. Since early 1996 the Company has allocated
substantial engineering resources to develop linear power amplifiers and MCLPAs
for the emerging PCS market. The Company has focused on establishing working
relationships with major OEMs to develop products for the PCS market, which is
projected to show significant growth in 1997.
Management believes that with its predistortion technology and the
linearity capability of its core amplifier technology, the Company can achieve
similar performance from a multicarrier amplifier which others achieve by using
dual feed forward loops; this results in much higher component count within the
amplifier unit and may result in poor reliability for such products, compared to
predistortion based feed forward amplifiers which use fewer components and
thereby have a high reliability.
The Company's business strategy focuses primarily on the wireless
communication market and consists of the following elements:
Increase Penetration of Wireless Equipment Manufacturers. Since 1991, the
Company has positioned itself as a supplier of amplifier products to large
wireless telecommunications OEMs, such as AT&T, DSC Communications, Samsung and
Goldstar. Amplidyne seeks to capitalize on its existing customer relationships
and become a more significant source of its customers' amplifiers by working
closelywith OEM customers to offer innovative solutions to technical
requirements and problems. Based on the
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<PAGE>
performance characteristics and functionality of its products, Amplidyne
believes it will be able to more rapidly penetrate the infrastructure equipment
market by initially focusing its marketing efforts on large OEMs rather than
system operators.
Develop Relationships with Emerging Wireless Equipment Manufacturers. The
Company anticipates that emerging wireless equipment manufacturers will make an
increasingly significant contribution to the growth of the wireless
telecommunications industry particularly the PCS and cellular segments.
Management believes that its linear power amplifiers and MCLPAs will assist
these equipment manufacturers in providing high capacity, low distortion low
cost per channel products and has already begun to sell amplifiers to several
emerging wireless equipment manufacturers.
Develop Products for Multiple Protocols. The Company intends to continue
to invest resources in the research and development of new products for various
protocols. For cellular systems, the Company currently supports the AMPS and
TACS analog protocols, and the CDMA, TDMA, E-TACS, NMT and GSM digital
protocols. For PCS systems, Amplidyne currently supports CDMA, TDMA, DCS-1800
and PCS-1900 digital protocols. Amplidyne is continuing to develop products
that incorporate protocols which it believes will address the needs of
established and emerging wireless systems. Management believes the development
of products for multiple protocols will enable Amplidyne to benefit from the
continuing growth of existing wireless systems and other emerging wireless
telecommunications markets while reducing the risks associated with relying on
the success of one or a limited number of existing or emerging industry
protocols.
Maintain a Technology Leadership Position. In management's belief the
Company, with its innovative products, has been addressing the needs of its
customers for products that solve significant technical problems. The Company
believes its interference cancellation technologies are among the most advanced
that are commercially available in the industry, both in performance and
diversity of methodology. The Company utilizes proprietary and patent-pending
predistortion technology and proprietary feed forward interference cancellation
technology in its linear power amplifiers and MCLPAs to enable the user to
significantly increase the quality and quantity of calls processed by new and
existing cellular base stations. The Company intends to continue to invest
substantial resources in research and development associated with its
interference cancellation technologies. See "Technology". The Company has
emphasized research and development on PCS products during 1996 which management
believes will be a major growth area for the Company during 1997.
Develop Innovative Proprietary Products. To date, the Company has focused
its efforts in the development of amplifier products which are highly innovative
and are not the standard "commodity" type product. In addition, the Company
believes that it has compiled an extensive design library in the solid-state,
high power amplifier industry utilizing its proprietary and patent-pending
technology and expertise in interference cancellation. The Company has developed
and intends to continue to develop products which combine basic components in
unique and high performance configuration to command higher prices in the
wireless communications market. In addition, the Company also plans to adopt
this expertise for new commercial market applications and product requirements
and develop products for the emerging DCS-1800 and PCS-1900 markets. The Company
has developed amplifier products during 1996 which can be used in PCS repeater
subsystems. Management believes that this segment of the business will show
substantial growth.
Provide Support from Product Design through Installation and Operation.
The Company works
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<PAGE>
with its customers throughout the design process to assist them in refining and
developing their amplifier specifications. Once the specifications have been met
and the product delivered, Amplidyne continues to provide technical support to
facilitate system integration, start-up and continued operation. By providing
customer support services from the product design phase through installation and
operation, management believes it fosters increased levels of customer loyalty
and satisfaction. In addition, through this process, the Company believes it
will develop new product definitions and implementations to further enhance the
strategic position of the Company in the wireless market.
Maintain Control of the Manufacturing Process. As part of the transition
to becoming a leading amplifier supplier to the wireless telecommunications
market, Amplidyne is in the process of implementing in-house automated
manufacturing in order to control its production schedule. In certain instances,
Amplidyne has made the strategic decisions to select single or limited source
suppliers in order to obtain lower pricing, receive more timely delivery and
maintain quality control.
The Amplidyne Advantage
The Company believes that its products, particularly the ultra linear
power amplifiers and MCLPAs have several features which differentiate them from
those of its competitors, such as:
The Predistortion Solution. Utilizing its proprietary technology the
Company can obtain significant distortion reduction in its core amplifiers. This
enables the predistorted amplifier to have feed forward correction (which is
described below, see "Business-Technology") applied to it to achieve distortion
cancellation. The Company believes that its competitors are only able to obtain
this level of distortion cancellation by use of complex and component intensive
"Dual Feed Forward Loops" resulting in the use of more components within the
amplifier unit. In general, the fewer components that an amplifier uses, the
better its reliability.
Superior Distortion and Spurious Cancellation Resulting in Ultra Linear
High Power Amplifiers. The Company believes the use of MCLPAs is critical in the
implementation of new cellular systems and upgrade of older analog systems.
Cellular systems need to cover large areas with minimum hardware in order to
minimize cost per subscriber. Reduction of the distortion and spurious signals
from the amplifiers is a key enabling technology. Amplidyne has developed
proprietary interference cancellation technology using multiple methods to
achieve high suppression of spurious output and distortion typically associated
with higher power amplifiers.
By utilizing its proprietary and patent-pending predistortion technology
and its proprietary feed forward technology, the MCLPAs amplification capacity
of the Company's amplifiers are, in management's belief, among the best in the
industry. Standard MCLPAs currently support 25 channels with approximately 25
watts composite power, resulting in approximate 1 watt per channel. The
Company's MCLPAs support up to 25 channels at 4 watts per channel, an
approximate 400% increase over industry standard MCLPAs.
High Quality and Reliability. Amplidyne believes that it has consistently
provided high quality, reliable products to its customers. The Company has many
thousands of its amplifiers in the field. Management believes that its
reputation for quality and reliability will enable Amplidyne to attract new
customers and maintain existing customers for all its products.
Linearity, Low Distortion and High Amplification. Wireless service
providers' ability to manage scarce spectrum resources more effectively and
accommodate a larger number of subscribers is largely
dependent on their ability to broadcast signals with high linearity, which
pertains to the ability of a
35
<PAGE>
component to amplify a wave form without altering its characteristics in
undesirable ways. Linear amplifiers allow signals to be amplified without
introducing spurious emissions that might interfere with adjacent channels.
Higher linearity increases the capacity of cellular systems by enabling a more
efficient use of digital transmission technologies, microcellular architectures
and adaptive channel allocation. In current cellular systems, the power
amplifier is generally the source of the greatest amount of signal distortion.
Consequently, obtaining power amplifiers with high linearity and low distortion
is critical to wireless service providers' ability to improve spectrum
efficiency.
The Company has several products with a patent pending (for which a notice
of allowance has been issued by the United States Patent and Trademark Office)
which it believes gives it a significant advantage over its competitors. These
features for Pre-distortion and Pre-distortion Linearization designs
significantly reduces distortion below that which is currently available in the
marketplace.
Multicarrier Designs. Multicarrier amplification, in which all channels
are amplified together by a MCLPA, rather than each channel using a separate
amplifier, allows for instantaneous electronic channel allocation. Functionally,
it combines multiple single channel power amplifiers, typically 16, into a
single unit, thereby eliminating the single channel power amplifiers and the
corresponding tunable cavity filters. MCLPAs require significantly higher
linearity compared to single channel designs.
By virtue of the Company's high linearity products which incorporates
pre-distortion and feed forward technology achieving, in management's belief,
the lowest distortion in the industry, the MCLPA amplified signal remains within
their prescribed band and spectrum with low interference of adjacent channels
thus providing flexibility to accommodate any frequency plan. Management
believes that its technology in MCLPAs will enable Amplidyne to attract new
customers.
Low Noise Amplifier. Since 1991, the Company has been manufacturing low
noise amplifiers (LNA) which are used in the receiver section of the base
station (digital and analogue). With this technology, the Company has the
ability to offer "booster amplifiers" to the wireless industry which incorporate
LNAs, MCLPAs and receive / transmit filters. Management believes that there is a
significant market for "booster amplifiers" which it intends to pursue. The
Company has recently received orders for small quantities of its low noise PCS
products. Management believes that this line of products have tremendous growth
potential.
High Quality, Reliability and Customer Support. The Company believes that
the power amplifier in cell sites historically has been the single most common
point of equipment failure in wireless telecommunications networks. Increasingly
reliable power amplifiers, therefore, will improve the level of service offered
by wireless service providers, while reducing their operating costs. In
addition, MCLPAs eliminate the need for high-maintenance, tunable cavity filters
which should further reduce costs.
The Company works closely with its customers throughout the design process
in refining and developing their amplifier specifications. The Company uses the
latest equipment and computer aided design and modeling, solid state device
physics, advanced digital signal processing ("DSP") and digital control systems,
in the development of its products in their specialized engineering and research
departments. The integration of the Company's design and production is a factor
in the Company's ability to provide its customers with high reliability, low
distortion and low maintenance amplifiers.
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<PAGE>
Technology
Wireless Transmit Technology. A typical cellular communications system
comprises a geographic region containing a number of cells, each with a base
station, which are networked to form a cellular service provider's coverage
area. Each base station or cell site houses the equipment that transmits and
receives telephone calls to and from the cellular subscriber within the cell and
the switching office of the local wireline telephone system. Such equipment
includes a series of transceivers, power amplifiers, tunable cavity filters and
an antenna. In a single channel system, each channel requires a separate
transceiver, power amplifier and tunable cavity filter. The power amplifier
within the base station receives a relatively weak signal from the transceiver
and significantly boosts the power of the outgoing wireless signal so that it
can be broadcast throughout the cell. The radio power levels necessary to
transmit the signal over the required range must be achieved without distorting
the modulation characteristics of the signal. The signal must also be amplified
with linearity in order to remain in the assigned channel with low distortion or
interference with adjacent channels.
Because cellular operators are allocated a small RF spectrum and certain
channels, it is necessary to make efficient use of the spectrum to enable
optimum system capacity. By amplifying all channels with minimum distortion at
the same time, rather than inefficient use of single channel amplification, one
obtains better system capacity. A MCLPA combines the performance capabilities of
up to 25 single carrier amplifiers into one unit, eliminating the need for
numerous single carrier amplifiers and their corresponding tunable cavity
filters. These MCLPAs require less space than multiple single channel amplifiers
and their corresponding tunable cavity filters which reduce the size and cost of
a base station. See Figure 1 below.
[Figure 1]
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<PAGE>
MCLPAs create distortion products which can cause adjacent channel
interference. The minimization of these distortion products requires
sophisticated technology. This is accomplished through interference cancellation
techniques such as "predistortion" and "feed forward" accompanied by highly
advanced control and processing technology. The Company has developed certain
proprietary technology and methods to achieve minimal distortion in its
amplifiers, technically called predistortion and feed forward correction. The
Company uses three distinct technologies (A) Linear class A and AB amplifiers,
(B) Predistorted class A and AB amplifiers and (C) Predistortion feed forward
amplifiers. The Company's proprietary leading edge products contain patent
pending predistortion and proprietary feed forward technology combined in a
proprietary automatic correction technique.
All amplifiers create distortion when they are run at a high power level.
For example, Figure 2 below shows two calls being processed through a linear
class A / AB amplifier. In an ideal case the output of the amplifier would
faithfully reproduce the input signal without any distortion.
[Figure 2]
In real life, however, distortion characteristics are produced. See Figure
3 below.
[Figure 3]
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<PAGE>
These distortion products can cause interference with another caller's
channel which in turn produces poor call quality. By using a simple, patent
pending technology, Amplidyne recreates the distortion for the amplifier in such
a manner to cancel the interference signals. See Figure 4 below.
[Figure 4]
Amplidyne believes that this cancellation technique is superior to any
other predistortion technology available at present. See Figure 5. Feed forward
cancellation involves taking the distortion created by the amplifier and
processing it in such a way that when it is added back into the amplifier having
been pre-distorted and combined with the feed forward technology, distortion
cancellation occurs. The Company believes that its patent pending technology has
the most unique and potent technology for distortion cancellation. Furthermore,
Amplidyne has selected linear class AB technology for its base amplifier which
it believes also has superior distortion characteristics compared to other
competitors because it is easier to pre-distort. Thus the three key ingredients
(a) Linear class A and AB amplifiers, (b) Predistortion technology and (c) Feed
forward technology enables Amplidyne to produce MCLPAs with what it believes to
be the best distortion cancellation available on the market. See Figure 6 below.
[Figure 5]
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<PAGE>
[Figure 6]
Analog v. Digital Technology. Cellular system operators are increasing
their system capacity by transitioning from analog to digital technology.
Cellular systems based on analog technology are capable of carrying only one
call per channel. Current analog standards and formats include AMPS and TACS.
Digital systems allow a given channel of spectrum to carry multiple calls
simultaneously thereby increasing system capacity. Conversion to digital
transmission is expected to allow three to eight times as many voice
conversations to occupy the same frequency bands. Current digital standards and
formats include TDMA and CDMA in North America and GSM and DCS-1800 in Europe.
An additional cellular system operating in the specialized mobile radio ("SMR")
spectrum is in the early stages of deployment in the United States. This system
uses digital techniques that include Frequency Hopping Multiple Access ("FHMA").
Wireless Receive Technology. The receiving section of a cellular base
station frequently uses two antennas for efficient spectrum usage. The
deployment of complex circuitry and techniques, including the use of GaAsFET
(Gallium Arsenide Field Effect Transistors) enhances the systems performance,
enabling the weak "noisy" signal to be amplified with a significant reduction in
the level of noise. Amplidyne has been manufacturing low noise amplifiers since
1991, with thousands currently in service.
Markets
The market for wireless communications services has grown substantially
during the past decade as cellular wireless local loop, SMR and other new and
emerging applications (such as PCS) have become increasingly accessible and
affordable to growing numbers of consumers. The growth of these markets has
increased the demand for the Company's products, although the Company cannot
predict trends in these markets.
Cellular Market. The market for cellular communications is currently the
largest of the wireless services. See " Industry Background." Cellular system
operators have expanded the capacity of their existing cellular systems by
splitting macrocells into smaller microcells. The Company believes that the
relatively small size, high power and performance characteristics of its
microcell MCLPAs will be
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particularly attractive to companies like AT&T, DSC Communications, Samsung,
Goldstar as well as emerging wireless telecommunications infrastructure
equipment providers when providing infrastructure equipment for such new cell
sites.
Wireless Local Loop and SMR Markets. Wireless local loop systems are
increasingly being adopted in developing markets to more quickly implement
telephone communication services. In certain developing countries, such as
Indonesia and Brazil, wireless local loop systems provide an attractive
alternative to copper and fiber optic cable based systems, with the potential to
be implemented more quickly and at lower cost than wireline telephone systems.
The Company designs, manufactures and markets MCLPAs for infrastructure
equipment systems in the wireless local loop market.
SMR, like cellular communications, is a two-way service for both speech
and data. SMR originally was designed as a private network for closed groups
communicating between a base station and a large number of users, mainly for
dispatching taxis, delivery and public safety vehicles. SMR system operators are
subject to certain limitations which make the use of SMR frequencies more
appropriate for short dispatch messages. The success of SMR as a new type of
wireless service will depend in part on whether infrastructure manufacturers and
service providers can reduce costs so as to gain greater market penetration than
cellular service providers.
Custom Communications and Other Markets. The custom communications market
consists of small niche segments within the larger communications market:
long-haul radio communications, land mobile communications, surveillance
communications, ground-to-air communications, microwave communications,
broadband communications and telemetry tracking. The Company sells custom
amplifiers and related products to these segments. See " Customers, Sales and
Marketing".
PCS and Other Potential Markets. The Company believes that new types of
wireless systems will be introduced in the near future. For example, in 1994 and
1995, the FCC auctioned RF spectrum in the 1.85 to 1.99 gigahertz range for the
provision of PCS. The Company has recently obtained purchase orders for PCS
products indicating rapid growth in this area. Like SMR, the success of PCS will
depend in part on whether manufacturers and service providers can reduce system
manufacturing and service costs sufficiently. The Company believes that
cellular, SMR and PCS will share future markets with PCS capturing the most
significant portion of this market. See "Business - Industry Background." The
Company is currently developing products for the PCS market, has shipped
prototype products for the PCS market and has recently received purchase orders
for PCS linear power amplifiers.
Products
The Company designs and sells multicarrier transmit amplifiers and low
noise receive amplifiers for the cellular communications market, as well as the
PCS, wireless local loop and special mobile radio (SMR) segments of the wireless
communications industry. The Company also provides a large number of catalog and
custom amplifiers to OEMs and to other customers in the communications market in
general.
o Multicarrier Linear Power Amplifiers (MCLPAs). When a cellular or
PCS user places a call, the call is processed through a base
station, amplified, and then transmitted on to the person receiving
the call. Therefore, all base stations require amplifiers (MCLPAs)
whether they are being used for cellular, PCS or local loop
applications. Amplidyne manufactures these amplifiers. The objective
is to provide a quality product at a good price and to have
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<PAGE>
exemplary reliability. Management believes that Amplidyne's products
with its patent pending predistortion technology (for which a notice
of allowance has been issued by the United States Patent and
Trademark Office), core linear amplifier technology and proprietary
feed forward technology achieve all of the above mentioned
objectives. Amplidyne's MCLPAs are a unique line of ultra linear
devices which utilize a proprietary predistortion and phase locked
feed forward architecture. MCLPAs typically amplify up to 25
carriers at 4 watts of output power.
AMPLIDYNE'S MULTICARRIER LINEAR POWER AMPLIFIER
[PICTURE No. 1]
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The following table provides certain information regarding the Company's
MCLPAs. The key item in this table is the IMD specification, which management
believes is among the best available in the industry.
AMPLIDYNE'S MCLPA PRODUCT SUMMARY
- --------------------------------------------------------------------------------
OUTPUT
Product POWER
Model No. FREQUENCY STANDARD WATTS IMD (dBc)*
- --------------------------------------------------------------------------------
AMP461/466-N-100 463-467.5 NMT-450 100 -70
- --------------------------------------------------------------------------------
AMP651/866-SE-100 851-866 SETACS 100 -70
- --------------------------------------------------------------------------------
AMP869-896-100 869-894 AMPS/CDMA 100 -70
CDPD, TDMA
- --------------------------------------------------------------------------------
AMP917/950-E-100 917-960 ETACS/CDMA 100 -70
- --------------------------------------------------------------------------------
AMP1819-D-100 1805-1880 DCS-1800 100 -70
- --------------------------------------------------------------------------------
AMP1990-P-100 1930-1990 PCS-1900 100 -70
- --------------------------------------------------------------------------------
AMP1855-K-100 1840-1870 PCS-CDMA 100 -70
- --------------------------------------------------------------------------------
* Carrier to Intermodulation Distortion Radio (the industry's standard measure)
and spurious emissions.
o High Power Linear Amplifiers. Amplidyne's product line of linear
amplifiers have a high third order intercept point which translates to
better call quality. These high power amplifiers are supplied as modules
or plug in enclosures. The communication bands available are NMT-450,
AMPS, TACS, ETACS and PCS. The output power ranges from 1 to 200 Watts.
These amplifiers can be used in instances where service providers only
need a single transmit channel.
[PICTURE No. 2]
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The following table lists the Company's high power linear amplifiers:
- --------------------------------------------------------------------------------
Model No. FREQUENCY MHz STANDARD POWER WATTS IMD (dBc)
- --------------------------------------------------------------------------------
AMP0861-50 869-894 CDMA 25 -50
AMPS/TDMA 50 -40
AMP/CDPD 65 -25
- --------------------------------------------------------------------------------
AMP0935-16 925-960 GSM 65 -25
- --------------------------------------------------------------------------------
AMP0933-50 917-960 ETACS 65 -25
- --------------------------------------------------------------------------------
AMP0450-25 463-468 NMT-450 50 -40
- --------------------------------------------------------------------------------
AMP1855-25 1840-1870 DCS-1800 30 -30
- --------------------------------------------------------------------------------
AMP1990-25 1930-1990 PCS-1900 30 -30
TDMA 50 -40
CDMA 25 -40
- --------------------------------------------------------------------------------
o Local Loop and Mini Cell Amplifiers. Local loop and mini cell amplifiers
are designed with a proprietary circuit to achieve a high IMD
specification, which translates to better call quality through the mini
cell. These amplifiers can be supplied by the Company as modules or in a
rack configuration.
[PICTURE No. 3]
o Low Noise Amplifier, Cellular, PCN, PCS, GSM. Amplidyne's low noise
amplifiers are manufactured with a mix of silicon and GaAsFET devices.
These amplifiers offer the user the lowest noise and the highest intercept
point, while maintaining good efficiency. Received calls at a base station
are low in level due to the fact that hand held cellular phones typically
operate at half a watt power level. This weak signal has to be amplified
clearly which is done by using Amplidyne's low noise amplifier. All
amplifiers undergo 72 hour burn-in period to ensure reliable filed
operation.
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o Communication Amplifiers. These amplifiers are designed for cellular and
PCN/PCS applications and use GaAs or Silicon Bipolar FET devices.
Management believes that this product provides the industry's best
performance per dollar. The transmit amplifiers are optimized for low
distortion products. Custom configurations are available for all
communication amplifiers. This line of products is aimed at the single
channel base station users employing the digital cellular standards (CDMA
and TDMA). Management believes by marketing this product in this format a
distinct, large market can be addressed by these products.
o Receive Multi-Coupler Amplifiers. Amplidyne supplies dual receiver
multi-carriers for cellular and PCS bands. Management believes that this
product line offers high performance and reliability. Receive
multi-coupler amplifiers consist of low noise amplifiers, as described
above, filters and other components used as a receiving subsystem within
the base station. Management believes by offering this product line,
Amplidyne has more value added to its low noise amplifiers and at the same
time can satisfy the requirements of its customers.
The Company has used its technological expertise to improve the linearity
of its amplifiers by introducing pre-distortion and compensation techniques.
Several of the Company's single-channel amplifiers include linearity correction
and compensation networks. These techniques are combined with automatic error
correction circuits to enhance the linearity and performance of the Company's
feed-forward amplifiers. Amplidyne has also used its technological expertise to
design and manufacture new products, such as the first 200 watt average power
multi-channel pre-distortion amplifier, and a PCS single-channel CDMA amplifier
being used in an overseas CDMA base station evaluation.
The Company's wireless telecommunications amplifiers can be configured as
modules, separate plug-in amplifier units or integrated subsystems. The
Company's products are integrated into systems by OEM customers, and therefore
must be engineered to be compatible with industry standards and with certain
customer specifications, such as frequency, power, linearity and built-in test
(BIT) for automatic fault diagnostics. The Company intends to utilize a portion
of the net proceeds of this Offering ($410,000) for the purchase of test
equipment which enables the Company to adjust its products in order to meet
customer specifications. See "Use of Proceeds."
Product Warranty
The Company warrants new products against defects in materials and
workmanship for a period of one (1) year from the date of shipment. To date, the
Company has not experienced a material line of warranty claims.
Backlog
As of December 31, 1994 and 1995 the Company has a backlog of $1.1 million
and $3.5 million, respectively. As of October 31, 1996, the Company had a
multi-year delivery backlog of approximately $103,000,000. It is anticipated
that this backlog and any orders received by December 31, 1996 will be filled
with continuing production during fiscal years 1997-1999. The Company cannot
predict whether or not all of such backlog will be delivered inasmuch as
purchase orders are subject to changes and/or cancellation particularly since
the wireless communications industry is extremely characterized by rapid
technological change, new product development, product obsolescence and evolving
industry standards. In addition, as technology changes, corporations are
frequently requested to update and provide new prototypes in accordance with new
specifications if products become obsolete or inferior. See Risk Factors - Rapid
Technological Change and Intense
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Competition."
Customers, Sales & Marketing
Customers. The Company markets its products worldwide generally to
wireless communications manufacturers (OEMs) and communications system
operators. The table below indicates net revenues derived from customers in the
Company's markets since 1994.
Net Revenues By Market Categories
(in thousands)
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
------------ -------------
Markets 1994 1995 1995 1996
<S> <C> <C> <C> <C>
Cellular Analog .................... $2,780 $ 308 $ 340 $ 74
Cellular Digital ................... 143 591 401 452
Wireless Telephony ................. 187 435 401 707
Satellite Communications,
Custom and other Products ....... 465 476 416 145
Digital PCS Products ............... -- -- -- 579
Total ...................... $3,575 $1,810 $1,558 $1,957
</TABLE>
Historically, the Company has derived a substantial percentage of its net
revenues from single customers during certain fiscal periods and until fiscal
1994 the Company derived substantially all of its net revenues from cellular
analog products. However, since 1995 the Company has focused primarily on
digital cellular and wireless telephony and therefore the sales in those areas
have substantially increased. The Company expects that for future sales the
Company will have substantial market share in the cellular digital, wireless
telephony and digital PCS products.
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* Cellular Analog and Digital. Since 1989 the Company has been working
closely with AT&T Bell Labs to develop products for analog base
stations primarily in the AMPS Band. These products consist
primarily of high linearity pre-amp amplifiers and low noise
amplifiers for the receive section of the base station. In
subsequent years the Company shipped thousands of the amplifiers to
its OEM customers. However, with the transition of digital
technology the sales of the products decreased substantially in 1995
and the Company concentrated its efforts in developing MCLPAs. In
February 1995 the Company received prototype orders for its wireless
MCLPAs. Sales to the analog and digital cellular industry have
decreased from 82% in 1994 to approximately 50% of total sales in
1995. For the first nine months of 1996 sales in this area are
approximately 27% of total revenues.
* Wireless Telephony. As a result of the shift in the Company's
research, engineering and development and marketing efforts, sales
to the wireless telephone segments of the wireless communications
industry have increased from approximately 5% of total revenues for
fiscal year end 1994 to 36% of total revenue for the nine months
ended September 30, 1996.
* Digital PCS. The Company has shipped prototype amplifiers to its OEM
customers as of April 1996 accounting for 30% of sales in the period
ended September 1996 and recently received purchase orders for its
PCS products. Management expects this sector of the market to show
substantial growth during fiscal 1997. The Company believes it is
one of the pioneers for low noise, and single channel high power
MCLPAs for the worldwide OEM and system operators.
* International Sales. Sales of wireless products outside the United
States (primarily to Western Europe and the Far East) represented
approximately 8%, 30% and 72% of net sales during fiscal 1994,
fiscal 1995 and the nine month period ended September 30, 1996,
respectively. The Company believes that cellular, PCS and wireless
telephony growth worldwide is going to far exceed growth rate
experienced in the U.S. The Company is positioning itself with
strategic alliances with key OEM's overseas to be a prime source of
base station, low noise and multi carrier power amplifiers.
* Sales and Marketing. The Company's executive officers are involved
in all aspects of the Company's relationships with its major OEM and
system operator customers. The Company employs a direct sales
approach focused on providing its wireless industry customers with
unique solutions to satisfy their transmit and receive amplification
needs. Sales of the Company's products to OEM and system operators
requires close technical liaison with customer engineers and
purchasing managers. The Company has entered into technical sales
representative agreements for the territories of Maryland, Virginia,
Pennsylvania, Washington, D.C., Delaware, New Jersey, Korea, England
and parts of Western Europe. By having sales representatives in
selected areas the Company can better serve its key customers in
these areas and continue to have good relationships with them by
providing technical support as well as strong individual based
customer service.
The Company intends to utilize a portion of the net proceeds of this
Offering ($410,000) for the purchase of test equipment which enables the Company
to adjust its products in order to meet customer
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<PAGE>
specifications. See "Use of Proceeds."
Competition
The ability of the Company to compete successfully and sustain
profitability depends in part upon the rate of which OEM customers incorporate
the Company's products into their systems. The Company believes that a
substantial majority of the present worldwide production of power amplifiers is
captive within the manufacturing operations of a small number of wireless
telecommunications OEMs and offered for sale as part of their wireless
telecommunications systems. The Company's future success is dependent upon the
extent to which these OEMs elect to purchase from outside sources rather than
manufacture their own amplification products. There can be no assurance that OEM
customers will incorporate the Company's products into their systems or that in
general OEM customers will continue to rely, or expand their reliance, on
external sources of supply for their power amplification products. Since each
OEM product involves a separate proposal by the amplifier supplier, there can be
no assurance that the Company's current OEM customers will not rely upon
internal production capabilities or a non-captive competitor for future
amplifier product needs. The Company's OEM customers continuously evaluate
whether to manufacture their own amplification products or purchase them from
outside sources. These OEM customers are large manufacturers of wireless
telecommunications equipment who could elect to enter the non-captive market and
compete directly with the Company. Such increased competition could materially
adversely affect the Company's business, financial condition and results of
operations. See "Risk Factors - Rapid Technological Change and Intense
Competition."
Certain of the Company's competitors have substantially greater technical,
financial, sales and marketing, distribution and other resources than the
Company and have greater name recognition and market acceptance of their
products and technologies. In addition, certain of these competitors are already
established in the wireless amplification market, but the Company believes it
can compete with them effectively. No assurance can be given that the Company's
competitors will not develop new technologies or enhancements to existing
products or introduce new products that will offer superior price or performance
features. To the extent that OEMs increase their reliance on external sources
for their power amplification needs more competitors could be attracted to the
market.
The Company expects its competitors to offer new and existing products at
prices necessary to gain or retain market share. The Company expects to
experience significant price competition, which could have a materially adverse
effect on gross margins. Certain of the Company's competitors have substantial
financial resources which may enable them to withstand sustained price
competition or downturns in the power amplification market. Currently, the
Company competes primarily with non-captive suppliers of power amplification
products. The Company believes that its competition, and ultimately the success
of the Company, will be based primarily upon service, pricing, reputation and
the ability to meet the delivery schedules of its customers.
There is no present potential that the Company may acquire or merge with a
business or company in which the Company's mangement or their affiliates or
associates directly or indirectly have an ownership interest. If such potential
arises, transactions between the Company and such persons will be on terms no
less favorable to the Company that can be obtained from unaffiliated parties.
Any such transactions will be
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<PAGE>
subject to the approval of a majority of the disinterested members of the Board
of Directors. Management is not aware of any circumstances under which this
policy may be changed.
Manufacturing
The Company assembles, tests, packages, and ships its products at its
manufacturing facilities located in Somerset, New Jersey. This facility includes
a separate assembly and test facility for various custom products.
Manufacturing Process. The Company's manufacturing process consists of
purchasing components, assembling and testing components and subassemblies,
integrating the subassemblies into a final product and testing the product. The
Company's amplifiers consist of a variety of subassemblies and components
designed or specified by the Company including housings, harnesses, cables,
packaged RF power transistors, integrated circuits and printed circuit boards.
Most of these components are manufactured by others and are shipped to the
Company for final assembly. Each of the Company's products receives extensive in
process and final quality inspections and tests.
The Company's devices, components and other electrical and mechanical
subcomponents are generally purchased from multiple suppliers. The Company does
not have any written agreement with any of its suppliers. The Company has
followed a general policy of multiple sourcing for most of its suppliers in
order to assure a continuous flow of such supplies. However, the Company does
purchase certain transistors produced by a single manufacturer because of the
high quality of its components. The Company believes it is unlikely that such
transistors would become unavailable, however, if that were to occur, there are
multiple manufacturers of generally comparable transistors. The Company would
require a period of time to "return" its products to function properly with the
replacement transistors. The Company believes that the distributors of such
transistors maintain adequate inventory levels, which would mitigate any adverse
effect on the Company's production in the event unavailability or shortage of
such transistors. If for any reason the Company could not obtain comparable
replacement transistors or could not return its products to operate with the
replacement transistors, the Company's business, financial condition and results
of operations could be adversely affected.
The Company currently utilizes discrete circuit technology on printed
circuit boards which are designed by the Company and provided by suppliers to
the Company's specifications. All transistors and other semiconductor devices
are purchased in sealed packages ready for assembly and testing. Other
components such as resistors, capacitors, connectors or mechanical supported
subassemblies are also manufactured by others. Components are ordered from
suppliers under master purchase orders with deliveries timed to meet the
Company's production schedules. As a result, the Company maintains a low
inventory of components, which could result in delay in production in the event
of delays in such deliveries.
The Company is in the process of integrating automated equipment to place
surface mount components on printed circuit boards.
Microwave Integrated Circuit Manufacturing Facility. The Company is
planning to install a facility to support assembly and testing of custom RF and
microwave amplifiers and other passive components for which miniaturization is
particularly important. Handling of all components, assembly and testing is
undertaken in environmentally controlled surroundings. The Company believes that
this approach may be used as a core technology for PCS products in the future
and the Company may use its capability and
49
<PAGE>
technology in conceptualization and implementation of PCS amplifiers and related
products. However, the Company to date has not manufactured PCS products
utilizing the approach and no assurance can be made that the Company will be
able to make such products utilizing the approach. There currently are adequate
and readily available sources for all components used in the Company's custom
products.
In connection with the Company's transition to an automated manufacturing
process, the Company intends to introduce computerized surface-mount machinery
and related process equipment to support automated assemblies. The Company
anticipates the transition to commence in the second quarter of 1997. See "Risk
Factors - Need to Implement Automated Manufacturing Processes; Dependence on
Contract Manufacturers; Limited Number of Suppliers."
The Company intends to utilize a portion of the net proceeds of this
Offering ($600,000) for the purchase of manufacturing equipment necessary to
manufacture the Company's products and mechanically assemble components of the
Company's products. See "Use of Proceeds."
Research, Engineering and Development
The Company's research, engineering and development efforts are focused on
the design of amplifiers for new protocols, the improvement of existing product
performance, cost reductions and improvements in the manufacturability of
existing products.
The Company has historically devoted a significant portion of its
resources to research, engineering and development programs and expects to
continue to allocate significant resources to these efforts. The Company's
research, engineering and development expenses in fiscal 1994 and 1995 were
approximately $330,000 and $370,000, respectively, and represented approximately
9% and 21%, respectively, of net revenues. The Company's research, engineering
and development expenses for the nine months ended September 30, 1996 were
approximately $701,000 representing 36% of net revenues. These efforts were
primarily dedicated to the development of the linear feed forward, high power,
low distortion amplifiers, resulting in the Company's models for AMPS, TACS,
NMT-450 and PCS-1900. The Company intends to utilize a portion of the net
proceeds of this Offering ($550,000) for research, engineering and development
to further develop the Company's products and to develop the Company's next
generation of products. See "Use of Proceeds."
The Company uses the latest equipment and computer aided design and
modeling, solid state device physics, advanced digital signal processing ("DSP")
and digital control systems, in the development of its products in the
specialized engineering and research departments.
The Company uses a CAD environment employing networked work stations to
model and test new circuits. This design environment, together with the
Company's experience in interference cancellation technology and modular product
architecture, allows the Company to rapidly define, develop and deliver new and
enhanced products and subsystems sought by its customers.
The markets in which the Company and OEM customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services. See "Risk Factors - Rapid
Technological Change and Intense Competition."
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Patents Pending, Proprietary Technology and Other Intellectual Property
The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. The Company has
a policy of seeking patents, when appropriate, on inventions resulting from its
ongoing research and development and manufacturing activities.
Presently, the Company has a patent application pending (No. 08/508,163)
(for which a notice of allowance has been issued by the United States Patent and
Trademark Office) with respect to its Pre-Distortion and Pre-Distortion
Linearzation technology which, the Company believes, is more effective in
reducing distortion then other currently available technology. There can be no
assurance that the Company's pending patent application will be allowed or
issued or that issued or pending patents will not be challenged or circumvented
by competitors.
Notwithstanding the Company's active pursuit of patent protection, the
Company believes that the success of its amplifier business depends more on its
specifications, CAE/CAD design and modeling tools, technical processes and
employee expertise than on patent protection. The Company generally enters into
confidentiality and non-disclosure agreements with its employees and limits
access to and distribution of its proprietary technology. The Company may in the
future be notified that it is infringing certain patent and/or other
intellectual property rights of others. Although there are no such pending
lawsuits against the Company or unresolved notices that the Company is
infringing intellectual property rights of others, there can be no assurance
that litigation or infringement claims will not occur in the future. See "Risk
Factors - Proprietary Technology; Risk of Third Party Claims of Infringement."
Governmental Regulations
The Company's customers must obtain regulatory approval to operate their
base stations. The United States Federal Communications Commission ("FCC")
recently adopted new regulations that impose more stringent RF and microwave
emissions standards on the telecommunications industry. There can be no
assurance that the Company's customers will comply with such regulations which
could materially adversely affect the Company's business, financial condition
and results of operations. The Company manufactures its products according to
specifications provided by its customers, which specifications are given to
comply with applicable regulations. The Company does not believe that costs
involved with manufacturing to meet specifications will have a material impact
on its operations. There can be no assurances that the adoption of future
regulations would not have a material adverse affect on the Company's business.
Employees
As of September 30, 1996, the Company had a total of 46 employees,
including 26 in operations, 14 in engineering, 2 in sales and marketing, 2 in
quality assurance and 2 in administration. The Company believes its future
performance will depend in large part on its ability to attract and retain
highly skilled employees. None of the Company's employees is represented by a
labor union and the Company has not experienced any work stoppages. The Company
considers its employee relations to be good.
Facilities
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The Company leases (from an unaffiliated party) approximately 21,000
square feet at 144 Belmont Drive, Somerset, New Jersey 08873 which serves as the
Company's executive offices and manufacturing facility. The lease term commenced
on May l, 1996 and expires on April 30, 1999. The annual rental is $168,000. The
Company has the option to extend the term of the lease for a three (3) year
period so long as it exercises the option for the entire building (36,405 square
feet) less space leased to third parties. Management believes that such lease
contains fair and reasonable terms.
The Company leases (from an unaffiliated party) approximately 6,000 square
feet at Building 7, Unit 9, Ilene Court, Belle Mead, New Jersey 08502 which
until April 1996 served as the Company's executive offices and now are utilized
as its mechanical operations. The lease term expires on October 31, 1997. The
annual rental increases to a maximum of $40,500. Total rental expenses for the
years ended December 31, 1994 and 1995 were $34,295 and $37,000, respectively.
Management believes that such lease contains fair and reasonable terms.
Environmental Regulations
The Company is subject to Federal, state and local governmental
regulations relating to the storage, discharge, handling, emissions, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture the Company's products. The Company believes that it is currently in
compliance in all material respects with such regulations. Failure to comply
with current or future regulations could result in the imposition of substantial
fines on the Company, suspension of production, alteration of its manufacturing
process, cessation of operations or other actions which could materially and
adversely affect the Company's business, financial condition and results of
operations.
Legal Proceedings
The Company is not a party to any material litigation or governmental
proceeding that management believes would result in judgments or fines that
would have a material adverse effect on the Company.
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<PAGE>
MANAGEMENT
The following persons are the directors and the executive officers of the
Company. All Directors are elected annually by the stockholders to serve until
the next annual meeting of the stockholders and until their successors are duly
elected and qualified. Officers are elected annually by the Board of Directors
to serve at the pleasure of the Board.
Name Age Position Held
---- --- -------------
Devendar S. Bains* 45 Chairman of the Board, President, Chief
Executive Officer, Treasurer and Director
Tarlochan Bains* 47 Vice President-Sales & Marketing and Director
Nirmal Bains 39 Secretary
Robert S. Benou* 60 Director
William A. Suter 45 RF Design Manager
Harris Freedman 61 Vice President - Strategic Alliances
Sharon Will 36 Vice President - Corporate Communications and
Investor Relations
* Member of the Compensation Committee and Audit Committee.
Devendar S. Bains has been Chairman of the Board, President, Chief Executive
Officer, Treasurer and a director of the Company since its inception in 1988.
From 1983 to 1988 Mr. Bains was Group Project Leader of Amplifier division of
Microwave Semiconductor Corporation. Previously, Mr. Bains was employed at
G.E.C. in Coventry, England. Mr. Bains received a Bachelor's Degree in
Electronic Engineering from Sheffield University, England, and a Masters Degree
from the University of Leeds and Sheffield, England. Mr. Bains is the brother of
Tarlochan Bains and the husband of Nirmal Bains.
Tarlochan Bains has been Vice President of Sales and Marketing since 1991.
Previously, Mr. Bains was Technical Manager at Land Rover in Solihull, England.
He has a Masters Degree in Mechanical Engineering from Hatfield Polytechnic,
England. Mr. Bains is the brother of Devendar S. Bains and the brother-in-law of
Nirmal Bains.
Nirmal Bains has been Secretary of the Company since 1989. She has a degree in
Computer Programming from Cittone Institute in New Jersey. Mrs. Bains is the
wife of Devendar S. Bains and the sister-in-law of Tarlochan Bains.
Robert S. Benou has been a Director of the Company since December 1995. Since
1968 Mr. Benou has been the Chairman of the Board, President and Chief Executive
Officer of Conolog Corporation, a publicly traded company on Nasdaq. Conolog is
engaged in the design, manufacture and distribution of electronic and
electromagnetic components and subassemblies for use in telephones, radio and
microwave transmission and reception and communication. Mr. Benou is a graduate
of Victoria College and has a Bachelor of Science from Kingston College, England
and a Bachelor of Science in Electronic Engineering from Newark College of
Engineering.
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<PAGE>
William A. Suter is the RF Design Manager of the Company responsible for the
design and development of the Company's products. Previously he was Senior
Design Engineer for Amplifonix, Inc. from August 1993 to November 1995, Plessey
SA from November 1989 to June 1993, BH Electronics from February 1989 to October
1989, and Communication Techniques, Inc. from February 1986 to February 1987.
Mr. Suter has published various articles on amplification methods and technology
in several industry publications. Mr. Suter has a Bachelors of Science in
Electronic Engineering from the University of Cape Town, South Africa.
Harris Freedman has served as Vice President - Strategic Alliances of the
Company since July 1996. Since August 1994 he has been Vice President of
Hemispherx Biopharma, Inc., a publicly traded company listed on Nasdaq. He is
the Secretary of SMACS Holdings Corp. a private company which provides
strategic-alliance services to emerging technology companies in the private and
public markets. His business experience has encompassed developing significant
business contacts and acting as an officer of several companies in the
pharmaceutical, health care and entertainment fields. Mr. Freedman was Vice
President of U.S. Alcohol Testing of America, Inc., from August 1990 to February
1991. Additionally, he was Vice President - East Coast Marketing for MusicSource
U.S.A., Inc from October 1992 to January 1994. Mr. Freedman attended New York
University from 1951 to 1954.
Sharon Will has been Vice President - Corporate Communications and Investor
Relations of the Company since July 1996. Since November 1994 she has been Vice
President of Hemispherx Biopharma, Inc., a publicly traded company listed on
Nasdaq. She was a registered sales representative and Senior Vice President for
Institutional Sales at Westfield Financial Corporation from September 1994 to
October 1994. She was a registered sales representative with Marsh Block
Corporation from July 1994 to September 1994. From October 1993 to July 1994 she
served as a registered sale representative at Seaboard Securities Corp. From
October 1991 to present, Ms. Will has been President of Worldwide Marketing Inc.
a manufacturers' representative of various companies selling to the retail trade
markets. Ms. Will was the National Sales Manager of Innovo, Inc., a domestic
manufacturer of textiles, from October 1989 to November 1991. She attended
Baylor College as an undergraduate for two years with a primary focus on
chemistry.
The Company has established a compensation committee and an audit
committee. The compensation committee reviews executive salaries, administers
any bonus, incentive compensation and stock option plans of the Company,
including the Amplidyne, Inc. 1996 Incentive Stock Option and Stock Appreciation
Rights Plan, and approves the salaries and other benefits of the executive
officers of the Company. In addition, the compensation committee consults with
the Company's management regarding pension and other benefit plans, and
compensation policies and practices of the Company.
The audit committee reviews the professional services provided by the
Company's independent auditors, the independence of such auditors from
management of the Company, the annual financial statements of the Company and
the Company's system of internal accounting controls. The audit committee also
reviews such other matters with respect to the accounting, auditing and
financial reporting practices and procedures of the Company as it may find
appropriate or as may be brought to its attention.
Executive Compensation
The following table sets forth the aggregate compensation paid by the
Company for the years ended December 31, 1994 and 1995 to its Chief Executive
Officer. No other employee received compensation in excess of $100,000.
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<PAGE>
Name Year Salary Bonus Other Compensation
---- ---- ------ ----- ------------------
Devendar S. Bains,
Chairman, 1995 $85,000 -0- $20,000(1)
Chief Executive 1994 $85,000 $200,000 $10,000(1)
Officer, President
and Treasurer
(1) Represents payment for health insurance and automobile lease payments on
behalf on such individual.
Employment Agreements
The Company has entered into five-year employment agreements commencing
May 1, 1996 with each of Devendar Bains (Chairman, Chief Executive Officer,
President and Treasurer), Tarlochan Bains (Vice President - Sales & Marketing),
and Nirmal Bains (Secretary). The employment agreements provide for annual base
salaries of $162,000, $100,000 and $50,000 with respect to Devendar Bains,
Tarlochan Bains and Nirmal Bains, respectively. The employment agreements
provide for discretionary bonuses to be determined in the sole discretion of the
Board of Directors and contain covenants not to compete with the Company for a
two year period following termination of employment.
The Company has entered into a two-year agreement commencing December 1995
and ending December 1997 with Robert Benou. Mr. Benou is to provide the Company
with such services as requested by the Company. Under such agreement, Mr. Benou
will receive compensation of $30,000 per year for a minimum of two years.
In December 1995 the Company entered into three-year employment agreements
with each of Harris Freedman and Sharon Will, Vice President for Strategic
Alliances and Vice President for Corporate Communications and Investor
Relations, respectively. Under the terms of each agreement they are to be paid
$60,000 per annum through December 1998.
Stock Option Plans and Agreements
Incentive Option Plan - In May 1996, the Directors of the Company adopted
and the stockholders of the Company approved the adoption of the Company's 1996
Incentive Stock Option Plan (" Incentive Option Plan"). The purpose of the
Incentive Option Plan is to enable the Company to encourage key employees and
Directors to contribute to the success of the Company by granting such employees
and Directors incentive stock options ("ISOs").
The Incentive Option Plan will be administered by the Board of Directors
or a committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs or a combination thereof, and the number of
shares to be subject to such options.
The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted.
The total number of shares with respect to which options may be granted
under the Incentive Option Plan is 1,500,000. ISOs may not be granted to an
individual to the extent that in the calendar year in which
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<PAGE>
such ISOs first become exercisable the shares subject to such ISOs have a fair
market value on the date of grant in excess of $100,000. No option may be
granted under the Incentive Option Plan after May 2006 and no option may be
outstanding for more than ten years after its grant. Additionally, no option can
be granted for more than five (5) years to a stockholder owning 10% or more of
the Company's outstanding Common Stock and such options must have an exercise
price of not less than 110% of the fair market value on the date of grant.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock,
or in a combination of both. The Company may lend to the holder of an option
funds sufficient to pay the exercise price, subject to certain limitations.
The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
under the Incentive Option Plan or materially increase the benefits of
participants.
In May 1996, 1,267,000 options to purchase Common Stock under the
Incentive Option Plan were granted to 40 employees ("Employee Options"),
including Dave Bains (1,000,000 options), Tarlochan Bains (100,000 options) and
Nirmal Bains (50,000 options), the Company's Chief Executive Officer, Vice
President-Sales and Marketing and Secretary, respectively. See "Principal
Stockholders." No determinations have been made regarding the persons to whom
options will be granted in the future, the number of shares which will be
subject to such options or the exercise prices to be fixed with respect to any
option. The Employee Options are exercisable at $4.00 which will vest, as to
33.33%, one year from the date of grant (May 1997) and, as to the remainder,
ratably over the following two-year period (33.33% in May 1998 and 33.33% in May
1999).
In addition, in May 1996, 30,000 options were granted to 1 employee ("Key
Employee Options") which are exercisable at $1.00 which will vest, as to 33.33%,
one year from the date of grant (May 1997) and, as to the remainder, ratably
over the following two-year period (33.33% in May 1998 and 33.33% in May 1999).
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding shares of
Common Stock beneficially owned as of the date of this Prospectus by (i) each
person, known by the Company to be the beneficial owner of five percent (5%) or
more of the outstanding shares of Common Stock, (ii) each of the Company's
directors and (iii) all of the Company's officers and directors as a group.
<TABLE>
<CAPTION>
Name of Beneficial Number of Shares Percentage Ownership Percentage Ownership
Owner* of Common Stock(1) Prior to the Offering After Offering
------------------ ---------------- -------------------- --------------------
<S> <C> <C> <C>
Devendar S. Bains(2) 2,000,000 70.18 47.06
Tarlochan Bains(3) -- -- --
Nirmal Bains(2)(4) 2,000,000 70.18 47.06
Robert S. Benou 50,000 1.75 1.18
Harris Freedman(5) 151,667 5.21 3.57
Sharon Will(6) 165,000 5.68 3.88
All Officers and
Directors as a group
(6 persons) 2,366,667 79.76 55.69
</TABLE>
- ----------
* Unless otherwise indicated, the address of all persons listed in this
section is c/o Amplidyne, Inc., 144 Belmont Drive, Somerset, NJ 08873.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of options. Each beneficial owner's percentage ownership
is determined by assuming those options that are held by such person and
that are exercisable within 60 days from the date of the Prospectus have
been exercised.
(2) Mr. Devendar Bains is the husband of Mrs. Nirmal Bains and the brother of
Mr. Tarlochan Bains. Mr. Devendar Bains is the record holder of such
Shares. Does not include 1,000,000 Employee Options. See "Management-Stock
Option Plans and Agreements."
(3) Does not include 100,000 Employee Options. See "Management - Stock Option
Plans and Agreements."
(4) Does not include 50,000 Employee Options. See "Management - Stock Option
Plans and Agreements."
(5) The address for such person is 1241 Gulf of Mexico Drive, Longboat Key,
Florida 34228. Mr. Freedman is the Vice President - Strategic Alliances of
the Company. Includes 90,000 shares of Common Stock and 61,667 warrants to
purchase Common Stock at $2.50 per share. Does not include an additional
123,333 of such warrants. See "Management" and "Description of
Securities."
(6) The address for such person is RRI Box 132, Millerton, New York 12546. Ms.
Will is the Vice President - Corporate Communications and Investor
Relations of the Company. Includes 110,000 shares of Common Stock and
55,000 warrants to purchase Common Stock at $2.50 per share. Does not
include an additional 110,000 of such warrants. See "Management" and
"Description of Securities."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of the sales of securities prior to the date hereof were made in
reliance upon Section 4(2) of the 1933 Act, which provides exemption for
transactions not involving a public offering.
The Company was incorporated on December 14, 1995 pursuant to the laws of
the State of Delaware as the successor to Amplidyne, Inc., a New Jersey
corporation ("Amplidyne-NJ"), which was incorporated in October 1988. The
Company was organized to effectuate a reincorporation of Amplidyne-NJ with and
into the Company on December 22, 1995.
Between January 1994 and April 1996, Devendar S. Bains, the Company's
President and Chief Executive Officer, loaned the Company an aggregate of
$350,000 without interest, payable on demand, all of which will be repaid at the
closing of this Offering. See "Use of Proceeds."
The Company intends to indemnify its officers and directors to the full
extent permitted by Delaware law. Under Delaware law, a corporation may
indemnify its agents for expenses and amounts paid in third party actions and,
upon court approval in derivative actions, if the agents acted in good faith and
with reasonable care. A majority vote of the Board of Directors, approval of the
stockholder or court approval is required to effectuate indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by an officer, director or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such officer, director or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
Transactions between the Company and its officers, directors, employees
and affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. Any such transactions will be subject to the
approval of a majority of the disinterested members of the Board of Directors.
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DESCRIPTION OF SECURITIES
General
The Company is authorized to issue up to 25,000,000 shares of Common
Stock, $.0001 par value per share, of which 2,850,000 Shares were issued and
outstanding as of the date of this Prospectus (which were held by 34 persons).
After giving effect to this Offering, 4,250,000 shares of Common Stock and
1,400,000 Warrants will be issued and outstanding. The Company's Certificate of
Incorporation authorizes 1,000,000 shares of "blank check" Preferred Stock, none
of which are outstanding.
Common Stock
Subject to the rights of holders of Preferred Stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. See "Dividend Policy."
Upon liquidation, dissolution or winding up of the Company, after payment of
creditors and the holders of any senior securities of the Company, including
Preferred Stock, if any, the assets of the Company will be divided pro rata on a
per share basis among the holders of the shares of Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the Common Stock and the Common Stock is not subject to call. The holders of
Common Stock do not have any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one vote for each
share held at all stockholders' meetings including the Annual Meeting, for all
purposes, including the election of directors. The Common Stock does not have
cumulative voting rights.
All of the issued and outstanding shares of Common Stock are and the
shares of Common Stock offered hereby when issued against the consideration set
forth in this Prospectus, will be, fully paid, validly issued and
non-assessable. The Company has agreed with the Representative that it will not
issue any shares of Common Stock for a period of 18 months from the Effective
Date without the written consent of the Representative.
Preferred Stock
None of the 1,000,000 "blank check" preferred shares are currently
outstanding. The Board of Directors of the Company have the authority, without
further action by the holders of the outstanding Common Stock, to issue shares
of Preferred Stock from time to time in one or more classes or series, to fix
the number of shares constituting any class or series and the stated value
thereof, if different from the par value, and to fix the terms of any such
series or class, including dividend rights, dividend rates, conversion or
exchange rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price and the liquidation preference of
such class or series. The Company has agreed with the Representative that it
will not issue any shares of Preferred Stock for a period of 18 months from the
Effective Date without the written consent of the Representative.
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Warrants
Each Warrant will entitle the registered holder to purchase one share of
the Company's Common Stock at an exercise price of $6.00 per share during the
four year period commencing one year from the date of this Prospectus. No
fractional shares of Common Stock will be issued in connection with the exercise
of Warrants. Upon exercise, the Company will pay the holder the value of any
such fractional shares in cash, based upon the market value of the Common Stock
at such time.
Unless extended by the Company at its discretion, the Warrants will expire
at 5:00 p.m., New York time, on the fifth 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 Company may redeem the Warrants at a price of $.01 per Warrant, at any
time once they become exercisable upon not less than 30 days prior to written
notice if the average closing price or bid price of the Common Stock as reported
by the principal exchange on which the Common Stock is traded, the Nasdaq
SmallCap Market or the National Quotation Bureau, Incorporated, as the case may
be, equals or exceeds $9.00 per Share for any twenty (20) consecutive trading
days ending within five (5) days prior to the date on which notice of redemption
is given.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
qualification under the securities laws of the state or residence of the holder
of such Warrants. Although the Company intends to have all shares so qualified
for sale in those states where the Securities are being offered and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement there can be no assurance that it
will be able to do so.
A holder of Warrants will not have any rights, privileges or liabilities
as a shareholder of the Company prior to exercise of the Warrants. The Company
is required to keep available a sufficient number of authorized shares of Common
Stock to permit exercise of the Warrants.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications. No assurance can be given that the market
price of the Company's Common Stock will exceed the exercise price of the
Warrants at any time during the exercise period.
In connection with this Offering, the Company will issue to Patterson
Travis, Inc. a Representative's Purchase Option to purchase 140,000 shares of
Common Stock ("Representative's Common Stock") and warrants to purchase an
additional 140,000 shares of Common Stock ("Representative's Warrants"). The
Representative's Common Stock and Representative's Warrant are being registered
under the Registration Statement to which this Prospectus is a part.
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701 Warrants
In December 1995, the Company issued 701 Warrants to purchase 350,000
Shares at $2.50 per share pursuant to Rule 701 under the Act to Harris Freedman
and Sharon Will, the Company's Vice President for Strategic Alliances and Vice
President for Corporate Communications and Investor Relations, respectively, of
the Company. See "Management" and "Principal Stockholders." The 701 Warrants
vest in one-third increments (commencing June 1996) over a three (3) year period
and are exercisable until June 30, 1999.
Options and Warrants
Between January and February 1996 the Company sold an aggregate of 250,000
shares of Common Stock. None of such sales were made to officers, directors or
affiliates of the Company. The sales of these shares of Common Stock were in
connection with a $500,000 private financing in which the Company issued
promissory notes in the aggregate amount of $250,000, 250,000 shares of Common
Stock and 250,000 options to purchase Common Stock at $2.50 per share. The
promissory notes accrue interest at 8% per annum. The principal and accrued
interest are payable on the earlier of (i) March 15, 1997 or (ii) the closing of
this Offering. See "Use of Proceeds." The options are immediately exercisable
until December 31, 1998. The shares of Common Stock underlying the options are
being registered hereunder. See "Selling Securityholders."
In April 1996 the Company sold an aggregate of 300,000 shares of Common
Stock. None of such sales were made to officers, directors or affiliates of the
Company. The sales of these shares of Common Stock were in connection with a
$600,000 private financing in which the Company issued promissory notes in the
aggregate amount of $300,000, 300,000 shares of Common Stock and 300,000 options
to purchase Common Stock at $2.50 share. The promissory notes accrue interest at
8% per annum. The principal and accrued interest are payable on the earlier of
(i) March 15, 1997 or (ii) the closing of this Offering. See "Use of Proceeds."
The options are immediately exercisable until December 31, 1998. The shares of
Common Stock underlying the options are being registered hereunder. See "Selling
Securityholders."
In connection with a $375,000 bridge financing in September 1996 in which
the Company issued promissory notes in the aggregate of $375,000, the Company
issued, for no additional consideration, 187,500 Bridge Warrants to purchase
Common Stock at $2.50 per share. None of such sales were made to officers,
directors or affiliates of the Company. The Bridge Warrants are exercisable for
a three year period commencing one year from the date of this Prospectus. The
promissory notes accrue interest at 8% per annum. The principal and accrued
interest are payable on the earlier of (i) March 15, 1997 or (ii) the closing of
this Offering. See "Use of Proceeds."
Delaware Anti-Takeover Law Provisions
As a Delaware corporation, the Company is subject to Section 203 of the
General Corporation Law. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owing 15% or more of a Delaware
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with such Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock
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held by the directors who are also officers of the corporation and by certain
employee stock plans), or (iii) following the transaction in which such person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Under section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the public announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of the corporation's board of directors
and if such business combination is approved by a majority of the board members
who were directors prior to any person's becoming an interested stockholder. The
provisions of Section 203 requiring a super-majority vote to approve certain
corporate transactions could have the effect of discouraging, delaying or
preventing hostile takeovers, including those that might result in the payment
of a premium over market price or changes in control or management of the
Company.
Limitation on Liability of Directors
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence. By its terms and in
accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of the Company (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve international
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, (relating to unlawful payments or dividends or
unlawful stock repurchases or redemptions), (iv) for any improper benefit or (v)
for breaches of a director's responsibilities under the Federal Securities laws.
Transfer Agent & Registrar
The transfer agent and registrar for the Company's securities is American
Stock Transfer and Trust Company, 40 Wall Street, New York, NY 10005.
Shares Eligible for Future Sale
Upon the consummation of this Offering, the Company will have 4,250,000
shares of Common Stock outstanding. Only those sold in this Offering (1,400,000
shares of Common Stock) will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended, except for any shares
purchased by an "affiliate" of the Company (in general, a person who has a
control relationship with the Company) which will be subject to the limitations
of Rule 144 adopted under the Securities Act of 1933, as amended. All of the
remaining 2,850,000 shares are deemed to be "restricted securities", as that
term is defined under Rule 144 promulgated under the Securities Act of 1933, as
amended, in that such shares were issued and sold by the Company in private
transactions not involving a public offering, all of which are subject to
lock-up restrictions described below. 2,000,000 of such Shares may be sold
pursuant to Rule 144 as defined below, commencing 90 days after the date of this
Prospectus, subject to an 18-month restriction against transfer described below;
300,000 Shares may be sold pursuant to Rule 144 commencing December 1997 subject
to an 18-month restriction against transfer; and the remaining 550,000 Shares
which were issued in the Bridge Financings may be sold pursuant to Rule 144
commencing January 1998, subject to a 12-month restriction against transfer. The
President of the Company (who owns 2,000,000 of the 2,850,000 outstanding
Shares) and the directors and/or 5% stockholders of the Company who own 250,000
of the 300,000 above-referenced Shares have agreed not to sell, assign or
transfer any securities of the Company owned by them for a period of eighteen
(18) months from the date of this Prospectus without the prior consent of the
Representative. The entity that owns the remaining 50,000 of the
above-referenced
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300,000 Shares has agreed not to sell, assign or transfer any of such Shares for
a period of eighteen (18) months from the date of this Prospectus, without the
prior consent of the Representative. The Selling Securityholders who own the
above-referenced 550,000 Shares have agreed not to sell, assign or transfer any
securities of the Company owned by them for a period of twelve (12) months from
the date of this Prospectus, which period is not subject to earlier release.
All of the Company's outstanding options and warrants and the Shares
reserved for issuance upon exercise of such convertible securities are subject
to restrictions against transfer. See "Risk Factors - Shares Eligible For Future
Sale May Adversely Affect The Market" and "Effect of Outstanding Options and
Warrants."
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 other persons whose shares are aggregated), 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 one percent of the total number of outstanding shares
of the same class or 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 the 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.
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 market sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices 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 could impair
the Company's ability to raise capital through the sale of its equity
securities.
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
covers the registration and sale of 550,000 shares of Common Stock underlying
550,000 options issued to certain stockholders (the "Selling Securityholders")
in connection with the Company's Bridge Financings. See "Certain Relationships
and Related Transactions" and "Description of Securities." The Company will not
receive any of the proceeds from the sale of the securities by the Selling
Securityholders. The securities held by the Selling Securityholders may not be
sold until twelve (12) months from the date of this Prospectus, which period is
not subject to earlier release. The resale of the securities of the Selling
Securityholders are subject to Prospectus delivery and other requirements of the
Securities Act of 1933, as amended (the "Act"). Sales of such securities or the
potential of such sales at any time may have an adverse effect on the market
prices of the securities offered hereby. See "Risk Factors - Effect of
Outstanding Options and Warrants."
The securities offered may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters (including the
Representative) dealers or agents. The distribution of securities by the Selling
Securityholders may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more broker-dealers
for resale of such shares as principals, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders in connection with such
sales of
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securities. The securities offered by the Selling Securityholders may be sold by
one or more of the following methods, without limitations: (a) a block trade in
which a broker or dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers,
and (d) face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Securityholders may arrange for other brokers or dealers to participate. The
Selling Securityholders and intermediaries through whom such securities are sold
may be deemed "underwriters" within the meaning of the Act with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholders, to the extent required, a Prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the Offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for sales
purchased from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
Sales of securities by the Selling Securityholders or even the potential
of such sales would likely have an adverse effect on the market prices of the
securities offered hereby.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between
the Company and the Underwriters ("Underwriting Agreement") the Underwriters
have agreed to purchase from the Company and the Company has agreed to sell to
the Underwriters, 1,400,000 shares of Common Stock and 1,400,000 Warrants
(collectively the "Securities") offered hereby on a "firm commitment" basis, if
any are purchased. The Underwriters have agreed to purchase the number of
Securities set forth opposite their names in the table below:
Underwriters Number of Securities
- ------------ --------------------
Patterson Travis, Inc.
- -----------------
- -----------------
- ----------------- --------------------
Total 1,400,000
The Securities offered hereby is being offered by the several Underwriters
named herein subject to prior sale, when, as and if delivered to and accepted by
the Underwriters and subject to certain other
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conditions. The Underwriters reserve the right to withdraw, cancel or modify the
offer and to reject any order in whole or in part.
The Underwriters have advised the Company that they propose to offer the
Securities to the public at the initial public offering prices as set forth on
the cover page of this Prospectus and that they may allow to certain dealers who
are NASD members concessions not to exceed $____ per Share at $___ per Warrant,
of which not in excess of $____ per Share and $___ per Warrant may be reallowed
to other dealers who are members of the NASD. After the Offering, the public
offering prices, concession and reallowance may be changed by the
Representative.
The Company has granted an option to the Representative, exercisable
during the thirty (30) day period from the date of this Prospectus, to purchase
up to a maximum of 210,000 additional Shares and 210,000 additional Warrants at
the Offering prices, less the underwriting discount, to cover over-allotments,
if any.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities arising under the Act. Insofar
as indemnification for liabilities arising under the Act may be provided to
officers, directors or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is therefore unenforceable.
The Company has agreed to pay to the Representative a non-accountable
expense allowance of three percent (3%) of the gross proceeds derived from the
sale of the Securities offered hereby (less $43,000 for costs and expenses
incurred by another underwriter), including any Securities purchased pursuant to
the Over-Allotment Option.
The Company has agreed to sell to the Representative, and to its
designees, for an aggregate purchase price of $140, an option (the
"Representative's Purchase Option") to purchase up to an aggregate of 140,000
Shares and 140,000 Warrants. The Representative's Purchase Option shall be
exercisable during a four (4) year period commencing one (1) year from the
Effective Date of this Prospectus. The Representative's Purchase Option may not
be assigned, transferred, sold or hypothecated by the Representative until
twelve (12) months after the Effective Date of this Prospectus, except to
officers of the Representative or to officers and partners of the selling group
members in this Offering. The Representative's Purchase Option grant to the
holders thereof certain piggyback and demand registration rights. The
Representative's Purchase Option is exercisable at one hundred fifty percent
(150%) of the initial public offering prices of the Securities. The exercise of
the Representative's Purchase Option and the number of Securities covered
thereby are subject to adjustment in certain events to prevent dilution.
The Company has engaged the Representative, on a non-exclusive basis, as
its agent for the solicitation of the exercise of the Warrants. Additionally,
other NASD members may be engaged by the Representative in its solicitation
efforts. To the extent not inconsistent with the guidelines of the NASD and the
rules and regulations of the Commission, the Company has agreed, subsequent to
one year from the date of this Prospectus, to pay the Representative for bona
fide services rendered a commission equal to 8% of the exercise price for each
Warrant exercised if the exercise was solicited by the Representative. In
addition to soliciting, either orally or in writing, the exercise of the
Warrants, such services may also include disseminating information, either
orally or in writing, to warrantholders about the Company or the market for the
Company's securities, and assisting in the processing of the exercise of
Warrants. No compensation
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will be paid to the Representative in connection with the exercise of the
Warrants if the market price of the underlying shares of Common Stock is lower
than the exercise price, the Warrants are held in a discretionary account, the
Warrants are exercised in an unsolicited transaction, the warrantholder has not
confirmed in writing that the Representative solicited such exercise or the
arrangement to pay the commission is not disclosed in the prospectus provided to
warrantholders at the time of exercise. In addition, unless granted an exemption
by the Commission from Rule 10b-6 under the Exchange Act, while it is soliciting
exercise of the Warrants, the Representative will be prohibited from engaging in
any market activities or solicited brokerage activities with regard to the
Company's securities unless the Representative has waived its right to receive a
fee for the exercise of the Warrants.
Prior to the date of this Prospectus, all of the officers, directors and
principal stockholders of the Company's Common Stock have agreed in writing not
to sell, assign or transfer any of their shares of the Company's securities
without the Representative's prior written consent for a period of eighteen (18)
months from the Effective Date. The remaining stockholders have agreed to a
twelve (12) month restriction which is not subject to earlier release.
The Representative may designate a non-director observer to attend
meetings of the Company's Board of Directors for a three (3) year period
commencing on the Effective Date.
The Representative has informed the Company that no sales will be made to
any account over which the Underwriters exercise discretionary authority.
The foregoing is a summary of certain provisions of the Underwriting
Agreement and Representative's Purchase Option which have been filed as exhibits
hereto.
Determination of Public Offering Price
Prior to this Offering, there has been no public market for the
Securities. The initial public offering prices for the Securities has been
determined by negotiations between the Company and the Representative. Among the
factors considered in the negotiations were the market price of the Company's
Common Stock, an analysis of the areas of activity in which the Company is
engaged, the present state of the Company's business, the Company's financial
condition, the Company's prospects, an assessment of management, and the general
condition of the securities market at the time of this Offering. The public
offering prices of the Securities does not necessarily bear any relationship to
assets, earnings, book value or other criteria of value applicable to the
Company.
The Company anticipates that the Common Stock and Warrants will be listed
for quotation on The Nasdaq Small Cap Market under the symbols "AMPD" and
"AMPDW", respectively, but there can be no assurances that an active trading
market will develop, even if the securities are accepted for quotation. The
Representative intends to make a market in all of the publicly-traded securities
of the Company.
EXPERTS
The financial statements of the Company appearing in this Prospectus and
Registration Statement
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at December 31, 1995 and December 31, 1994 and for the years then ended have
been audited by Grant Thornton LLP, Independent Certified Public Accountants, as
set forth in its report thereon appearing elsewhere herein and in the
Registration Statement, and is included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Securities being offered hereby will be passed upon
for the Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY
10022. Bernstein & Wasserman, LLP, is the record owner of 50,000 shares of
Common Stock. Bernstein & Wasserman, LLP, has served, and continues to serve, as
counsel to the Representative in matters unrelated to this Offering. Legal
matters for the Representative will be passed upon by Gerald A. Kaufman, Esq.,
33 Walt Whitman Road, Suite 233, Huntington, NY 11746.
AVAILABLE INFORMATION
The Company does not presently file reports and other information with the
Securities and Exchange Commission (the "Commission"). However, following
completion of this Offering, the Company intends to furnish its stockholders
with annual reports containing audited financial statements examined and
reported upon by its independent public accounting firm and such interim
reports, in each case as it may determine to furnish or as may be required by
law. After the effective date of this Offering, the Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and in accordance therewith will file reports, proxy
statements and other information with the Commission.
Reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained at the Commission at Room
1024, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a web site on the Internet (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission through the
Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). The Company
has filed, through EDGAR, with the Commission a registration statement on Form
SB-2 (herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Act of which this Prospectus forms a part.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information
reference is made to the Registration Statement.
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GLOSSARY OF TERMS
-----------------
AMPS: Advanced Mobile Phone Services.
AMPS is the current cellular Air
Interface standard in the U.S., and
pillar of analog cellular network.
Analog transmission
protocols: Transmission of information using analog
modulation of signals.
CAD: Computer Aided Design.
CAE: Computer Aided Engineering.
CAGR: Compounded Annual Growth Rate.
Cavity Filters: Large metallic structures which filter out
unwanted signals, but allow the required
signal to be transmitted.
CDMA: Code Division Multiple Access. A relatively
new generation of Digital Cellular Systems;
offers more captivity than the AMPS System.
Communication Amplifiers: Amplifier used in telecommunication systems.
DCS-1800: Digital Communication Service at 1800 Mhz.
Digital Control Systems: Control system based on a microprocessor
which uses digital signals to achieve
control.
Digital Signal Processing
(DSP): A means of processing information in a
digital format.
Distortion Cancellation: A means of canceling distortion by using
pre-distortion, feed forward or both.
Dual Feed Forward Loops: Consists of two feed forward loops to
minimize distortion.
ETACS: Extended Total Access Communications Systems.
Feed Forward: A means of canceling distortion in an
amplifier.
FHMA: Frequency Hopping Multiple Access. A
transmission reducer in which the frequency
of transmission frequently changes.
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GaAsFET: Galium Arsenide Field Effect Transistors.
Gigahertz (Ghz): Transmission frequency at the rate of
1,000,000,000 cycles per second.
GSM: Global System for Mobile Communications.
High Power Linear Amplifier: Amplifiers used for single channel linear
amplification.
IMD: Measure of Intermodulation Distortion below
carrier level.
Interference Cancellation: A means of canceling interference in an
amplifier by using pre-distortion or feed
forward or both.
Linear Class A Amplifiers: Classical design for minimal distortion.
Linear Class AB Amplifiers: Amplifiers designed for better efficiency;
the linearity performance is not as good as
Class A.
Linearity: A measure of linear performance of an
amplifier (ie., the more linear an amplifier
the better the quality of the signal
amplified through it).
Local Loop: Interconnection of phone lines (ie., such as
an apartment complex to a public switched
network).
Low Noise Amplifier (LNA): An amplifier used in the receive section of a
base station which amplifies a weak, noisy
signal with minimal additional noise.
Megahertz (Mhz): A unit of frequency equal to 1,000,000 cycles
per second.
Mini Cell Amplifier: Small base station used in highly urbanized
areas requiring physically small amplifiers
called "Mini Cell Amplifiers."
Multicarrier Linear Power
Amplifier (MCLPA): Amplifier that will transmit multiple signals
with minimal distortion.
NMT: Nordic Mobile Telephone. System widely used
in Denmark, Finland, Norway, & Sweden.
OEM: Original Equipment Manufacturer.
PCS: Personal Communications Systems.
PCS Band: Personal Communications Systems, which use
transmit and receive frequency bands as
allocated by the FCC.
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Pre-distortion: A means of reducing distortion in an
amplifier.
Pre-distortion Feed
Forward Amplifiers: Amplifiers used to minimize distortion by the
use of pre-distortion and feed forward.
Pre-distortion Linearization: A means of linearizing an amplifier by the
use of pre-distortion.
PSTN: Public Switch Telephone Network.
RF: Radio Frequency.
Silicon Bipolar FET: Type of transistor based on silicon
technology.
Single Channel
Power Amplifier: Amplifier that amplifies one channel or one
signal without creating excessive distortion.
SMR: Specialized Mobile Radio, widely expected to
be used by Cab Services.
TACS: Total Access Communications Systems, widely
used in the United Kingdom.
TDMA: Time Division Multiple Access. System which
allow transmissions by allocated time slots.
Terrestrial Radio Systems: Radio systems consisting of tower mounted
antennas at distances in excess of 10 miles,
used to transmit radio signals.
Transceiver: Equipment that transmits and receives
information simultaneously.
Transistor: A small electronic semiconductor device used
extensively in the electronic industry.
Ultra Linear Power Amplifiers: Amplifiers used to transmit multicarrier
signals with minimal distortion.
Wave Form: All signals transmitted by an amplifier can
be analyzed by looking at the shape of the
waves and its output. This composite signal
is called a wave form.
Watt: A metric unit of power equal to the work done
at the rate of one joule per second or to the
power produced by a current of one ampere
across a potential difference of one volt.
70
<PAGE>
Amplidyne, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets F-3
Statements of Operations F-5
Statement of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8 - F-19
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Amplidyne, Inc.
We have audited the accompanying balance sheets of Amplidyne, Inc. as of
December 31, 1995 and 1994, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amplidyne, Inc., as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Parsippany, New Jersey
May 17, 1996, except for the fourth paragraph
of Note C, as to which the date is
September 30, 1996
F-2
<PAGE>
Amplidyne, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
----------------------- -------------
ASSETS 1994 1995 1996
-------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 3,337 $ 153,747 $ 113,583
Accounts receivable, net of
allowance for doubtful accounts
of $61,065 in 1996 and
$10,000 in 1995 408,835 165,702 376,022
Inventory 285,366 281,078 465,756
Refundable income taxes 19,479 28,235 5,665
-------- ---------- ----------
Total current assets 717,017 628,762 961,026
PROPERTY AND EQUIPMENT
Machinery and equipment 99,697 132,067 389,244
Furniture and fixtures 9,444 13,144 42,806
Autos and trucks 19,923 19,923 19,923
Leasehold improvements 16,070 21,220 25,383
-------- ---------- ----------
145,134 186,354 477,356
Less accumulated depreciation and
amortization 73,940 103,951 146,364
-------- ---------- ----------
71,194 82,403 330,992
DEFERRED REGISTRATION COSTS 140,000
OTHER ASSETS 26,245 11,100 35,000
-------- ---------- ----------
$814,456 $ 722,265 $1,467,018
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Amplidyne, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
LIABILITIES AND --------------------------
STOCKHOLDERS' EQUITY 1994 1995 1996
--------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Bank line of credit $ 230,000 $ 210,000
Notes payable 925,000
Current maturities of lease obligations $ 9,425 78,365 164,587
Accounts payable 196,010 287,498 627,744
Accrued expenses 150,928 184,429 152,874
Customer advances 35,980 155,932
Stockholders' loan 120,716 270,716 350,000
--------- ----------- -----------
Total current liabilities 513,059 1,206,940 2,430,205
LONG-TERM LIABILITIES
Lease obligations 9,846 69,451 450,440
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 1,000,000 shares
of no stated value; no shares
issued and outstanding
Common stock - authorized, 25,000,000 shares
of $.0001 par value; 2,850,000
shares issued and outstanding at September
30, 1996 and 2,100,000 shares
issued and outstanding
at December 31, 1995 and 1994 210 210 285
Additional paid-in capital 4,790 1,184,790 4,433,556
Retained earnings (accumulated deficit) 286,551 (1,739,126) (5,847,468)
--------- ----------- -----------
291,551 (554,126) (1,413,627)
--------- ----------- -----------
$ 814,456 $ 722,265 $ 1,467,018
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Amplidyne, Inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
---------------------------- ----------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 3,575,132 $ 1,810,222 $ 1,558,216 $ 1,957,694
Cost of goods sold 2,712,960 1,756,365 1,332,145 1,889,436
----------- ----------- ----------- -----------
Gross profit 862,172 53,857 226,071 68,258
Operating expenses
Selling, general and administrative 721,993 527,150 436,460 922,266
Research, engineering and development 333,306 372,334 121,975 701,209
----------- ----------- ----------- -----------
Operating loss (193,127) (845,627) (332,364) (1,555,217)
Other nonoperating expense
Stock compensation and financing
costs 1,180,000 2,553,125
----------- ----------- ----------- -----------
Loss before income taxes (193,127) (2,025,627) (332,364) (4,108,342)
Provision for income taxes (benefit) (15,260) 50
----------- ----------- ----------- -----------
NET LOSS $ (177,867) $(2,025,677) $ (332,364) $(4,108,342)
=========== =========== =========== ===========
Net loss per share $ (.05) $ (.62) $ (.10) $ (1.26)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 3,257,812 3,257,812 3,257,812 3,257,812
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Amplidyne, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994 and 1995
<TABLE>
<CAPTION>
Common stock Additional Retained
--------------------- paid-in earnings
Shares Par value capital (deficit) Total
---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 2,100,000 $210 $ 4,790 $ 464,418 $ 469,418
Net loss for 1994 (177,867) (177,867)
---------- ---- ---------- ----------- -----------
Balance at December 31, 1994 2,100,000 210 4,790 286,551 291,551
Net loss for 1995 (2,025,677) (2,025,677)
Assignment of common stock 400,000 400,000
Stock-related compensation expense 780,000 780,000
---------- ---- ---------- ----------- -----------
Balance at December 31, 1995 2,100,000 210 1,184,790 (1,739,126) (554,126)
Net loss for the period (unaudited) (4,108,342) (4,108,342)
Private placement 550,000 55 549,945 550,000
Financing expense 2,553,125 2,553,125
Contributed capital 125,716 125,716
Exercise of options 200,000 20 19,980 20,000
---------- ---- ---------- ----------- -----------
Balance at September 30, 1996 (unaudited) 2,850,000 $285 $4,433,556 $(5,847,468) $(1,413,627)
========== ==== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Amplidyne, Inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
------------------------ ------------------------
1994 1995 1995 1996
--------- ----------- --------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(177,867) $(2,025,677) $(332,364) $(4,108,342)
--------- ----------- --------- -----------
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities
Depreciation and amortization 22,676 30,011 21,255 42,413
Bad debt expense 10,000 51,065
Stock compensation expense 1,180,000 2,553,125
Changes in assets and liabilities
Accounts receivable (14,247) 243,133 215,484 (261,385)
Inventories 45,914 4,288 (17,456) (184,678)
Prepaid expenses and other assets (18,633) 6,389 26,245 (141,330)
Accounts payable and accrued
expenses 97,674 124,989 102,866 308,691
Income taxes payable (8,259) (8,705)
Customer advances 35,980 119,952 (35,980) (155,932)
--------- ----------- --------- -----------
Total adjustments 161,105 1,708,762 313,709 2,211,969
--------- ----------- --------- -----------
Net cash (used in) provided by
operating activities (16,762) (316,915) (18,655) (1,896,373)
--------- ----------- --------- -----------
Cash flows from investing activities
Purchase of fixed assets (40,443) (41,220) (24,160) (92,892)
--------- ----------- --------- -----------
Cash flows from financing activities
Proceeds from (repayment of) bank
line of credit 230,000 115,000 (20,000)
Proceeds from notes payable 925,000
Lease obligations 19,271 128,545 (6,140) 269,101
Proceeds from (repayment to) stockholder (14,700) 150,000 205,000
Stock issuance 570,000
--------- ----------- --------- -----------
Net cash provided by (used in)
financing activities 4,571 508,545 108,860 1,949,101
--------- ----------- --------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (52,634) 150,410 66,045 (40,164)
Cash and cash equivalents at beginning of year 55,971 3,337 3,337 153,747
--------- ----------- --------- -----------
Cash and cash equivalents at end of year $ 3,337 $ 153,747 $ 69,382 $ 113,583
========= =========== ========= ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for
Interest $ 229 $ 11,426 $ 2,214 $ 29,748
Income taxes 14,479 9,496 9,496 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE A - REORGANIZATION AND NATURE OF BUSINESS
Amplidyne, Inc. (the "Company") was originally incorporated on October 24,
1988 as a New Jersey corporation. Its principal line of business is the
custom manufacturing of amplifiers for wireless communication products.
Many of its customers are large, international telecommunications original
equipment manufacturers ("OEM") for which products are manufactured to
their specifications.
On December 14, 1995, Amplidyne, Inc. was incorporated as a Delaware
corporation and authorized to issue 25,000,000 shares of common stock with
a par value of $.0001, and 1,000,000 shares of preferred stock with no
stated value.
On December 22, 1995, Amplidyne, Inc. (the predecessor company) was merged
into Amplidyne, Inc., the Delaware corporation. Each share of the
predecessor company, 100 shares outstanding, was exchanged for 21,000
shares of the new entity. As a result, the sole shareholder of the
predecessor owned 2,100,000 shares of the new entity after the merger.
On December 22, 1995, the Company's principal shareholder entered into
stock assignment agreements with an individual and a law firm, which
assigned without cost 50,000 shares each for services previously rendered
to the Company. For financial reporting purposes, the difference between
the cost to the assignees (zero) and $4.00 (the estimated fair market
value per share), which aggregates $400,000, is considered to be a
contribution to capital by the principal stockholder and consulting
expense charged to operations in 1995.
In December 1995, the Company entered into employment agreements with its
Vice-President of Corporate Communications and Investor Relations and its
Vice-President of Strategic Alliances. Under the terms of each agreement,
the officers will be paid $60,000 per year (paid monthly) each for
thirty-six months beginning in January 1996. The aggregate compensation
will be charged ratably to operations beginning in January 1996. In
addition, the officers were given the opportunity to purchase an aggregate
of 200,000 shares at $.10 per share upon execution of the agreements and
purchased such shares in April 1996. For financial reporting purposes, the
difference between the $.10 per share and $4.00 (the estimated fair market
value per share) is considered to be compensation ($780,000), which was
charged to operations in December 1995 with a corresponding amount
credited to paid-in capital.
F-8
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE A (continued)
Also in December 31, 1995, the Company granted warrants to the officers
whereby they have the option to purchase up to 350,000 shares of stock at
$2.50 per share. The warrants are exercisable one-third after June 30,
1996, two-thirds after June 30, 1997 and 100% on June 30, 1998. For
financial reporting purposes, the difference between the $2.50 per share
and $4 (the estimated fair market value per share) aggregates $525,000 and
will be charged to operations ratably over the period from July 1, 1996 to
June 30, 1998. The corresponding credit will be to paid-in capital.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
1. Revenue Recognition
Revenue is recognized upon shipment of products to customers.
2. Inventories
Inventories are stated at the lower of cost or market; cost is determined
using the first-in, first-out method.
3. Property, Plant and Equipment
Depreciation and amortization are provided for in amounts sufficient
to relate the cost of depreciable assets to operations over their
estimated service lives which range from three to seven years.
Leasehold improvements are amortized over the lives of the
respective leases or the service lives of the improvements,
whichever is shorter. The straight-line method of depreciation is
followed for substantially all assets for financial reporting
purposes, but accelerated methods are used for tax purposes.
F-9
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE B (continued)
4. Income Taxes
The Company accounts for income taxes under SFAS No. 109. This
statement requires, among other things, an asset and liability
approach for financial accounting and reporting for deferred income
taxes. In addition, the deferred tax liabilities and assets are
required to be adjusted for the effect of any future changes in the
tax laws or rates. Deferred income taxes arise from temporary
differences resulting in the basis of assets and liabilities for
financial reporting and income tax purposes.
5. Concentrations of Credit Risk and Economic Dependency
Statement of Financial Accounting Standards No. 105 ("SFAS No. 105")
requires the disclosure of significant concentrations of credit
risk, regardless of the degree of such risk. Financial instruments,
as defined by SFAS No. 105, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and
accounts receivable.
The Company's customers are generally large, international, original
equipment manufacturers (OEMs). A relatively few customers account
for a substantial portion of the Company's revenues and accounts
receivable.
During 1994, one customer accounted for approximately 66% of net
sales, whereas in 1995 four customers accounted for 61% of net sales
(18%, 17%, 15% and 11%). Export sales in 1995 accounted for
approximately 30% of net sales and were primarily to the United
Kingdom and Spain. In 1994, export sales were less than 10%. For the
nine months ended September 30, 1996, three customers accounted for
70% of net sales (36%, 21% and 13%). Export sales for the same
period were 72%.
In addition, the Company is dependent on a limited number of
suppliers for key components used in the Company's products
(primarily power transistors). If the Company is unable to obtain
sufficient quantities of these components, it could have a
materially adverse effect on the Company's business, financial
condition, results of operations and ability to fulfill customer
orders.
F-10
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE B (continued)
6. Accounting Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
7. Accounting Pronouncements Not Yet Adopted
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," is required to be
implemented in 1996. SFAS No. 121 requires that long-lived assets
and certain identifiable intangibles held and used by the entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected future cash flows
(undiscounted and without interest) is less than the carrying amount
of the asset, an impairment loss is recognized. Measurement of that
loss would be based on the fair value of the asset. The Company
believes that implementation of this statement will not have any
material effect on its financial position.
SFAS No. 123, "Accounting for Stock-Based Compensation," is also
required to be implemented in 1996 and introduces a choice of the
method of accounting used for stock-based compensation. Entities may
use the "intrinsic value" method currently based on APB No. 25 or
the new "fair value" method contained in SFAS No. 123. The Company
has selected the intrinsic value method.
8. Unaudited Interim Financial Data
The accompanying unaudited financial statements as of September 30,
1996 and 1995 have been prepared in accordance with generally
accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. The results for interim periods are not
necessarily indicative of results to be expected for the year.
F-11
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE B (continued)
9. Deferred Registration Costs
Deferred registration costs represent certain direct fees incurred
in connection with this public offering. Such amounts will be
accounted for as a reduction of proceeds. In the event the offering
is not completed, these amounts will be charged to operations.
NOTE C - PUBLIC OFFERING AND RESERVED SHARES
The Company intends to sell 1,400,000 shares of common stock at a proposed
public offering price of $5.00 per share and 1,400,000 warrants at a
proposed public offering price of $.10 per warrant. The final offering
price will be set immediately prior to the signing of an Underwriter
Agreement with Patterson Travis, Inc. Patterson Travis will have the
option to purchase up to 180,000 additional shares to cover
overallotments.
In addition, the Company intends to issue to the Underwriter warrants to
purchase an aggregate 10% of the amount of common stock and warrants
offered to the public, exclusive of exercise of any portion of the
overallotment option (the "Underwriter's Warrants"). The Underwriter's
Warrants entitle the holder thereof to purchase one share and one warrant
at prices per share and per warrant equal to 120% of the public offering
prices of the common stock and warrants and shall be exercisable for a
period of four years commencing one year after the effective date of the
contemplated registration statement.
The Company also issued 250,000 options and 300,000 options in March and
April 1996, respectively, to noteholders (Note D) whereby each option
entitles the holder to purchase one share of common stock at $2.50,
exercisable until December 31, 1998.
During September 1996, the Company raised additional funds in the
aggregate amount of $375,000 by issuance of 8% per annum promissory notes.
Such notes are payable upon the earlier of March 15, 1997 or the closing
of the Company's initial public offering. In addition, warrants were
granted for the purchase of 187,500 shares of common stock at an
exercisable price of $2.50 per share. The proceeds were used for working
capital needs.
F-12
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE C (continued)
An incentive option plan and stock appreciation rights ("SARs") were
authorized prior to the public offering whereby options could be granted
to purchase no more than 1,500,000 shares of common stock at exercise
prices no less than fair market value as of date of grant. In May 1996,
267,000 options were granted to approximately forty employees of the
Company. The options are exercisable at $4.00 per share (estimated fair
market value). In June 1996, 1,000,000 options were granted to the
principal shareholder. The options are exercisable at $4.00 per share
(estimated fair market value).
In May 1996, 30,000 options were granted to a key employee of the Company.
The options are exercisable at $1 per share and vest ratably over a
three-year period. Approximately $90,000 of compensation expense will be
charged to operations over the three-year period of vesting.
Also, in December 1995, the Company granted to two officers options to
purchase an aggregate 200,000 shares at $.10 per share (Note A). The
options were exercised in full in April 1996. The Company also granted
warrants to these officers in December 1995 to purchase 350,000 shares at
$2.50 per share, exercisable over a two-year period from July 1, 1996 to
June 30, 1998.
The following table summarizes shares of common stock reserved for
issuance (assuming the overallotment option is not exercised):
<TABLE>
<CAPTION>
Number
of shares
Reserved for issuable
------------ --------
<S> <C>
Underwriters' warrants 280,000
Options to noteholders (March) 250,000
Options to noteholders (April) 300,000
Shares reserved for stock option and SARs plan 1,500,000
Warrants to officers 350,000
Options to employees (May) 30,000
Options to noteholders (September) 187,500
---------
2,897,500
=========
</TABLE>
F-13
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE D - PRIVATE PLACEMENT
In March 1996, the Company issued, in a private placement, ten units at
$50,000 per unit, resulting in proceeds of $480,000, which is net of
expenses of $20,000. Each unit consists of 25,000 shares of common stock,
par value $.0001 per share, 25,000 options each to purchase one share of
common stock at a price equal to $2.50 per share, exercisable until
December 31, 1998, and an 8% promissory note in the principal amount of
$25,000 due on the earlier of (i) March 15, 1997 or (ii) the closing of
the Company's initial public offering.
In April 1996, the Company issued an additional twelve units at $50,000
per unit, resulting in proceeds of $600,000. Each unit consists of 25,000
shares of common stock at $1 per share, par value of $.0001 per share,
25,000 options each to purchase one share of common stock at a price equal
to $2.50 per share, exercisable until December 31, 1998, and an 8%
promissory note in the principal amount of $25,000 due on the earlier of:
(i) March 15, 1997 or (ii) the closing of the Company's initial public
offering.
The difference between the $1.00 per share purchase price and the fair
market value price of $4.00 per share ($3.00 per share) aggregating
$1,650,000 for the March and April private placements has been charged to
operations over the expected term of the debt (to September 30, 1996) with
a corresponding credit to paid-in capital.
The difference between the option price of $2.50 per share and the fair
market value price of $4.00 per share ($1.50 per share) aggregates
$825,000 for the March and April private placements and has been charged
to operations over the expected term of the debt (to September 30, 1996)
with a corresponding credit to paid-in capital.
The total financing cost resulting from the above stock transaction is
$2,475,000 ($1,125,000 relating to March and $1,350,000 relating to
April), which has been charged in the first quarter, ($281,250) second and
third quarters ($1,096,875 each in the second and third quarters) of 1996.
F-14
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE E - INCOME TAXES
The Company filed its Federal income tax and New Jersey corporation
business tax returns on the basis of a September 30 year-end. The Company
intends to change its tax year and to conform to its financial reporting
year-end.
The provision (benefit) for income taxes consists of:
Year ended December 31,
-----------------------
1994 1995
---- ----
Federal $(19,403)
State 4,143 $50
-------- --
$(15,260) $50
======= ==
The 1994 Federal benefit results from carryback of net operating losses to
prior tax years. New Jersey tax law does not allow a carryback of net
operating losses. The 1994 New Jersey tax expense relates to tax on income
reported in tax year-end September 30, 1994.
The principal components of the Company's Federal and state deferred tax
assets relate to net operating loss carryovers. At December 31, 1995, the
Company's Federal net operating loss carryovers is approximately $814,000,
the New Jersey net operating loss carryover is approximately $984,000.
Because of uncertainty in the Company's ability to utilize the net
operating loss carryovers, a full valuation allowance has been provided.
Approximately $400,000 of such net operating losses arise from deductions
relating to stock and options. If and to the extent tax benefits relating
to stock and options are realized, such benefits will be credited to
operations to the extent of amounts previously charged to operations.
Internal Revenue Code Section 382 places a limitation on the utilization
of Federal net operating loss and other credit carryforwards when an
ownership change, as defined by the tax law, occurs. Generally, this
occurs when a greater than 50 percentage point change in ownership occurs.
Accordingly, the actual utilization of the net operating loss
carryforwards and other deferred tax assets for tax purposes may be
limited annually under Code Section 382 to a percentage (about 6%) of the
fair market value of the Company at the time of any such ownership change.
F-15
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE E (continued)
The Company's tax provision (benefit) differs from the expected statutory
rate principally due to the impact of state income and minimum taxes,
increases in valuation allowance and impact of surtax exemptions.
NOTE F - LEASE OBLIGATIONS
The Company has capital leases for certain equipment for use in its
research and development activities. Since the equipment is deemed to have
no alternative future use or economic value, the discounted present value
of such leases has been expensed to research, engineering and development
at lease inception. The total amount expensed relating to research and
development was $143,000 and $20,000 for the years ended December 31, 1995
and 1994, respectively, and $327,000 for the nine months ended September
30, 1996. At September 30, 1996, $188,212 of lease obligations related to
other office equipment not related to research, engineering and
development activities.
Future minimum lease payments on these leases are as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ -------------
(unaudited)
<S> <C> <C>
1996 $ 90,360 $ 200,553
1997 73,169 285,412
1998 147,887
1999 64,012
2000 6,781
Thereafter 525
--------- ---------
163,529 705,170
Less amount representing interest (15,713) (90,143)
--------- ---------
Present value of minimum lease payments $ 147,816 $ 615,027
========= =========
</TABLE>
F-16
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE G - COMMITMENTS AND CONTINGENCIES
1. Operating Leases
The Company leases office and manufacturing space and various
equipment under operating leases expiring through 2000.
The following is a schedule, by calendar year, of future minimum
lease payments under operating leases having remaining terms in
excess of one year as of December 31, 1995:
Year ending December 31,
1996 $179,888
1997 216,138
1998 177,592
1999 42,000
--------
$615,618
========
Total expenses for all operating leases was $168,000 and $129,000
for the years ended December 31, 1994 and 1995, respectively, and
$168,000 for the nine months ended September 30, 1996.
During March 1996, the Company entered into a lease agreement for
approximately 21,000 square feet of additional office and
manufacturing space. The lease term commenced May 1, 1996 and is for
a three-year period ending April 30, 1999. The annual rental is
$168,000 plus the Company's share of real estate taxes, utilities
and other occupancy costs. The Company has the option to renew the
lease for another three-year term so long as it exercises its option
to lease the entire building (36,405 square feet).
The Company is still obligated, until October 31, 1997, under its
lease for its previous 6,000 square-foot office location. This
location may be utilized by the Company as its mechanical workshop
or it may be sublet. The total remaining commitment is approximately
$73,000, which includes estimated real estate and other occupancy
cost.
F-17
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE G (continued)
2. Bank Line of Credit
During May 1995, the Company obtained a bank line of credit of
$250,000 to meet short-term liquidity requirements. The line expired
January 31, 1996 but was extended to July 31, 1996. At December 31,
1995, $230,000 was outstanding. Interest is payable at 1% above
prime (9.5% at December 31, 1995) and the loan is collateralized by
accounts receivable, inventory and equipment.
3. Employment Agreements
Commencing May 1, 1996, the Company entered into three five-year
employment agreements with its Chairman, its Vice President of Sales
and Marketing and its Secretary. The agreements call for aggregate
annual base salaries of $312,000, plus certain employee benefits.
NOTE H - LOSS PER SHARE
All shares, warrants and options issued or granted within the past twelve
months at prices lower than the initial public offering price ($5 per
share) are considered, for purposes of calculating loss per share, to be
outstanding for all periods presented. Accordingly, loss per share amounts
are based upon the weighted average number of shares outstanding
(2,850,000 shares) for each period presented plus the effect of below
market warrants and options calculated based on the treasury stock
approach (407,812 shares for each period presented). The total shares
outstanding for purposes of loss per share calculations is 3,257,812.
F-18
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to September 30, 1995
and 1996 are unaudited)
NOTE I - STOCKHOLDER LOAN
During 1994, 1995 and 1996, the Company's president and principal
shareholder advanced funds to the Company for operating needs. Amounts so
advanced were without interest and are expected to be repaid in full from
the proceeds of the contemplated initial public offering.
Effective March 31, 1996, $125,716 of stockholder loans was forgiven and
contributed to capital.
NOTE J - SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company acquired equipment under capital lease obligations totalling
$198,110 during the nine months ended September 30, 1996.
F-19
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
__________
TABLE OF CONTENTS
Page
Prospectus Summary.......................................................
The Company..............................................................
The Offering.............................................................
Summary Financial
Information............................................................
Risk Factors.............................................................
Use of Proceeds..........................................................
Dilution.................................................................
Capitalization...........................................................
Dividend Policy..........................................................
Selected Financial Data..................................................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.............................................................
Business.................................................................
Management...............................................................
Principal Stockholders...................................................
Certain Transactions.....................................................
Description of
Securities..............................................................
Selling Securityholders..................................................
Underwriting.............................................................
Experts..................................................................
Legal Matters............................................................
Available Information....................................................
Glossary of Terms........................................................
Financial Statements.....................................................
__________
Until ________, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
1,400,000 Shares of Common Stock
1,400,000 Redeemable Common Stock
Purchase Warrants
AMPLIDYNE, INC.
__________
PROSPECTUS
__________
Patterson Travis, Inc.
________, 1996
<PAGE>
SUBJECT TO COMPLETION, DATED ________, 1996
SELLING
SECURITYHOLDERS
PROSPECTUS
AMPLIDYNE, INC.
550,000 Shares of Common Stock
This Prospectus relates to the sale of 550,000 shares of common stock,
$.0001 par value per share ("Common Stock" or "Shares") of Amplidyne, Inc. (the
"Company" or "Amplidyne") underlying options granted to certain stockholders,
hereinafter collectively referred to as the "Selling Securityholders." The
Company will not receive any of the proceeds on the sale of the securities by
the Selling Securityholders. The securities held by the Selling Securityholders
may not be sold until twelve (12) months from the date of this Prospectus, which
period is not subject to earlier release. The resale of the securities of the
Selling Securityholders are subject to Prospectus delivery and other
requirements of the Securities Act of 1933, as amended (the "Act"). Sales of
such securities or the potential of such sales at any time may have an adverse
effect on the market prices of the securities offered hereby. See "Selling
Securityholders" and "Risk Factors - Shares Eligible for Future Sale May
Adversely Affect the Market."
The Company has applied for inclusion of its Common Stock and Redeemable
Common Stock Purchase Warrants ("Warrants") on The Nasdaq Small Cap Market,
although there can be no assurances that an active trading market will develop
even if the securities are accepted for quotation or that the Company will
maintain certain minimum criteria established by Nasdaq for continued quotation.
See "Risk Factors - No Prior Public Market; Potential Limited Trading Market;
Possible Volatility of Stock Price."
The securities offered by this Prospectus may be sold from time to time by
the Selling Securityholders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Securityholders. The
distribution of the securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with sales of such securities.
The Selling Securityholders and intermediaries through whom such
securities may be sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"), with respect to the securities
offered and any profits realized or commissions received may be deemed
underwriting compensation. The Company has agreed to indemnify the Selling
Securityholders against
Alt - 1
<PAGE>
certain liabilities, including liabilities under the Act.
All costs incurred in the registration of the securities of the Selling
Securityholders are being borne by the Company. See "Selling Securityholders."
On the date hereof the Company commenced a public offering of 1,400,000
shares of Common Stock and 1,400,000 Warrants which was underwritten by
Patterson Travis, Inc., as representative (the "Representative") of the several
underwriters of this Offering (the "Underwriters"). See "Company Offering."
__________
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" WHICH BEGIN ON PAGE ____
AND "DILUTION."
__________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1996
Alt - 2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered(1) 550,000 shares of Common Stock,
$.0001 par value. See Description of
Securities.
Securities Outstanding Prior
to Company Offering 2,850,000 Shares
Securities Outstanding
Subsequent to
Company Offering.................. 4,250,000 Shares
.................. 1,400,000 Warrants
Use of Proceeds..................... The Company will not receive any of
the proceeds of the offering of the
securities offered hereby by the
Selling Securityholders.
Risk Factors........................ The securities are subject to a high
degree of risk and substantial
dilution. See "Risk Factors" and
"Dilution".
Proposed Nasdaq SmallCap
Market Symbols(3).................. Common Stock - AMPD; Warrants -
AMPDW
</TABLE>
- ----------
(1) Concurrently with this Offering, the Company is offering 1,400,000 shares
of Common Stock and 1,400,000 Warrants. See "Company Offering."
Alt - 3
<PAGE>
ALTERNATE
COMPANY OFFERING
On the date of this Prospectus, a Registration Statement under the Act
with respect to an underwritten public offering (the "Offering") of 1,400,000
shares of Common Stock and 1,400,000 Warrants by the Company was declared
effective by the Securities and Exchange Commission ("SEC"), and the Company
commenced the sale of Shares offered thereby. Sales of securities under this
Prospectus by the Selling Securityholders or even the potential of such sales
may have an adverse effect on the market price of the Company's securities.
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part covers
the registration and sale of 550,000 shares of Common Stock underlying options
granted to certain stockholders of the Company, hereinafter collectively
referred to as the "Selling Securityholders." The Company will not receive any
of the proceeds on the sale of the securities by the Selling Securityholders.
The securities held by the Selling Securityholders may not be sold until twelve
(12) months from the date of this Prospectus, which period is not subject to
earlier release. The resale of the securities by the Selling Securityholders is
subject to Prospectus delivery and other requirements of the Act.
The following table sets forth the holders of the shares of Common Stock
which are being offered by the Selling Securityholders, the number of shares
owned before the Offering, the number of shares being offered and the number of
shares and the percentage of the class to be owned after the Offering is
complete.
<TABLE>
<CAPTION>
===========================================================================================
Name Shares of Shares of Shares of Percentage of
Common Common Stock Class After
Stock Owned Stock Owned Offering (2)
Before Offered After
Offering (1) Hereby Offering
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Karsten 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Ronny Doran 12,500 6,250 6,250 .13
- -------------------------------------------------------------------------------------------
Joseph Giamanco 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Marvin Ginsberg 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Gerald Kay 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Jerome Belson 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Robert Wax 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Bernice Brauser 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Milton Greiss 18,750 9,375 9,375 .20
- -------------------------------------------------------------------------------------------
</TABLE>
Alt - 4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Evan Stern 18,750 9,375 9,375 .20
- -------------------------------------------------------------------------------------------
Bircherest Industries 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Wellington 12,500 6,250 6,250 .13
Corporation, N.V
- -------------------------------------------------------------------------------------------
Jaminsville 31,250 15,625 15,625 .33
Corporation, N.V.
- -------------------------------------------------------------------------------------------
Carol Shiller 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Chana Sasha Foundation 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Katherine Gaston 12,500 6,250 6,250 .13
- -------------------------------------------------------------------------------------------
Phil Lifschitz 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Alan Grodko 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Israel Cohen 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Jeffrey Grodko 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
General Capital Associates 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
Quad Capital Partners 50,000 25,000 25,000 .52
- -------------------------------------------------------------------------------------------
ATM Partners 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
The Bridge Fund N.V. 18,750 9,375 9,375 .20
- -------------------------------------------------------------------------------------------
Alan Cohen 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Raymond Agoglia 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Isaac Dweck 100,000 50,000 50,000 1.04
- -------------------------------------------------------------------------------------------
Universal Partners, L.P. 50,000 25,000 25,000 .26
- -------------------------------------------------------------------------------------------
Michael Rubin 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Tissera Overseas 50,000 25,000 25,000 .26
Fund N.V
- -------------------------------------------------------------------------------------------
Diane Weiser 25,000 12,500 12,500 .26
- -------------------------------------------------------------------------------------------
Total 1,100,000 550,000 550,000 11.46
===========================================================================================
</TABLE>
(1) Includes shares of Common Stock underlying the 550,000 options.
(2) Assumes the exercise of the 550,000 options, the sale of the Common Stock
issuable upon exercise thereof and the sale of the 1,400,000 shares of
Common Stock offered by the Company.
Alt - 5
<PAGE>
PLAN OF DISTRIBUTION
The securities offered hereby may be sold from time to time directly by
the Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters (including the
Representative) dealers or agents. The distribution of securities by the Selling
Securityholders may be effected in one or more transactions that may take place
on the over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more broker-dealers
for resale of such shares as principals, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders in connection with such
sales of securities. The securities offered by the Selling Securityholders may
be sold by one or more of the following methods, without limitations: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and (d) face-to-face transactions between sellers and
purchasers without a broker-dealer. In effecting sales, brokers or dealers
engaged by the Selling Securityholders may arrange for other brokers or dealers
to participate. The Selling Securityholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the Act
with respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholders, to the extent required, a Prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the Offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for sales
purchased from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
Sales of securities by the Selling Securityholders or even the potential
of such sales would likely have an adverse effect on the market prices of the
securities offered hereby. See "Company Offering."
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
________
TABLE OF CONTENTS
Page
----
Prospectus Summary......................................................
The Company.............................................................
The Offering............................................................
Summary Financial
Information...........................................................
Risk Factors............................................................
Use of Proceeds of Company
Offering ............................................................
Dilution................................................................
Capitalization..........................................................
Dividend Policy.........................................................
Selected Financial Data.................................................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.............................................................
Business................................................................
Management..............................................................
Principal Stockholders..................................................
Certain Transactions....................................................
Description of
Securities.............................................................
Company Offering........................................................
Selling Securityholders.................................................
Plan of Distribution....................................................
Experts.................................................................
Changes in Accountants..................................................
Legal Matters...........................................................
Available Information...................................................
Glossary of Terms.......................................................
Financial Statements....................................................
________
Until ___, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
ALTERNATE
________
________
________
AMPLIDYNE, INC.
________
PROSPECTUS
________
________, 1996
________
Alt - 7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
In connection with the Offering, the Underwriter agreed to indemnify the
Company, its directors, and each person who controls it within the meaning of
Section 15 of the Act with respect to any statement in or omission from the
registration statement or the Prospectus or any amendment or supplement thereto
if such statement or omission was made in reliance upon information furnished in
writing to the Company by the Underwriter specifically for or in connection with
the preparation of the registration statement, the prospectus, or any such
amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the Delaware General Corporation Law and Article Tenth provides for
indemnification of officers and directors.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
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.
The Company does not currently have any liability insurance coverage for
its officers and directors.
Items 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this Offering are as follows:
SEC filing fee.......................... $ 7,769.08
The Nasdaq Small Cap Market
filing fee................................ $ 10,000.00
NASD filing fee......................... $ 2,452.25
Accounting fees and expenses*...... $ 75,000.00
Legal fees and expenses*.............. $ 90,000.00
Blue Sky fees and expenses*.......... $ 45,000.00
II - 1
<PAGE>
Printing and engraving*................. $ 40,000.00
Transfer Agent's and Registrar's fees*.... $ 3,500.00
Miscellaneous expenses*................... $ 26,278.67
-------------
Total...................................... $ 300,000.00
============
- ----------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company sold by
it since inception, which securities were not registered under the Securities
Act of 1933, as amended. There were no underwriting discounts and commissions
paid in connection with the issuance of any shares of Common Stock prior to the
date of this Registration Statement.
All of the sales of securities prior to the date hereof were made in
reliance upon Section 4(2) of the 1933 Act, which provides exemption for
transactions not involving a public offering. All certificates are "restricted
securities" and bear a restrictive legend. See "Description of Securities Shares
Eligible for Future Sale."
The Company was incorporated on December 14, 1995 pursuant to the laws of
the State of Delaware as the successor to Amplidyne, Inc., a New Jersey
corporation ("Amplidyne-NJ"), which was incorporated in October 1988. The
Company was organized to effectuate a reincorporation of Amplidyne-NJ with and
into the Company on December 22, 1995. In connection with the merger, each share
of Amplidyne-NJ common stock (a total of 100) was converted into 21,000 shares
of the Company's Common Stock, resulting in the issuance of 2,100,000 shares of
Common Stock.
In December 1995, the Company offered for sale an aggregate of 200,000
shares of its Common Stock to two officers (Harris Freedman and Sharon Will) at
a purchase price of $.10 per share (an aggregate purchase price of $20,000).
Such shares were purchased in April 1996.
Between January and February 1996 the Company sold an aggregate of 250,000
shares of Common Stock to the following persons: Robert Karsten (12,500), Ronny
Doran (6,250), Joseph Giamanco (25,000), Marvin Ginsberg (12,500), Gerald Kay
(25,000), Jerome Belson (25,000), Robert Wax (12,500), Bernice Brauser (25,000)
Milton Greiss (9,375), Evan Stern (9,375), Birchcrest Industries (25,000),
Wellington Corporation, N.V. (6,250), Jaminsville Corporation, N.V. (6,250),
Carol Shiller (25,000) and Chana Sasha Foundation (25,000). The sales of these
shares of Common Stock were in connection with a $500,000 private financing in
which the Company issued promissory notes in the aggregate amount of $250,000,
250,000 shares of Common Stock and 250,000 options to purchase Common Stock at
$2.50 per share. The promissory notes accrue interest at 8% per annum. The
principal and accrued interest are payable on the earlier of (i) March 15, 1997
or (ii) the closing of this Offering. See "Use of Proceeds." The options are
immediately exercisable until December 31, 1998. The shares of Common Stock
underlying the options are being registered hereunder. See "Selling
Securityholders."
II - 2
<PAGE>
In April 1996 the Company sold an aggregate of 300,000 shares of Common
Stock to the following persons: Katherine Gaston(6,250), Phil Lifschitz
(25,000), Alan Grodko (12,500), Israel Cohen (12,500), Jeffrey Grodko (12,500),
Generation Capital Associates (25,000), Quad Capital Partners (25,000), ATM
Partners (12,500), Jaminsville Corporation, N.V. (9,375), The Bridge Fund, N.V.
(9,375), Alan Cohen (12,500) Raymond Agoglia (12,500), Isaac Dweck (50,000),
Universal Partners, L.P. (25,000) Michael Rubin (12,500), Tissere Overseas Fund,
N.V. (25,000) and Diane Weiser (12,500). The sales of these shares of Common
Stock were in connection with a $600,000 private financing in which the Company
issued promissory notes in the aggregate amount of $300,000, 300,000 shares of
Common Stock and 300,000 options to purchase Common Stock at $2.50 per share.
The promissory notes accrue interest at 8% per annum. The principal and accrued
interest are payable on the earlier of (i) March 15, 1997 or (ii) the closing of
this Offering. See "Use of Proceeds." The options are immediately exercisable
until December 31, 1998. The shares of Common Stock underlying the options are
being registered hereunder. See "Selling Securityholders."
In connection with a $375,000 bridge financing in September 1996 in which
the Company issued promissory notes in the aggregate of $375,000, the Company
issued, for no additional consideration, 187,500 Bridge Warrants to purchase
Common Stock at $2.50 per share. The Bridge Warrants are exercisable for a three
year period commencing one year from the date of this Prospectus. The promissory
notes accrue interest at 8% per annum. The principal and accrued interest are
payable on the earlier of (i) March 15, 1997 or (ii) the closing of this
Offering. The Bridge Warrants were issued as follows: Gerald Brauser (12,500),
New Amsterdam Investment Trust (12,500), Jaminsville Corporation, N.V. (12,500),
Stanley Snyder (12,500), Jerome Belson (25,000), Robert Karsten (12,500),
Millyridge Corporation, N.V. (12,500), Mary Martire (10,000), Joseph Paresi
(5,000), Susan Brauser (20,000), Generation Capital Associates (25,000), Bellaty
Corporation, N.V. (12,500), Laurissa Martire (5,000), Jennifer Martire (5,000)
and Lisa Martire (5,000).
Item 27. Exhibits.
---------
1.1 Form of Underwriting Agreement*
1.2 Form of Selected Dealer Agreement*
1.3 Form of Agreement Among Underwriters*
3.1 Certificate of Incorporation of the Company
3.2 Certificate of Merger (Delaware)
3.3 Certificate of Merger (New Jersey)
3.4 Agreement and Plan of Merger
3.5 By-Laws of the Company
4.1 Specimen Certificate for shares of Common Stock
4.2 Specimen Certificate for Warrants
II - 3
<PAGE>
4.3 Form of Underwriter's Purchase Option*
4.4 Form of Warrant Agreement*
5.1 Opinion of Bernstein & Wasserman, LLP, counsel to the Company*
10.1 1996 Incentive Stock Option Plan
10.2 Employment Agreement between the Company and Devendar S. Bains
10.3 Employment Agreement between the Company and Tarlochan Bains
10.4 Employment Agreement between the Company and Nirmal Bains
10.5 Agreement of Lease for Premises located at 144 Belmont Drive,
Somerset, New Jersey 08873
10.6 Agreement of Lease for Premises located at Unit 9, Building 7,
Ilene Court, Belle Mead, New Jersey 08502
10.7 Agreement between the Company and Electronic Marketing
Associates, Inc.
10.8 Agreement between the Company and Link Microtek Limited.
10.9 Agreement between the Company and ENS Engineering.
10.10 Employment Agreement between the Company and Harris Freedman.
10.11 Employment Agreement between the Company and Sharon Will.
10.12 Form of Lockup Agreement with Officers, Directors and 5% or
Greater Shareholders.
10.13 Form of Lockup Agreement with Selling Securityholders.
23.1 Consent of Bernstein & Wasserman, LLP (included in Exhibit 5.1)*
23.2 Consent of Grant Thornton, LLP, Independent Certified Public
Accountants.*
- ----------
* Filed herewith.
II - 4
<PAGE>
Item 28. Undertakings.
(a) Rule 415 Offering
The undersigned Registrant will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually or
in the aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) Include any additional or changed material information on the plan
of distribution.
2. For determining liability under the Act, treat each such post-effective
amendment as a new registration statement of the securities offered, and the
Offering of such securities at that time shall be deemed to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
(b) Equity Offerings of Nonreporting Small Business Issuers
The undersigned Registrant will provide to the Underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(c) Indemnification
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 24 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) Rule 430A
II - 5
<PAGE>
The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the small business issuer under Rule 424(b)(1) or (4) or 497(h) under the Act as
part of this Registration Statement as of the time the Commission declared it
effective.
2. For any liability under the Act, treat each post-effective amendment
that contains a form of prospectus as a new registration statement for the
securities offered in the Registration Statement, and that the Offering of the
securities at that time as the initial bona fide Offering of those securities.
II - 6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in New
York, New York on November 27, 1996.
AMPLIDYNE, INC.
By:/s/ Devendar S. Bains
-------------------------------
Name: Devendar S. Bains
Title: Chief Executive Officer,
President, Treasurer, Principal
Accounting Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendments thereto has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Devendar S. Bains Chief Executive Officer, November 27, 1996
- ----------------------- President, Treasurer,
Devendar S. Bains Principal Accounting Officer
and Director
/s/ Tarlochan Bains Vice President and Director November 27, 1996
- -----------------------
Tarlochan Bains
/s/ Nirmal Bains Secretary November 27, 1996
- -----------------------
Nirmal Bains
/s/ Robert S. Benou Director November 27, 1996
- -----------------------
Robert S. Benou
II - 7
</TABLE>
<PAGE>
1,400,000 Shares of Common Stock
1,400,000 Class A Redeemable Warrants
AMPLIDYNE, INC.
UNDERWRITING AGREEMENT
December , 1996
Patterson Travis, Inc.
One Battery Park Plaza
New York, New York 10004
AMPLIDYNE, INC. a Delaware corporation (the "Company"),
proposes to issue and sell to you, the Underwriter, (the "Underwriter")
pursuant to this Underwriting Agreement (the "Agreement"), an aggregate of
1,400,000 shares of Common Stock ("Shares") and 1,400,000 Class A Redeemable
Warrants ("Warrants") to purchase a Share at a price of $6.00 per share for a
four year period commencing one year from the Effective Date as defined herein.
The Shares and the Warrants shall be sold together on the basis of one Share
and one Warrant and the Shares and Warrants are together referred to as the
"Securities".
In addition, the Company proposes to grant to the
Underwriter the option referred to in Section 2(b) to purchase all or any part
of an aggregate of 210,000 additional Shares and 210,000 Warrants. Unless the
context otherwise indicates, the term "Securities" shall include the 210,000
additional Securities referred to above.
You have advised the Company that the Underwriter desires to
purchase the Securities and that you are authorized to execute this Agreement
on behalf of the Underwriter. The Company confirms the Agreement made by it
with respect to the sale of the Securities as follows:
1. Representations and Warranties.
The Company represents and warrants to, and agrees with, the
Underwriter that:
(a) A registration statement (File No. 333-11015) on Form SB-2
relating to the public offering of the Securities, including a preliminary form
of 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 Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act. The Company
proposes to file, prior to the effective date of such registration statement
(the "Effective Date"), an additional amendment or amendments to such
registration statement, as are required by applicable law copies of which shall
be delivered to you. "Preliminary Prospectus" shall mean each prospectus filed
pursuant to Rule 430A of the Rules and Regulations. The registration statement
(including all financial statements and exhibits) as amended at
<PAGE>
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 terms "Prospectus" shall mean the prospectus first filed pursuant to
Rule 424(b), and (iii) if such registration statement or prospectus is amended
or such prospectus is supplemented, after the Effective Date of such
registration statement and prior to the Closing Date (as hereinafter defined),
the terms "Registration Statement" and "Prospectus" shall include each
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) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When the Registration
Statement becomes effective and at all times subsequent thereto up to the
Closing Date (as hereinafter defined) (i) the Registration Statement and
Prospectus and any amendments or supplements thereto will contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and 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 not misleading; provided,
however, that the Company makes no representations, warranties or agreements 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 or on behalf of the Underwriter specifically for
use in the preparation thereof. It is understood that the statements set forth
in the Prospectus under the heading "Underwriting" and the identity of counsel
to the Underwriter under the heading "Legal Matters" constitute the only
information furnished in writing by or on behalf of the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company 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 business, properties
or financial condition of the Company.
(d) The authorized, issued and outstanding capital stock of the
Company as of September 30, 1996 is as set forth in the Prospectus under
"Capitalization"; the Securities to be issued and outstanding capital stock of
the Company set forth thereunder have been, or will be when issued as set forth
in the Prospectus, duly authorized, validly issued, fully paid and
non-assessable; 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 shares of common
stock of the Company have been granted or entered into by the Company; and the
Shares and Warrants conforms to all statements relating thereto contained in
the Registration Statement and Prospectus.
2
<PAGE>
(e) The Securities are duly authorized, and when issued and
delivered 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 except as described in the
Registration Statement.
The Securities contained in the Underwriter's Purchase Option
("PO") (described in Section 11 herein) have been duly authorized and, when
duly issued and delivered, such PO will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms and
entitled to the benefits provided by the PO. The Securities included in the PO
when issued and sold, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company, and assuming due execution of this
Agreement by the Underwriter, constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally and also subject to any limitations on
enforceability which may be imposed by application of equitable principles. 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, issue
and sale except, such as may be required under the Act or state securities
laws.
(g) Except as described in the Prospectus, the Company is not in
violation, breach or default of or 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, any of the terms or provisions of, or
constitute a 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
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company is subject, nor will such action result in a violation of the by-laws
of the Company, as amended, or any statute or any order, rule or regulation
applicable to the Company of any court or of any regulatory authority or other
governmental body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets described in
the Prospectus as owned by it, 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 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, the Company is not 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 under any of the leases or
3
<PAGE>
subleases mentioned above, or affecting or questioning the right of the Company
to continue 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 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 proposed to be conducted as set forth in the
Prospectus.
(i) Grant Thornton, LLP, who have given their reports on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are incorporated in the Prospectus, are with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(j) The Company shall obtain a report from Grant Thornton, LLP
stating that the financial statements, together with related notes, set forth
in the Prospectus 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 have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and prior to the Closing
Date (as hereinafter defined) the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which is
material to the business of the Company, and there has not been any change in
the capital stock of, or any incurrence of long-term debt by, the Company, or
any issuance of options, warrants or other rights to purchase the capital stock
of the Company other than as set forth in the Registration Statement or
pursuant to the Company's Stock Option Plan, and assuming the Company receives
the proceeds of the offering contemplated hereby it does not now reasonably
foresee a prospective adverse change in the condition (financial or other), net
worth, results of operations, business, key personnel or properties which would
be material to the business or financial condition of the Company, and the
Company has not become the subject of, any material litigation whether or not
in the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened or any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of
the Company exist or are imminent which might be expected to adversely affect
the conduct of the business, property or operations or the financial condition
or earnings of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid all
4
<PAGE>
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.
(n) The Company and its subsidiaries have sufficient licenses,
permits and other governmental authorizations as required for the conduct of
its business or the ownership of its properties as described in the Prospectus
and is in all material respects complying therewith and to the best of its
knowledge owns and possesses adequate rights 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 other in respect thereof. To the best knowledge of
the Company, none of the activities or business of the Company are in violation
of, or cause the Company 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 the condition (financial or otherwise),
business, property, prospective results of operations, or net worth of the
Company.
(o) The Company has not 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. The Company
shall implement internal accounting controls and procedures which shall be
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Date (as hereinafter defined) all transfer or
other taxes which are required to be paid by the Company in connection with the
sale and transfer of the Securities 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 of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has no subsidiaries other than as described in
the Prospectus.
(s) 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 public
offering referred to herein.
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 agrees to issue and sell to the Underwriter, and the
Underwriter agrees to buy from the Company (i) at $4.50 per Share, at the place
and time hereinafter
5
<PAGE>
specified, the 1,400,000 Shares (the "First Shares") and (ii) at $.09 per
Warrant, the 1,400,000 Warrants (the "First Warrants"). The First Shares and
First Warrants are hereinafter collectively referred to as the "First
Securities".
Delivery of the First Securities against payment therefor shall
take place at the offices of Patterson Travis, Inc., One Battery Park Plaza,
New York, New York 10004 (or at such other place as may be designated by
agreement between you and the Company) at 10:00 a.m., New York time, on
December, 1996 or at such later time and date as you may designate, such time
and date of payment and delivery for the First Securities being herein called
the "First 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 Underwriter to
purchase all or any part of an aggregate of an additional 210,000 Securities at
the same price per Share and Warrant as the Underwriter shall pay for the First
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 30 days after the effective
date of the Registration Statement upon notice by the Underwriter to the
Company advising it 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 Underwriter but shall not be earlier than four nor later than
ten full business days after the exercise of said option, nor in any event
prior to the First 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 office of Patterson Travis, Inc., One Battery
Park Plaza, New York, New York, 10004. The Option granted hereunder may be
exercised only to cover over-allotments in the sale by the Underwriter of First
Securities referred to in subsection (a) above.
(c) The Company will make the certificates for the Securities to
be purchased by the Underwriter hereunder available to you for checking at
least two full business days prior to the First Closing Date or the Option
Closing Date (which are collectively referred to herein as the "Closing Dates"
and individually as a "Closing Date"). The certificates shall be in such names
and denominations as you may request, at least two full business days prior to
the Closing Dates. Delivery at the time and place specified in this Agreement
is a further condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Shares and
Warrants to be purchased by the Underwriter hereunder will be delivered by the
Company to you for the account of the Underwriter against payment of the
purchase prices by the Underwriter, by certified or bank cashier's checks in
New York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercise 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 to or upon the order of the Company by certified or bank cashier's checks
payable in New York
6
<PAGE>
Clearing House funds at the offices of the Underwriter 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
Underwriter for the account of the Underwriter registered in such names and in
such denominations as the Underwriter may request.
It is understood that the Underwriter 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 becomes effective.
(d) At the "First Closing" the Company shall grant to the
Underwriter a purchase option for 140,000 Shares and 140,000 Warrants.
3. Covenants of the Company.
The Company covenants and agrees with the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and 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 have been advised and furnished with a copy or
to which you or your counsel shall have reasonably objected in writing or which
is not in compliance with the Act and the Rules and Regulations. At any time
prior to the later of (A) the completion by the Underwriter of the distribution
of the Securities contemplated hereby (but in no event more than nine months
after the date on which the Registration Statement shall have become or been
declared effective, or (B) 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, in
your reasonable opinion, may be necessary or advisable in connection with the
distribution of the Securities.
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
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 utmost efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof.
7
<PAGE>
The Company has caused to be delivered to you such copies of the
Preliminary Prospectus which you have reasonably requested, 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 Underwriter and dealers to use
the Prospectus in connection with the sale of the Securities for such period as
in the opinion of counsel to the Underwriter 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 this Act to be delivered 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
Underwriter should be set forth in an amendment of 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 Rules and Regulations, the Company will notify you promptly and
forthwith prepare and file with the Commission 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 fact 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
Underwriter, except that in case any Underwriter is required, in connection
with the sale of the Securities, to deliver a Prospectus nine months or more
after the effective date of the Registration Statement, the Company will upon
request of and at the expense of the Underwriter, amend or supplement the
Registration Statement and Prospectus and furnish the Underwriter with
reasonable quantities of prospectuses complying with Section 10(a)(3) of the
Act.
The Company will comply with the Act, the applicable Rules and
Regulations and the Securities Exchange Act of 1934 and the rules and
regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will use its best efforts to qualify to register
the Securities for sale under the securities or "blue sky" laws of such
jurisdictions as the Underwriter may reasonably request 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 Underwriter may reasonably request.
(c) If the sale of the Securities provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder,
8
<PAGE>
including, but not limited to, all of the expenses itemized in Section 8, on an
actual out-of-pocket accountable basis.
(d) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its stockholders and warrantholders an
annual report (including financial statements audited by independent public
accountants), in reasonable detail, and at its expense, will furnish to you
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 source and application of funds 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 stockholders; (iii) as soon as they are
available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission; and (iv) such other information as
you may from time to time reasonably request.
(e) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (d) 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.
(f) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement, including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to you such number of copies of the Registration
Statement, including such financial statements but without exhibits, and of all
amendments thereto, as you may reasonably request. The Company will deliver to
or upon the order of the Underwriter, from time to time until the Effective
Date as many copies of any Preliminary Prospectus filed with the Commission
prior to the Effective Date as the Underwriter may reasonably request. The
Company will deliver to the Underwriter on the Effective Date 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 Underwriter may from time to time reasonably
request.
(g) The Company will make generally available to its security
holders and deliver to you as soon as it is practicable to do so, an earnings
statement (which need not be audited) covering a period of at least twelve
consecutive months beginning after the Effective Date which shall satisfy the
requirements of Section 11(a) of the Act.
(h) The Company will apply the net proceeds from the sale of the
Securities for the purposes set forth under "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 pursuant to Rule 463 under the Act.
(i) 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
9
<PAGE>
reasonable opinion of Gerald A. Kaufman, counsel to the Underwriter 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.
(j) Prior to the Effective Date, the Company shall have obtained
agreements on your behalf stating that for a period of eighteen months from the
Closing Date, the officers, directors and beneficial holders of more than 5% of
the outstanding Shares of Common Stock of the Company currently outstanding
will not publicly sell any Shares of Common Stock without the prior written
consent of the Underwriter.
(k) Upon completion of this offering, the Company will make all
filings required, including registration under the Securities Exchange Act of
1934, to obtain the listing of the Securities (including Shares and Warrants
separately), in the NASDAQ system, and will effect and maintain such listing
for at least five (5) years from the Closing Date.
(l) The Company will reserve and keep available that maximum
number of its authorized but unissued Common Stock which are issuable upon
exercise of the Warrants.
(m) On the Closing Date and simultaneously with the delivery of
the Securities, the Company shall execute and deliver to you the Underwriter's
Purchase Option. The Option will be substantially in the form of the
Underwriter's Option filed as Exhibit to the Registration Statement.
(n) During the 90 day period commencing as of the Closing Date,
the Company will not, without the prior written consent of the Underwriter
grant options to purchase Shares of Common Stock at a price less than the
initial public offering price.
(o) The Company and each 5% or more shareholder represent that
it or he has not taken and agree not to take any action designed to or which
might cause or result in the stabilization or manipulation of the price of the
Securities or to facilitate the sale or resale of the Securities.
(p) Upon exercise of any Warrant(s) subsequent to one year from
the Effective Date, the Company will pay the Underwriter a fee of 8% of the
aggregate exercise price of the Warrants, of which 1% may be reallowed to the
dealer who solicited the exercise (which may also be the Underwriter), if (i)
the market price of the Company's Common Stock is greater than the exercise
price of the Warrant's on the date of exercise, and (ii) the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. and such member was designated in writing, by the holder of such
Warrant, as having solicited the exercise of the Warrant; (iii) the Warrant is
not held in a discretionary account, and (iv) the solicitation of the Warrant
was not in violation of Rule 10b-6 promulgated under the Securities Exchange
Act of 1934 as amended. The Company agrees not to solicit the exercise of any
Warrants other than through the Underwriter and will not authorize any other
dealer to engage in such solicitation without the Underwriter's prior written
consent.
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4. Conditions of Underwriter's Obligation.
The obligation of the Underwriter to purchase and pay for the
Securities which they have agreed to purchase hereunder is subject to the
accuracy (as of the date hereof, and as of the Closing Dates) 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 to be performed
hereunder, and to the following conditions.
(a) The Registration Statement shall have become effective and
prior to the Closing Dates no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that or
similar purpose shall have been instituted or shall be pending or, to your
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Gerald A. Kaufman, counsel to the Underwriter; and no stop order shall be in
effect denying or suspending effectiveness of such qualification nor shall any
stop order proceedings with respect thereto be instituted or pending or
threatened under such law.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, the Prospectus, or any amendment or supplement thereto
contains any untrue statement of fact which, in the reasonable opinion of
Gerald A. Kaufman, counsel, is material and is required to be stated therein or
necessary to make the statements therein no misleading.
(c) At the First Closing Date, you shall have received the
opinion, dated as of the Closing Date, of Bernstein & Wasserman, LLP, counsel
for the Company, in form and substance reasonably satisfactory to counsel for
the Underwriter, to the effect that:
(i) the Company, has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, 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 where the failure to be so qualified would not have a
material affect upon the Company.
(ii) to the best knowledge of such counsel, the Company or its
subsidiaries, has obtained all material licenses, registrations, permits and
other governmental authorizations which are reasonably necessary to the conduct
of its business and such licenses, registrations, permits and governmental
authorizations are in full force and effect.
(iii) the authorized capitalization of the Company as of
September 30, 1996 is set forth under "Capitalization" in the Prospectus; all
shares of the Company's outstanding stock requiring authorization for issuance
by the Company's board of directors have been duly authorized, validly issued,
are fully paid and non-assessable
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and conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of the Company 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 other rights to subscribe for
or to purchase, nor are there any restrictions upon the voting or transfer of
any of the shares other than as set forth in the Prospectus; the Common Stock
and the Warrants, conform to the respective descriptions thereof contained in
the Prospectus; the Shares have been, and the shares of Common Stock to be
issued upon exercise of the Warrants in accordance with the terms of such
Warrants have been duly authorized and when issued and delivered, will be duly
and validly issued, fully paid, non-assessable, free of preemptive rights and no
personal liability will attach to the ownership thereof; a sufficient number of
shares of Common Stock has been reserved for issuance upon exercise of the
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 for or relating to
the registration of any shares of Common Stock or those contained in the PO.
(iv) this Agreement and the Underwriter's PO have been duly and
validly authorized, executed and delivered by the Company, and assuming due
execution and delivery of this Agreement by the Underwriter, are the valid and
legally binding obligations of the Company, subject to applicable bankruptcy,
reorganization, insolvency, moratorium, and other similar laws applicable to
creditor's rights generally and also subject to any limitations on
enforceability which may be imposed by application of equitable principles.
except no opinion need be expressed as to the enforceability of the indemnity
provisions contained in Section 6 or the contribution provisions contained in
Section 7 of this Agreement.
(v) the certificates evidencing the Shares of Common Stock and
Warrants are in valid and proper legal form; the Warrants will be exercisable
for shares of Common Stock of the Company in accordance with the terms of the
Warrants and at the prices therein provided for; at all times during the term
of the Warrants the shares of Common Stock of the Company issuable upon
exercise of the Warrants will have been duly authorized and reserved for
issuance upon such exercise of Warrants and at the price provided for, will be
duly and validly issued, fully paid and non- assessable.
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could materially
adversely affect the business, property financial condition or operations of
the Company; or which question the validity of the Shares, this Agreement, the
Warrants, or any action taken or to be taken by the Company pursuant to this
Agreement; and no such proceedings are known to such counsel to be contemplated
against the Company; to the best knowledge of such counsel, there are no
governmental proceedings or regulations required to be described or referred to
in the Registration Statement which are not so described or referred to.
(vii) Neither the Company nor its subsidiaries is in violation
of or default under, nor will the execution and delivery of this Agreement or
the Warrants and the incurrence of the obligations herein or therein
contemplated, result in a violation of, or constitute a default under the
certificate or articles of incorporation or by-laws, or to the
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best knowledge of such counsel, in the performance or observance of any material
obligations, agreements, covenants or conditions 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 is a party or by which it or any of its properties may be
bound or in violation of any material order, rule, regulation, writ, injunction,
or decree of any government, governmental instrumentality or court, domestic or
foreign.
(viii) 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.
(ix) 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 cause such counsel to have reason to believe that the
Registration Statement or any amendment thereto at the time it became effective
contained any untrue statement of a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus or any supplement thereto contains any untrue statement of a
material fact required to be stated therein or omitted to state any material
fact required to be stated therein or necessary to make the statements therein
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 necessary
in order to make statements therein, in light of the circumstances under which
they were 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).
(x) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and other
documents are accurate and fairly present the information required to be shown,
and such counsel has examined all contracts and other documents referred to in
the Registration Statement and the Prospectus and any such amendment or
supplement or filed as exhibits to the Registration Statement, and such counsel
does not know of any contracts or documents of a character required to be
summarized or described therein or to be filed as exhibits thereto which are
not so summarized, described or filed.
(xi) 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 Securities (other than necessary
amendments to the Registration Statement) other than (a) registrations or
qualifications of the Securities under applicable state or foreign
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securities or Blue Sky laws and (b) registration under the Act, and (c)
"clearance" from the National Association of Securities Dealers, Inc.
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. Notwithstanding the foregoing, such counsel may rely as to
all matters of law other than the law of the United States or of the States of
Delaware or New York upon opinions of counsel satisfactory to you, in which
case the opinion shall state that such counsel has no reason to believe that
you and they are not entitled to so rely.
(d) Intentionally Omitted.
(e) You shall have received letters prior to the Effective Date
and again on and as of the First Closing Date from Grant Thornton, LLP
independent public accountants for the Company, substantially in the form
approved by you.
(f) At the First Closing Date, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
with the same effect as if made on and as of the Closing Date and the Company
shall have performed all of its obligations hereunder and satisfied all
conditions to be satisfied at or prior to such Closing Date, (ii) 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 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
not misleading, (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change in the business,
properties or condition (financial or otherwise), results of operations,
capital stock, long-term or short-term debt or general affairs of the Company
from that set forth in the Registration Statement and the Prospectus, except
changes which the Registration Statement and Prospectus indicate might occur
after the Effective Date, and the Company shall not have incurred any material
liabilities or agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus; and (iv) except as
set forth in the Prospectus, no action, suit or proceeding at law or in equity
shall be pending or threatened against the Company which would be required to
be set forth in the Registration Statement, and no proceedings shall be pending
or threatened against the Company before or by any commission, board of
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company, and (v) you shall have received, at the Closing Date, a
certificate signed by the Chairman of the Board or President and the principal
financial officer of the Company, dated as of the Closing Date, evidencing
compliance with the provisions of this subsection (f).
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(h) Upon exercise of the option provided for in Section 2(b)
hereof, the obligations of the Underwriter 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
contemplated by the Commission for additional information shall have been
complied with to the satisfaction of Gerald A. Kaufman, counsel to the
Underwriter; (ii) At the Option Closing Date there shall have been delivered to
you, the signed opinion of Bernstein & Wasserman, LLP, counsel for the Company,
dated as of the Option Closing Date, in form and substance satisfactory to
Gerald A. Kaufman, counsel to the Underwriter, which opinion shall be
substantially the same in scope and substance as the opinion furnished to you
at the First Closing Date pursuant to Section 4(c) hereof, except that such
opinion, where appropriate, shall cover the Option Securities rather than the
First Securities. If the First Closing Date is the same as the Option Closing
Date, such opinions may be combined; (iii) At the Option Closing Date, there
shall have been delivered to you a certificate of the Chairman of the Board or
the President and the principal financial or accounting officer of the Company,
dated the Option Closing Date, in form and substance reasonably satisfactory to
Gerald A. Kaufman, counsel to the Underwriter, substantially the same in scope
and substance as the certificate furnished to you at the First 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 Thornton, LLP dated the Option Closing Date and addressed to the
Underwriter, confirming the information in their letter referred to in Section
4(e) hereof as of the date thereof and stating that, without any additional
investigation required, 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 Underwriter and Gerald A. Kaufman,
counsel to the Underwriter, 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 therein.
(i) 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
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Underwriter under this Agreement may be canceled at, or at any time prior to,
each Closing Date by the Underwriter 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 Underwriter 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:
(a) The Registration Statement shall have become effective not
later than 10:00 A.M., New York time, on the day following the date of this
Agreement,; or on such later date as the Company and the Underwriter may agree
in writing.
(b) On the Closing Date, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued under the
Act or any proceedings therefor 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 First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Option
Securities on exercise of the option provided for in Section 2(b) hereof shall
be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act from and 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 such 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 alleged untrue statement of any material fact
contained in (A) the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment thereof or supplement thereto, (B) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company 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 thereof 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 case to the extent, but
only to the extent, that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration Statement or any
such
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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. This indemnity will be in addition to any liability which the Company
may otherwise have.
(b) The Underwriter agree to indemnify and hold 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, from and 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 statement 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 specifically for use in the
preparation thereof. 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. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, 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 as 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 indemnified party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is the
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 judgment of
the Underwriter, it is advisable for the Underwriter or
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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 Underwriter 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 indemnified party,
specified in this paragraph which shall not be unreasonably withheld in light of
all factors of importance to such indemnified party.
7. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which (i) the Underwriter makes claim for
indemnification pursuant to Section 6 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 the 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 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 Underwriter are responsible in the
aggregate for that portion of such losses, claims, damages or liabilities
represented by the percentage that the underwriting discounts per Share and
Warrant 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 omissions 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 Underwriter agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriter to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages 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 7 and no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, 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
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and each person who controls the Underwriter shall be entitled to contribution
from the Company to the full extent permitted by law. The foregoing contribution
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. Cost and Expenses.
(a) Whether or not this Agreement becomes effective or the sale
of the Securities to the Underwriter 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 statement therein and all
amendments and exhibits thereto), each 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
expenses, including reasonable fees and disbursements of counsel in connection
with the qualification of the Securities under the state securities or blue sky
laws which the Underwriter shall designate; the cost of printing and furnishing
to the Underwriter copies of the Registration Statement, and the Preliminary
Prospectus, the Prospectus, this Agreement, and the Blue Sky Memorandum and the
cost of printing and certificates representing the securities comprising the
Securities. The Company shall pay any and all taxes (including any transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales to
the Underwriter 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 as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at
the First Closing Date pay to the Underwriter a non-accountable expense
allowance of $214,200. In the event the over-allotment option is exercised, the
Company shall pay to the Underwriter at the Option Closing Date an additional
amount equal to 3% of the gross proceeds received upon exercise of the
over-allotment option. In the event the transactions contemplated hereby are
not consummated by reason of any action by the Underwriter pursuant to Section
10 of this Agreement, the Company shall be liable for the accountable out of
pocket expenses of the Underwriter, including legal fees up to a maximum of
$40,000. In the event the transactions contemplated hereby are not consummated
by reason of any action of the Company or because of a breach by the Company of
any covenant, representation or warranty herein, the Company shall be liable
for the accountable out of pocket expenses of the Underwriter, including legal
fees but not in excess of $40,000.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter from any other person for
services as a finder in
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connection with the proposed offering, and the Company agrees to indemnify and
hold harmless the Underwriter from and 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' fee), to which the indemnified party may become subject insofar as
such losses, claims, damages or liabilities (or 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. Effective Date.
The Agreement shall become effective upon its execution, except
that the Underwriter may, at its option, delay its effectiveness until 11:00
A.M., New York 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 the Underwriter in its discretion shall
first commence the initial public offering of any of the Securities. The time
of the initial public offering shall mean the time of release by you of the
first newspaper advertisement with respect to the Securities, or the time when
the Securities are first generally offered by you to dealers by letter or
telegram, whichever shall first occur. 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, 12, 13, 14 and 16 shall remain in effect notwithstanding such
termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13,
14 and 16 may be terminated at any time prior to the First Closing Date, and
the option referred to in Section 2(b), if exercised, may be canceled, at any
time prior to the Option Closing Date, by the Underwriter if in its judgment it
is impracticable to offer for sale or to enforce contracts made for the resale
of the Securities agreed to be purchased hereunder by reason of (i) the Company
having sustained a material 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 (which are not in force and effect on the date
hereof), (iv) a banking moratorium having been declared by federal or New York
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 government body or any authoritative accounting institute or
board, or any governmental executive, which is reasonably believed likely by
the Underwriter to have a material adverse impact on the business, financial
condition or financial statements of the Company, (vii) any material adverse
change in the financial or securities markets in the United States having
occurred since the date of this Agreement, or (viii) any material adverse
change having occurred, since the respective dates 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.
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<PAGE>
(b) If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10 or in Section 9, the Company shall be promptly notified by the Underwriter,
by telephone or telegram, confirmed by letter.
11. Underwriter's Option.
On the First Closing Date, the Company will sell to the
Underwriter for a consideration of $120, and upon the terms and conditions set
forth in the form of annexed as an exhibit to the Registration Statement, an
option ("PO") to purchase an aggregate of 140,000 Shares and 140,000 Warrants.
The PO shall be for a five year term and the exercise prices shall be $7.50 per
Share and $.15 per Warrant with the Warrant to be identical to the Warrants
sold to the public. In the event of conflict in the terms of this Agreement and
the Warrant, the language of the Warrant shall control.
12. Representations, Warranties, and Agreements to Survive
Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the Underwriter 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 Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of any payment of
the Securities and the termination of this Agreement.
13. Notice.
All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to the Underwriter, will be
mailed, delivered or telegraphed and confirmed to them at Patterson Travis,
Inc. One Battery Park Plaza, New York, New York, 10004 with a copy sent to
Gerald A. Kaufman, 33 Walt Whitman Road, Huntington Station, New York 11746 of
if sent to the Company, will be mailed, delivered or telegraphed and confirmed
to it at 144 Belmont Drive, Somerset, New Jersey 08873 with a copy to Bernstein
& Wasserman, LLP, 950 Third Avenue, New York, New York 10022, Attention: Stuart
Neuhauser, Esq.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of
the Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors of the Company (if any) named
in the Prospectus, the officers of the Company who have signed the Registration
Statement, and their respective executors, administrators, successors and
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
purchasers, as such purchaser, from the Underwriter of the Securities.
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<PAGE>
15. Director
For a period of three years from Effective Date, the Underwriter
will have the right to designate one person to be elected as a director of the
Company or to be an observer at the meeting.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance
with, the laws of the State of New York applicable to agreements made and to be
entirely performed within New York the Company and the Underwriter in
accordance with its terms.
Very truly yours,
AMPLIDYNE, INC.
By: __________________________
Devendar S. Bains, President
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
Patterson Travis, Inc.
By: ___________________________
We hereby agree to be bound by the provisions of Sections 3(o)
and 12 hereof as corrected.
- ---------------------------
Devendar S. Bians
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<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE
PRICE CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE,
AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR
COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN
AFTER THE EFFECTIVE DATE.
AMPLIDYNE, INC.
1,400,000 SHARES OF COMMON STOCK, $.0001 PAR VALUE
AND
1,400,000 CLASS A REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
SELECTED DEALERS AGREEMENT
_______ __, 1996
Dear Sirs:
1. Patterson Travis, Inc. (the "Underwriter"), has agreed to offer on a
firm commitment basis, subject to the terms and conditions and execution of the
Underwriting Agreement, 1,400,000 shares of Common Stock, $.0001 par value per
share ("Common Stock") of Amplidyne, Inc. (the "Company") and 1,400,000 Class A
Redeemable Common Stock Purchase Warrants ("Warrants"), (hereinafter,
collectively referred to as the "Securities"; including any shares of Common
Stock and Warrants offered pursuant to an over-allotment option, the "Firm
Securities"). Each Warrant is exercisable to purchase one (1) share of Common
Stock. The Firm Securities are more particularly described in the enclosed
Preliminary Prospectus, additional copies of which, as well as the Prospectus
(after effective date), will be supplied in reasonable quantities upon request.
2. The Underwriter is soliciting offers to buy Securities, upon the
terms and conditions hereof, from Selected Dealers, who are to act as
principals, including you, who are (i) registered with the Securities and
Exchange Commission ("the Commission") as broker-dealers under the Securities
Exchange Act of 1934, as amended ("the 1934 Act"), and members in good standing
with the National Association of Securities Dealers, Inc. ("the NASD"), or (ii)
dealers of institutions with their principal place of business located outside
the United States, its territories and possessions and not registered under the
1934 Act who agree to make no sales within the
<PAGE>
United States, its territories and possessions or to persons who are nationals
thereof or residents therein and, in making sales, to comply with the NASD's
interpretation with respect to free-riding and withholding. The Securities are
to be offered to the public at a price of $5.00 per share of Common Stock and
$.10 per Warrant. Selected Dealers will be allowed a concession of not less
than __% of the aggregate offering price. You will be notified of the precise
amount of such concession prior to the effective date of the Registration
Statement. The offer is solicited subject to the issuance and delivery of the
Securities and their acceptance by the Underwriter, to the approval of legal
matters by counsel and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part without
obligation or commitment of any kind by you any time prior to acceptance and no
offer may be accepted by us and no sale can be made until after the
registration statement covering the Securities has become effective with the
Commission. Subject to the foregoing, upon execution by you of the Offer to
Purchase below and the return of same to us, you shall be deemed to have
offered to purchase the number of Securities set forth in your offer on the
basis set forth in paragraph 2 above. Any oral notice by us of acceptance of
your offer shall be immediately followed by written or telegraphic confirmation
preceded or accompanied by a copy of the Prospectus. If a contractual
commitment arises hereunder, all the terms of this Selected Dealers Agreement
shall be applicable. We may also make available to you an allotment to purchase
Securities, but such allotment shall be subject to modification or termination
upon notice from us any time prior to an exchange of confirmations reflecting
completed transactions. All references hereafter in this Agreement to the
purchase and sale of the Securities assume and are applicable only if
contractual commitments to purchase are completed in accordance with the
foregoing.
4. You agree that in re-offering the Securities, if your offer is
accepted after the Effective Date, you will make a bona fide public
distribution of same. You will advise us upon request of the Securities
purchased by you remaining unsold, and we shall have the right to repurchase
such Securities upon demand at the public offering price less the concession as
set forth in paragraph 2 above. Any of the Securities purchased by you pursuant
to this Agreement are to be re-offered by you to the public at the public
offering price, subject to the terms hereof and shall not be offered or sold by
you below the public offering price before the termination of this Agreement.
5. Payment for Securities which you purchase hereunder shall be made by
you on such date as we may determine by certified or bank cashier's check
payable in New York Clearinghouse funds to Patterson Travis, Inc. Certificates
for the Securities shall be delivered as soon as practicable at the offices of
Patterson Travis, Inc., One Battery Park Plaza, New York, NY 10004. Unless
specifically authorized by us, payment by you may not be deferred until
delivery of certificates to you.
6. A registration statement covering the offering has been filed with
the Commission in respect to the Securities. You will be promptly advised when
the registration statement becomes effective. Each Selected Dealer in selling
the Securities pursuant hereto agrees (which
2
<PAGE>
agreement shall also be for the benefit of the Company) that it will comply
with the applicable requirements of the Securities Act of 1933 and of the 1934
Act and any applicable rules and regulations issued under said Acts. No person
is authorized by the Company or by the Underwriter to give any information or
to make any representations other than those contained in the Prospectus in
connection with the sale of the Securities. Nothing contained herein shall
render the Selected Dealers a member of the underwriting group or partners with
the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Securities have been qualified for sale or are exempt
under the respective securities or blue sky laws of such states, but we have
not assumed and will not assume any obligation or responsibility as to the
right of any Selected Dealer to sell Securities in any state.
8. The Underwriter shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. The Underwriter shall not be under any liability to you,
except such as may be incurred under the Securities Act of 1933 and the rules
and regulations thereunder, except for lack of good faith and except for
obligations assumed by us in this Agreement, and no obligation on our part
shall be implied or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Securities; such contractual commitment can only be
made in accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. ("Association") and registered
as a broker-dealer or are not eligible for membership under Section I of the
By-Laws of the Association who agree to make no sales within the United States,
its territories or possessions or to persons who are nationals thereof or
residents therein and, in making sales, to comply with the NASD's
interpretation with respect to free-riding and withholding. Your attention is
called to the following: (a) Rules 2730, 2740, 2420 and 2750 of the NASD
Conduct Rules of the Association and the interpretations of said Section
promulgated by the Board of Governors of such Association including the
interpretation with respect to "Free-Riding and Withholding"; (b) Section 10(b)
of the 1934 Act and Rules 10b-6 and 10b-10 of the general rules and regulations
promulgated under said Act; (c) Securities Act Release #3907; (d) Securities
Act Release #4150; and (e) Securities Act Release #4968 requiring the
distribution of a Preliminary Prospectus to all persons reasonably expected to
be purchasers of Securities from you at least 48 hours prior to the time you
expect to mail confirmations. You, if a member of the Association, by signing
this Agreement, acknowledge that you are familiar with the cited law, rules and
releases, and agree that you will not directly and/or indirectly violate any
provisions of applicable law in connection with your participation in the
distribution of the Securities.
3
<PAGE>
11. In addition to compliance with the provisions of paragraph 10
hereof, you will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase Securities or its
component securities in the open market or otherwise make a market in such
securities or otherwise attempt to induce others to purchase such securities in
the open market. Nothing contained in this paragraph 11 shall, however,
preclude you from acting as agent in the execution of unsolicited orders of
customers in transactions effectuated for them through a market maker.
12. You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions. If the Underwriter contracts for
or purchases in the open market in connection with such stabilization any
Securities sold to you hereunder and not effectively placed by you, the
Underwriter may charge you the Selected Dealer's concession originally allowed
you on the Securities so purchased, and you agree to pay such amount to us on
demand.
13. By submitting an Offer to Purchase you confirm that your net
capital is such that you may, in accordance with Rule 15c3-1 adopted under the
1934 Act, agree to purchase the number of Securities you may become obligated
to purchase under the provisions of this Agreement.
14. You agree that (i) you shall not recommend to a customer the
purchase of Firm Securities unless you shall have reasonable grounds to believe
that the recommendation is suitable for such customer on the basis of
information furnished by such customer concerning the customer's investment
objectives, financial situation and needs, and any other information known to
you, (ii) in connection with all such determinations, you shall maintain in
your files the basis for such determination, and (iii) you shall not execute
any transaction in Firm Securities in a discretionary account without the prior
specific written approval of the customer.
4
<PAGE>
15. All communications from you should be directed to us at the office of
Patterson Travis, Inc. One Battery Park Plaza, New York, NY 10004. All
communications from us to you shall be directed to the address to which this
letter is mailed.
Very truly yours,
PATTERSON TRAVIS, INC.
By: _____________________________
Name:
Title:
ACCEPTED AND AGREED TO AS OF THE ______
DAY OF ____________, 1996
[Name of Dealer]
By: ____________________________
Its
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<PAGE>
TO: Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
We hereby subscribe for ____________ Shares of Common Stock, $.0001 par
value per share, of Amplidyne, Inc. and ______ Class A Redeemable Common Stock
Purchase Warrants in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Prospectus referred to
in the first paragraph thereof relating to said Securities. We further state
that in purchasing said Securities 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. (the "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. We hereby agree to comply with the
provisions of Rule 2740 of the NASD Conduct Rules, and if we are a foreign
dealer and not a member of the NASD, we also agree to comply with the NASD's
interpretation with respect to free-riding and withholding, to comply, as
though we were a member of the NASD, with the provisions of Rules 2730 and 2750
of the NASD Conduct Rules.
Name of
Dealer: _______________________________
By: _______________________________
Address: _______________________________
Dated: _____________, 1996 _______________________________
<PAGE>
AMPLIDYNE, INC.
1,400,000 SHARES OF COMMON
STOCK, PAR VALUE $.0001 PER SHARE
AND
1,400,000 REDEEMABLE WARRANTS
AGREEMENT AMONG UNDERWRITERS
________________, 1996
Dear Sirs:
We wish to confirm our agreement among you the undersigned and the
other underwriters set forth on Schedule A attached hereto (collectively, the
"Underwriters") with respect to the purchase by the Underwriters severally, on
a firm commitment basis, from Amplidyne, Inc., a Delaware corporation (the
"Company"), of up to 1,400,000 shares of Common Stock, par value $.0001 per
share and 1,400,000 Redeemable Warrants (the "Securities").
The Company has filed a registration statement with respect to the
Securities with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), which is more particularly
described in the Underwriting Agreement hereinafter referred to. As used
herein, the "Registration Statement" means such registration statement, as
amended and supplemented from time to time in accordance with the Act, and the
"Prospectus" means the prospectus constituting a part of the Registration
Statement, as amended and supplemented from time to time in connection with the
offering of the Securities. One or more amendments or supplements to the
Registration Statement or the Prospectus have been or may be filed in which,
with our consent hereby given, we have been or will be named as one of the
underwriters of the Securities, but no such amendment or supplement shall
release us from or otherwise affect our obligations hereunder or under the
Underwriting Agreement.
1. Underwriting Agreement. Annexed hereto is a copy of a proposed
agreement (the "Underwriting Agreement") with the Company providing for the
purchase of the Securities from the Company by each Underwriter, severally and
not jointly, of the respective amount of the Securities set forth opposite its
name in Schedule A hereto. We authorize you to execute the Underwriting
Agreement on our behalf in substantially the form annexed hereto. It is
understood that the number of Securities to be purchased by us (hereinafter
referred to as "our Securities") as set forth herein will not be changed
without our consent except as provided herein or in the
<PAGE>
Underwriting Agreement. The term "Underwriting Commitment", with respect to any
Underwriter, shall refer to the number of Securities which such Underwriter is
obligated to purchase pursuant to the provisions of the Underwriting Agreement.
2. Authority of Representative. We authorize you, as Representative of
the several Underwriters, (i) to act as our representative in all matters
concerning the Underwriting Agreement, this Agreement, and the purchase,
carrying, sale and distribution of the Securities thereunder, (ii) to exercise
all authority vested in the Underwriters or the Representative by the
Underwriting Agreement, and (iii) to take such action as you may deem necessary
or advisable in respect of all matters pertaining thereto, including the
determination of the time of the public offering and the furnishing to the
Company of the information to be included in the Prospectus with respect to the
terms of the offering. We understand that you will advise us when the
Securities are released for sale to the public. You will furnish to us as soon
as possible copies of the Prospectus to be used in connection with the offering
of the Securities. We authorize you on our behalf, in your discretion, to
approve or object to any amendments or supplements to the Registration
Statement or the Prospectus.
We authorize you to reserve for sale and to sell for our account (a) to
institutions and other retail purchasers and (b) to dealers selected by you
("Selected Dealers"), including Underwriters, such amounts of our Securities as
you determine, and we authorize you to fix the concessions and reallowances in
connection with any such sales to Selected Dealers. Such concessions and
reallowances may be allowed only as consideration for services rendered in
distribution to Selected Dealers who are actually engaged in the investment
banking or securities business, and who are either (i) members in good standing
of the National Association of Securities Dealers, Inc., ("NASD") and who agree
in writing to comply with Section 24 of the NASD's Rules of Fair Practice (the
"Rules") or (ii) foreign dealers who are not eligible for membership in the
NASD and (a) who agree that (x) in making sales of Securities outside the
United States they will comply with the NASD's Interpretation with Respect to
Free-Riding and Withholding and (y) they will not offer or sell any Securities
in the United States and (b) who agree in writing that in making sales of the
Securities outside the United States they will comply with the provisions of
Sections 8, 24 and 36 of Article III of such Rules and with Section 25 of such
Rules as that Section applies to a non-member broker or dealer in a foreign
county. Except for sales for the accounts of Underwriters designated by a
purchaser, aggregate sales of Securities to institutions and for the accounts
of Underwriters designated by a purchaser, aggregate sales of Securities to
institutions and other retail purchasers will be made for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
Underwriting Commitments. Sales of Securities to Selected Dealers will be made
for the accounts of the several Underwriters in such proportions as you
determine.
We authorize you in your discretion, after the Securities are released
for sale to the public, to change the public offering price of the Securities,
the concessions and reallowances in connection with sales to Selected Dealers
and other terms of sale hereunder and under the agreements with Selected
Dealers.
2
<PAGE>
Sales of the Securities between Underwriters may be made with your
prior consent, or as you deem advisable for Blue Sky purposes.
At or prior to the time when the Securities are released for sale, you
will advise us of the amounts so sold or reserved for sale for our account. We
will retain for direct sale any Securities purchased by us and not sold or
reserved for sale for our account. With your consent, we may obtain release
from you for direct sale of Securities reserved for sale to Selected Dealers
but not sold and paid for, in which event the amount reserved for our account
for sale to Selected Dealers will be correspondingly reduced.
After advice from you that the Securities are released for sale to the
public, we will offer for sale to the public in conformity with the terms of
offering set forth in the Prospectus such of our Securities as you advise us
are not sold or reserved for sale for our account.
We will advise you from time to time, at your request, of the number of
Securities retained by us remaining unsold. You may at any time (a) reserve any
of such Securities for sale by you for our account or (b) purchase any of such
Securities which, in your opinion, is needed to enable you to make deliveries
for the accounts of the several Underwriters pursuant to this Agreement. Such
purchases will be made at the public offering price or, at your option, at such
price less any part of the Selected Dealers' concession.
In respect of any Securities sold directly by us and thereafter
purchased by you at or below the public offering price prior to the termination
of this Agreement (or such longer period as may be necessary to cover any short
position with respect to the offering), you may charge our account with an
amount equal to the Selected Dealers' concession with respect thereto and
credit such amount against the cost thereof, or you may require us to purchase
such Securities at a price equal to the total cost thereof, including any
commissions and transfer taxes on redelivery.
3. Stabilization and Trading in Securities. We authorize you, at any
time prior to Termination (as defined in Section 5 hereof), in your discretion
to make purchase and sales of Securities in the open market or otherwise,
either for long or short accounts, and on such terms and at such prices as you
may determine; provided, however, that in no time will the aggregate of our net
commitments resulting from such purchases and sales whether for long or short
account, exceed 15% of our Underwriting Commitment. All such purchases and
sales will be made for the respective accounts of several Underwriters as
nearly as practicable in proportion to their respective Underwriting
Commitments. We agree to take up at cost on demand any of the Securities so
purchased for our account and to deliver on demand any of the Securities so
sold for our account. Without limiting the generality of the foregoing, you may
buy or take over for the accounts of the several Underwriters, all in the
proportion and within the limits set forth above, at the price at which
reserved, any Securities of any Underwriter reserved for sale by you, but not
purchased and paid for.
3
<PAGE>
Except as permitted by you, we will not bid for, purchase, attempt to
induce others to purchase, or sell, directly or indirectly, any Securities
otherwise than by (a) the purchase and sale of Securities as provided in the
Underwriting Agreement, this Agreement or the agreements with Selected Dealers,
(b) the purchase from or sale to other Underwriters or Selected Dealers of
Securities at the public offering price or at such price less any part of the
Selected Dealers' concession and (c) as brokers pursuant to unsolicited orders.
We confirm that we have at all times complied and agree that we will at all
times comply with the provisions of Rule 10b-6 of the Commission under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), applicable to
this offering.
We understand that, in the event that you effect stabilization pursuant
to this Section, you will notify us promptly of the date and time at which the
first stabilizing purchase is effected and the date and time when stabilizing
is terminated. We agree (and such agreement will survive Termination) to comply
with all requirements of the 1934 Act and the rules and regulations thereunder
applicable to us with respect to notifications and keeping of records of
stabilizing transactions.
4. Delivery and Payment. At your request, we will furnish you with
funds in an amount equal to the public offering price, less the Selected
Dealers' concession, of either our Securities or our unreserved Securities, as
you may direct, and we authorize you to make payment therewith pursuant to the
provisions of the Underwriting Agreement. Such payment will be credited to our
account. You may in your discretion make such payment on our behalf with your
own funds, in which event we will reimburse you on request.
You will promptly deliver to us any Securities purchased by us and not
sold or reserved for sale by you. You may in your discretion deliver such
Securities to us through the facilities of The Depository Trust Company if
transactions in the Securities may be settled through its facilities and if we
are a member or, if we are not a member, through our ordinary correspondent who
is a member, unless we promptly give you written instructions otherwise. All
other Securities which you then hold for our account will be delivered to us
upon Termination, or prior thereto in your discretion, and may at any time be
delivered to us for carrying purposes only, subject to redelivery upon demand.
If, upon Termination, the amount of Securities reserved by you which remains
unsold does not exceed ten percent of the aggregate Underwriting Commitments of
all of the Underwriters, you may, in your discretion, sell such Securities at
such prices as you may determine.
We authorize you, in connection with the purchase, distribution and
resale of the Securities, to advance your own funds for our account (in which
event we will reimburse you on request), charging current interest rates, or to
arrange loans for our account and execute on our behalf any note in connection
therewith, and to hold or pledge all or any part of our Securities as security
therefor. Any lender is hereby authorized to accept your instructions with
respect thereto.
4
<PAGE>
You will promptly remit to us or credit to our account (a) the proceeds
of any loan made on our behalf and (b) upon payment to you for any unreserved
Securities sold for our account, an amount equal to the sale price of such
Securities received by you, less transfer taxes, if any, and expenses, and (c)
upon payment to you for any reserved Securities sold for our account, the
purchase price (if any) paid by us for such Securities, and you will debit or
credit, as appropriate, our account with the difference between the sale price
and the purchase price of reserved Securities sold for our account.
5. Termination and Settlement. Termination of this Agreement
("Termination") will occur (a) at the close of business on the forty fifth day
after the date of the Underwriting Agreement, or (b) on such earlier or later
date, not more than 30 days after the date specified in (a), as you may
determine, or (c) on the date of termination of the Underwriting Agreement, if
the same shall be terminated as provided by its terms.
Upon Termination, all authorizations, rights and obligations hereunder
will cease, except (a) the mutual obligation to settle account hereunder, (b)
our obligation to pay any claims referred to in the last paragraph of this
Section, (c) our obligation with respect to purchases which may be made by you
from time to time thereafter to cover any short position with respect to the
offering and (d) the obligations with respect to indemnity and contribution set
forth in Section 7 hereof, all of which will continue until fully discharged,
and except your authority with respect to matters to be determined by you, or
by you and the Company pursuant to the terms of the Underwriting Agreement,
which will survive Termination.
The accounts arising pursuant to this Agreement will be settled and
paid as soon as practicable after Termination. The determination by you of the
amounts to be paid to or by us will be final and conclusive.
We authorize you to charge our account with (a) any transfer taxes on
sales made for our account, (b) our proportionate share (based upon our
Underwriting Commitment) of all expenses (other than transfer taxes) incurred
by you, as Representative of the several Underwriters, in connection with the
negotiations for, purchase of and distribution of the Securities and (c) the
compensation to the Representative referred to in Section 6.
Notwithstanding any settlement upon Termination, we will pay our
proportionate share of an amount asserted against and discharged by the
Underwriters, or any of them, based upon the claim that the Underwriters
constitute an association, unincorporated business or other separate entity, or
based upon or arising out of a claim that this Agreement or the Underwriting
Agreement is invalid or illegal for any reason, including any expense incurred
in defending against such claim, and will pay any transfer taxes which may be
assessed thereafter on account of any sale or transfer of Securities for our
account.
6. Indemnity and Contribution. Each Underwriter, including yourselves,
agrees to indemnity, hold harmless and reimburse each other Underwriter, each
person who controls any
5
<PAGE>
other Underwriter within the meaning of Section 15 of the Act, and any
successor of any other Underwriter, all if and to the extent that each
Underwriter will be obligated in the Underwriting Agreement to indemnify, hold
harmless and reimburse the Company, each of its directors, each of its officers
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act.
Each Underwriter (including yourselves) will pay upon request, as
contribution, its proportionate share, based upon its Underwriting Commitment,
of any losses, claims, damages or liabilities, joint or several, paid or
incurred by any Underwriter to any person other than an Underwriter arising out
of or based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus or any
related preliminary prospectus or any other selling or advertising material
approved by you for use by the Underwriters in connection with the sale of the
Securities, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading (other than 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 an Underwriter
specifically for use therein); and will pay such proportionate share of any
legal or other expenses reasonably incurred by you or with your consent in
connection with investigating or defending any such loss, claim damage or
liability, or any action in respect thereof. In determining the amount of any
Underwriter's obligation under this paragraph, appropriate adjustment may be
made by you to reflect any amounts received by any one or more Underwriters in
respect of such claim from the Company, pursuant to the Underwriting Agreement
or otherwise. There will be credited against any amount paid or payable by us
pursuant to this paragraph any loss, damage, liability or expense which is
incurred by us as a result of any such claim asserted against us, and if such
loss, claim, damage, liability or expense is incurred by us subsequent to any
payment by us pursuant to this paragraph, appropriate provision will be made to
effect such credit, by refund or otherwise. If any such claim is asserted, you
may take such action in connection therewith as you deem necessary or
desirable, including retention of counsel for the underwriters, and in your
discretion separate counsel for any particular Underwriter or group of
Underwriters, and the fees and disbursements of any counsel so retained by you,
including fees and disbursements for a successful defense, will be included in
the amounts payable pursuant to this paragraph. In determining amounts payable
pursuant to this paragraph, any loss, claim, damage, liability or expense
incurred by any person controlling any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the 1934 Act which has been incurred by
reason of such control relationship will be deemed to have been incurred by
such Underwriter. Any Underwriter may elect to retain at its own expense its
own counsel. You may settle or consent to the settlement of any such claim, on
advice of counsel retained by you, with the approval of a majority in interest
of the Underwriters. Whenever you receive notice of the assertion of any claim
to which the provisions of this paragraph would be applicable, you will give
prompt notice thereof to each Underwriter. You will also furnish each
Underwriter with periodic reports, at such times as you deem appropriate, as to
the status of such claim and the action taken by you in connection therewith.
If any Underwriter or Underwriters default in their obligations to make any
payments under this paragraph, each non-defaulting Underwriter will be
obligated to pay its proportionate
6
<PAGE>
share of all defaulted payments, based upon such Underwriter's Underwriting
Commitment as related to the Underwriting Commitments of all non-defaulting
Underwriters.
7. Position of Representative. In taking any action under this
Agreement, you will act only as agent to the Underwriters and will be under no
liability to us except for lack of good faith, for obligations expressly
assumed by you in this Agreement and for any liability imposed by the Act.
8. Miscellaneous. If the Underwriting Agreement provides that the
obligations of the Underwriters thereunder are subject to the condition that
the Registration Statement, as defined therein, shall have become effective not
later than a specified time on a specified date following the date of the of
the of Underwriting Agreement, you are hereby authorized, in your discretion,
to extend such date to not later than the same specified time on the second
full business day following such specified date, and, with the consent of
Underwriters, including yourselves, who have agreed to purchase in the
aggregate at least a majority of the Firm Securities, to extend such date to
any subsequent date and to execute on our behalf any supplementary agreement
that may be necessary for such purpose.
With respect to the Underwriting Agreement, you are authorized in your
discretion (a) to postpone the Closing Date, or any other date specified
therein and (b) to exercise any right of cancellation or termination.
Default by any of the other Underwriters with respect to the
Underwriting Agreement will release us from any of our obligations thereunder
and hereunder only if the Underwriting Agreement is thereupon terminated in
accordance with its terms. If one or more Underwriters default under the
Underwriting Agreement, you may arrange for the purchase by others, including
non-defaulting Underwriters, of Securities not taken up by the defaulting
Underwriter or Underwriters.
Nothing herein contained will constitute the Underwriters a
partnership, association or separate entity, and the obligations of ourselves
and of each of the other Underwriters are several and not joint. If for Federal
income tax purposes the several Underwriters should be deemed to constitute a
partnership, then each Underwriter elects to be excluded from the application
of Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986,
as amended. You, as Representative of the several Underwriters, are authorized,
in your discretion, to execute on behalf of the Underwriters such evidence of
such election as may be required by the Internal Revenue Service.
We authorize you to file with any governmental agency any reports
required to be field by you in connection with the transactions contemplated by
this Agreement or the Underwriting Agreement, and we will furnish any
information in our possession needed for such reports. You do not assume any
responsibility or obligation as to our right to sell the Stock in any
jurisdiction, notwithstanding any information you may furnish in that
connection.
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<PAGE>
We will not advertise over our name until after the first public
advertisement made by you and then only at our own expense and risk. We
authorize you to exercise complete discretion with regard to the first public
advertisement.
You will not be under any duty to account for any interest on our funds
at any time in your hands.
We hereby confirm that we are willing to accept the responsibilities
under the Act of an Underwriter named in the Registration Statement. We agree
that we will deliver all preliminary and final prospectuses required for
compliance with the provisions of Rule 15c2-8 under the 1934 Act. We agree to
purchase our Securities, set forth on Schedule A, on a "firm committment basis"
and that we will meet all net capital requirements to do so.
Any notice from you to us will be deemed to have been duly given if
mailed, telexed or sent by facsimile or other written communication to us at
the address set forth on the signature page hereof. Any notice to you will be
deemed to have been duly given if mailed, telexed or sent by facsimile or other
written communication to you at One Battery Park Plaza, New York, New York
10005 Attention: Mr. Judah Wernick, President, or at such other address as you
shall specify.
You represent that you are a member in good standing of the NASD and we
represent that we are actually engaged in the investment banking or securities
business and are a member in good standing of the NASD or a foreign dealer not
eligible for membership in the NASD and we agree that, if the former, we will
comply with the provisions of Section 24 of the Rules, and, if the latter, that
(i) in making sales of the Securities outside the United States, we will comply
with the provisions of Sections 8, 24 and 36 of such rules, with Section 25 of
such Rules as that Section applies to a non-member broker or dealer in a
foreign country and with the requirements of the NASD's Interpretation with
Respect to Free-Riding and Withholding, and (ii) we will not offer or sell any
of the Securities in the United States except through you.
The Agreement will be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of conflict of
law.
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<PAGE>
The Agreement is being executed by us and delivered to you in
duplicate. Please indicate your receipt of identical agreements from each of
the other Underwriters by signing and returning to us one counterpart of this
Agreement whereupon it will constitute a binding contract between us.
Very truly yours,
[Name of Underwriter]
By __________________________
Name:
Title:
Address:
Confirmed as of the day and year first above written
PATTERSON TRAVIS, INC.
Representative of the Underwriters
By: ______________________
Name:
Title:
9
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Schedule A
Name Common Stock Warrants
---- ------------ --------
Patterson Travis, Inc. 1,400,000 1,400,000
--------------- ----------
Total 1,400,000 1,400,000
10
<PAGE>
Option to Purchase
140,000 Shares of Common Stock
and
140,000 Warrants
AMPLIDYNE, INC.
PURCHASE OPTION
Dated: __, 1996
THIS CERTIFIES that Patterson Travis, Inc., One Battery Park Plaza, New
York, NY 10004 (hereinafter sometimes referred to as the "Holder"), is entitled
to purchase from AMPLIDYNE,INC. (hereinafter referred to as the "Company"), at
the prices and during the periods as hereinafter specified, up to 140,000
shares of Common Stock, par value $.0001 per share ("Common Stock"), and
140,000 Class A Redeemable Common Stock Purchase Warrants ("Warrants"). Each
Warrant entitles the registered holder thereof to purchase one (1) share of
Common Stock at an exercise price of $6.00 per share. The Warrants
(hereinafter, the "Warrants") are exercisable for a four year period,
commencing ________ __, 1997 (one (1) year from the Effective Date).
Hereinafter, the shares of Common Stock and Warrants shall be referred to as an
"Option Securities" or "Securities."
The Securities have been registered under a Registration Statement on
Form SB-2 (File No. 333-11015) declared effective by the Securities and
Exchange Commission on ________ __, 1996 (the "Registration Statement"). This
Option (the "Option") to purchase 140,000 shares of Common Stock and 140,000
Warrants was originally issued pursuant to an underwriting agreement between
the Company and Patterson Travis, Inc. as underwriter (the "Underwriter"), in
connection with a public offering of 1,400,000 shares of Common Stock and
1,400,000 Warrants (collectively, the "Public Securities") through the
Underwriter, in consideration of $140.00 received for the Option.
Except as specifically otherwise provided herein, the Common
<PAGE>
Stock and the Warrants issued pursuant to this Option shall bear the same terms
and conditions as described under the caption "Description of Securities" in
the Registration Statement, and the Warrants shall be governed by the terms of
the Warrant Agreement dated as of ________ __, 1996, executed in connection
with such public offering (the "Warrant Agreement"), except that the holder
shall have registration rights under the Securities Act of 1933, as amended
(the "Act"), for the Option, the Common Stock and the Warrants included in the
Option, and the shares of Common Stock underlying the Warrants, as more fully
described in paragraph 6 of this Option. In the event of any reduction of the
exercise price of the Warrants included in the Public Securities, the same
changes to the Warrants included in the Option and the components thereof shall
be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this Option,
and during the periods as follows:
(a) Between ________ ___, 1997 (one (1) year from the
Effectiveate) and ________ __, 2001, inclusive, the Holder shall have the
option to purchase Common Stock and Warrants hereunder at prices of $7.50 and
$.15, respectively (subject to adjustment pursuant to paragraph 8 hereof) (the
"Exercise Price").
(b) After ________ __, 2001, the Holder shall have no right to
purchase any Option Securities hereunder.
2. The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of the Company); (ii) payment to
the Company of the Exercise Price then in effect for the number of Option
Securities specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any; and (iii) delivery to the Company of a
duly executed agreement signed by the person(s) designated in the purchase form
to the effect that such person(s) agree(s) to be bound by the provisions of
paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7 hereof. This
Option shall be deemed to have been exercised, in whole or in part to the
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<PAGE>
extent specified, immediately prior to the close of business on the date this
Option is surrendered and payment is made in accordance with the foregoing
provisions of this paragraph 2, and the person or persons in whose name or
names the certificates for shares of Common Stock and Warrants shall be
issuable upon such exercise shall become the holder or holders of record of
such Common Stock and Warrants at that time and date. The Common Stock and
Warrants and the certificates for the Common Stock and Warrants so purchased
shall be delivered to the Holder within a reasonable time, not exceeding ten
(10) days, after the rights represented by this Option shall have been so
exercised.
3. This Option shall not be transferred, sold, assigned, or
hypothecated for a period of one (1) year from the Effective Date, except that
it may be transferred to successors of the Holder, and may be assigned in whole
or in part to any person who is an officer of the Holder or selling group
member of the offering during such period. Any transfer after one (1) year must
be accompanied with an immediate exercise of the Option. Any such assignment
shall be effected by the Holder (i) executing the form of assignment at the end
hereof and (ii) surrendering this Option for cancellation at the office or
agency of the Company referred to in paragraph 2 hereof, accompanied by a
certificate (signed by an officer of the Holder if the Holder is a
corporation), stating that each transferee is a permitted transferee under this
paragraph 3 hereof; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Option or Options of like
tenor and representing in the aggregate rights to purchase the same number of
Option Securities as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Option Securities purchased hereunder and
the Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable. The Company
further covenants and agrees that during the periods within which this Option
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number
of shares of Common Stock for issuance upon exercise of the Warrants included
in the Option Securities.
3
<PAGE>
5. This Option shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the
Company shall advise the Holder or its transferee, whether the Holder holds the
Option or has exercised the Option and holds Option Securities or any of the
securities underlying the Option Securities, by written notice at least 30 days
prior to the filing of any post-effective amendment to the Registration
Statement or of any new registration statement or post-effective amendment
thereto under the Act covering any securities of the Company, for its own
account or for the account of others (other than a registration statement on
Form S-4 or S-8 or any successor forms thereto), and will for a period of five
years from the effective date of the Registration Statement, upon the request
of the Holder, include in any such post-effective amendment or registration
statement, such information as may be required to permit a public offering of
the Option, all or any of the Common Stock, or Warrants included in the
Securities or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates provided that the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or execute a general
consent to service of process in any jurisdiction in any action and do any and
all other acts and things which may be reasonably necessary or desirable to
enable such Holders to consummate the public sale or other disposition of the
Registrable Securities, and furnish indemnification in the manner provided in
paragraph 7 hereof. The Holder shall furnish information and indemnification as
set forth in paragraph 7 except that the maximum amount which may be recovered
from the Holder shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Company shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the holders of Registrable Securities requested
to be included in the registration to include such securities in such
underwritten offering on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding the foregoing, if
the managing underwriter or
4
<PAGE>
underwriters of such offering advises the holders of Registrable Securities
that the total amount of securities which they intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then the amount of securities to be offered for the accounts of
holders of Registrable Securities shall be eliminated, reduced, or limited to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount, if any, recommended by such managing underwriter
or underwriters (any such reduction or limitation in the total amount of
Registrable Securities to be included in such offering to be borne by the
holders of Registrable Securities proposed to be included therein pro rata).
The Holder will pay its own legal fees and expenses and any underwriting
discounts and commissions on the securities sold by such Holder and shall not
be responsible for any other expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to
the Company at any time during the period set forth in paragraph l(a) hereof to
the effect that such holder desires to register under the Act this Option or
any of the underlying securities contained in the Option Securities underlying
the Option under such circumstances that a public distribution (within the
meaning of the Act) of any such securities will be involved then the Company
will promptly, but no later than 60 days after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, to the end that the Option and/or
any of the Securities underlying the Option Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use
its best efforts to cause such registration to become and remain effective for
a period of 120 days (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided that such holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing. The 50% holder (which for
purposes hereof shall mean any direct or indirect transferee of such holder)
may, at its option, request the filing of a post-effective amendment to the
current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only two occasions during the
term of this Option. The Holder may at its option request the registration of
the Option and/or any of the securities underlying the Option in a registration
statement made by the Company as contemplated by
5
<PAGE>
Section 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Securities issuable upon exercise of the Option and
even though the Holder has not given notice of exercise of the Option. The 50%
holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the Option
or separately as to the Common Stock and/or Warrants included in the Option
and/or the Common Stock issuable upon the exercise of the Warrants, and such
registration rights may be exercised by the 50% holder prior to or subsequent
to the exercise of the Option. Within ten business days after receiving any
such notice pursuant to this subsection (b) of paragraph 6, the Company shall
give notice to the other holders of the Options, advising that the Company is
proceeding with such post-effective amendment or registration statement and
offering to include therein the securities underlying the Options of the other
holders. Each holder electing to include its Registrable Securities in any such
offering shall provide written notice to the Company within twenty (20) days
after receipt of notice from the Company. The failure to provide such notice to
the Company shall be deemed conclusive evidence of such holder's election not
to include its Registrable Securities in such offering. Each holder electing to
include its Registrable Securities shall furnish the Company with such
appropriate information (relating to the intentions of such holders) in
connection therewith as the Company shall reasonably request in writing. All
costs and expenses of only one such post-effective amendment or new
registration statement shall be borne by the Company, except that the holders
shall bear the fees of their own counsel and any underwriting discounts or
commissions applicable to any of the securities sold by them.
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required to be
prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a
registration statement would have a material adverse effect on the consummation
of such offering or (iv) the Company is subject to an underwriter's lock-up as
a result of an underwritten
6
<PAGE>
public offering and such underwriter has refused in writing, the Company's
request to waive such lock-up. In the event of such postponement, the Company
shall be required to file the registration statement pursuant to this Section
6(b), within 60 days of the consummation of the event requiring such
postponement.
The Company will use its best efforts to maintain such
registration statement or post-effective amendment current under the Act for a
period of at least six months (and for up to an additional three months if
requested by the Holder) from the effective date thereof. The Company shall
supply prospectuses, and such other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities, use its best efforts to register and qualify any of the
Registrable Securities for sale in such states as such holder designates,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service
of process in any jurisdiction in any action and furnish indemnification in the
manner provided in paragraph 7 hereof.
(c) The term "50% holder" as used in this paragraph 6 shall mean
the holder of at least 50% of the Common Stock and the Warrants underlying the
Option (considered in the aggregate) and shall include any owner or combination
of owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock held by such owner or owners
as well as the number of shares then issuable upon exercise of the Warrants.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Option or any shares or warrants issued or issuable upon the
exercise of any Options, is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the securities covered
by such registration statement, amendment, or supplement (such holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages, or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such
7
<PAGE>
underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in any such registration statement or any
preliminary prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse the Distributing
Holder and each such controlling person and underwriter for any legal or other
expenses reasonably incurred by the Distributing Holder or such controlling
person or underwriter in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder or any other Distributing
Holder, for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each
person, if any, who controls the Company (within the meaning of the Act)
against any losses, claims, damages, or liabilities, joint and several, to
which the Company or any such director, officer, or controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or 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 statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus, or said
amendment or supplement in reliance upon and in conformity with written
information furnished by such
8
<PAGE>
Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer, or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Paragraph 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall
be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the
9
<PAGE>
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Notwithstanding anything to the contrary contained in the Warrant Agreement, in
the event an adjustment to the Exercise Price is effected pursuant to this
Subsection (a) (and a corresponding adjustment to the number of Option
Securities is made pursuant to Subsection (d) below), the exercise price of the
Warrants shall be adjusted so that it shall equal the price determined by
multiplying the exercise price of the Warrants by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after giving effect to such action and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
In such event, there shall be no adjustment to the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the Common
Stock (as defined in Subsection (e) below) on the record date mentioned below,
the Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the number of shares then comprising an Option
Securities by the product of the Exercise Price in effect immediately prior to
the date of such issuance multiplied by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock outstanding on the
record date mentioned below and the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of Common
Stock so offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price per share of
the Common Stock, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date and the number of
additional shares of Common Stock offered for subscription or purchase (or into
which the convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued and
shall become effective
10
<PAGE>
immediately after the record date for the determination of shareholders
entitled to receive such rights or warrants; and to the extent that shares of
Common Stock are not delivered (or securities convertible into Common Stock are
not delivered) after the expiration of such rights or warrants the Exercise
Price shall be readjusted to the Exercise Price which would then be in effect
had the adjustments made upon the issuance of such rights or warrants been made
upon the basis of delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions and-dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the number of shares
then comprising an Option Securities by the product of the Exercise Price in
effect immediately prior thereto multiplied by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as defined in
Subsection (e) below), less the fair market value (as determined by the
Company's Board of Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and the denominator of which shall
be the total number of shares of Common Stock outstanding multiplied by such
current market price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such distribution.
(d) Whenever the Exercise Price payable upon exercise of this
Option is adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Option Securities purchasable upon exercise of this Option shall simultaneously
be adjusted by multiplying the number of Option Securities initially issuable
upon exercise of this Option by the Exercise Price in effect on the date hereof
and dividing the product so obtained by the Exercise Price, as adjusted.
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<PAGE>
(e) For the purpose of any computation under Subsections (b) or
(c) above, the current market price per share of Common Stock at any date shall
be deemed to be the average of the daily closing prices for 20 consecutive
business days before such date. The closing price for each day shall be the
last sale price regular way or, in case no such reported sale takes place on
such day, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least fifteen cents
($0.15) in such price; provided, however, that any adjustments which by reason
of this Subsection (i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any Federal
Income tax liability to the holders of Common Stock or securities convertible
into Common Stock (including Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly, but no later than 10 days after any request for
such an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Option Securities issuable upon exercise
of this Option and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holder, at the address set
forth herein, and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain
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<PAGE>
a firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to make
any computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder thereafter shall become
entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Option shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (a) to (g), inclusive above.
9. This Agreement shall be governed by and in accordance with the laws
of the State of New York.
IN WITNESS WHEREOF, Amplidyne, Inc., has caused this Option to be
signed by its duly authorized officers under its corporate seal, and this
Option to be dated ________ __, 1996.
AMPLIDYNE, INC.
By: ______________________________
Devendar S. Bains
President
(Corporate Seal)
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<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
____ Shares of Common Stock, $.0001 per value per share, of Amplidyne, Inc.
and _____ Warrants and herewith makes payment of $______________ therefor, and
requests that the Warrants and certificates for shares of Common Stock be
issued in the name(s) of, and delivered to _________________________ whose
address(es) is (are) _____________________________________.
Dated:
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right to purchase
Securities, consisting of Common Stock and Warrants of Amplidyne, Inc., in the
numbers set forth below represented by the foregoing Option to the extent of
_____ shares of Common Stock and ____ Warrants, and appoints
_________________________________ attorney to transfer such rights on the books
of Amplidyne, Inc., with full power of substitution in the premises.
Dated:
By: ______________________________
Address:
______________________________
______________________________
______________________________
In the presence of:
<PAGE>
WARRANT AGREEMENT
AGREEMENT, dated as of this _____day of ________, 1996, by and between
AMPLIDYNE, INC., a Delaware corporation ("Company"), and American Stock
Transfer & Trust Company, as Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, in connection with a public offering of up to 1,610,000
shares of Common Stock, par value $.0001 per share, and 1,610,000 Class A
Redeemable Common Stock Purchase Warrants (the "Warrants") pursuant to an
underwriting agreement (the "Underwriting Agreement") dated ________ __, 1996
between the Company and Patterson Travis, Inc. ("Patterson"), and the issuance
to Patterson or its designees of a Purchase Option to purchase 140,000
additional shares of Common Stock and 140,000 Warrants (the "Purchase Option"),
the Company will issue up to 1,750,000 Warrants;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties
hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
<PAGE>
(a) "Common Stock" shall mean the common stock of the Company
of which at the date hereof consists of 25,000,000 authorized shares, par value
$.0001 per share, and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect to the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution, or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include (1) only shares of such
class designated in the Company's Certificate of Incorporation as Common Stock
on the date of the original issue of the Warrants or (ii), in the case of any
reclassification, change, consolidation, merger, sale, or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities, or
property provided for in such section or (iii), in the case of any
reclassification or change in the outstanding shares of Common Stock issuable
upon exercise of the Warrants as a result of a subdivision or combination or
consisting of a change in par value, or from par value to no par value, or from
no par value to par value, such shares of Common Stock as so reclassified or
changed.
(b) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal business
shall be administered, which office is located at the date hereof at 40 Wall
Street, New York, New York 10005.
(c) "Exercise Date" shall mean, as to any Warrant, the date
on which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean ________ __,
1997 (one (1) year from the Effective Date).
(e) "Purchase Price" shall mean the purchase price per share
to be paid upon exercise of each Warrant in accordance with the terms hereof,
which price shall be $6.00 per share, subject to
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<PAGE>
adjustment from time to time pursuant to the provisions of Section 9 hereof, and
subject to the Company's right, in its sole discretion, to reduce the Purchase
Price upon notice to all warrantholders.
(f) "Redemption Price" shall mean the price at which the
Company may, at its option, redeem the Warrants, in accordance with the terms
hereof, which price shall be $0.01 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as
of any particular date, the person in whose name the certificate representing
the Warrant shall be registered on that date on the books maintained by the
Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, as the Company's transfer agent, or its authorized successor, as
such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on ________ __, 2001 or the Redemption Date as defined in Section 8,
whichever is earlier; provided that if such date shall in the State of New York
be a holiday or a day on which banks are authorized or required to close, then
5:00 P.M. (New York time) on the next following day which in the State of New
York is not a holiday or a day on which banks are authorized or required to
close. Upon notice to all warrantholders the Company shall have the right to
extend the warrant expiration date.
2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant initially shall entitle the Registered Holder
of the Warrant representing such Warrant to purchase one share of Common Stock
upon the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
shall be executed by the Company and delivered to the Warrant Agent. Upon
written order of the Company signed by its President or Chairman or a Vice
President and by its Secretary or an Assistant Secretary, the Warrant
Certificates shall be countersigned, issued, and delivered by the Warrant
Agent.
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<PAGE>
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 1,750,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise
of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date,
upon the exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed, or
mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant
to the Purchase Option; and (vi) those issued at the option of the Company, in
such form as may be approved by the its Board of Directors, to reflect any
adjustment or change in the Purchase Price, the number of shares of Common
Stock purchasable upon exercise of the Warrants or the Redemption Price
therefor made pursuant to Section 9 hereof.
(e) Pursuant to the terms of the Purchase Option, Patterson
may purchase up to 140,000 shares of Common Stock and 140,000 Warrants. The
Purchase Option shall not be transferred, sold, assigned or hypothecated for a
period of one (1) year from the Effective Date, except that it may be
transferred to persons who are officers of Patterson or selling group members
in the offering.
3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers, or other marks of
identification or designation and such legends, summaries, or endorsements
printed, lithographed, or engraved thereon as the Company may deem appropriate
and as are not
4
<PAGE>
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Warrants may be
listed, or to conform to usage or to the requirements of Section 2(b). The
Warrant Certificates shall be dated the date of issuance thereof (whether upon
initial issuance, transfer, exchange, or in lieu of mutilated, lost, stolen, or
destroyed Warrant Certificates) and issued in registered form. Warrant
Certificates shall be numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President, or any Vice President and by
its Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be an officer of the Company or to hold such
office. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder without further
action by the Company, except as otherwise provided by Section 4 hereof.
4. Exercise. (a) Each Class A Warrant may be exercised by the
Registered Holder thereof at any time on or after the Initial Exercise Date,
but not after the Warrant Expiration Date, upon the terms and subject to the
conditions set forth herein and in the applicable Warrant Certificate. A
Warrant shall be deemed to have been exercised immediately prior to the close
of business on the Exercise Date and the person entitled to receive the
securities deliverable upon such exercise shall be treated for all purposes as
the holder of those securities upon the exercise of the Warrant as of the close
of business on the Exercise Date. As soon as practicable on or after the
Exercise Date the Warrant Agent shall
5
<PAGE>
deposit the proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. Promptly following, and
in any event within five days after the date of such notice from the Warrant
Agent, the Warrant Agent, on behalf of the Company, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon such
exercise (plus a certificate for any remaining unexercised Warrants of the
Registered Holder), unless prior to the date of issuance of such certificates
the Company shall instruct the Warrant Agent to refrain from causing such
issuance of certificates pending clearance of checks received in payment of the
Purchase Price pursuant to such Warrants. Upon the exercise of any Warrant and
clearance of the funds received, the Warrant Agent shall promptly remit the
payment received for the Warrant (the "Warrant Proceeds") to the Company or as
the Company may direct in writing.
(b) If, subsequent to ____, 1997, in respect of the exercise
of any Warrant, (i) the market price of the Company's Common Stock is greater
than the then Purchase Price of the Warrants, (ii) the exercise of the Warrant
was solicited by a member of the National Association of Securities Dealers,
Inc. ("NASD") and such member was designated in writing by the holder of such
Warrant as having solicited such Warrant, (iii) the Warrant was not held in a
discretionary account, (iv) disclosure of compensation arrangements was made
both at the time of the original offering and at the time of exercise and (v)
the solicitation of the exercise of the Warrant was not in violation of Rule
10b-6 (as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities Exchange Act of 1934, then the
Warrant Agent, simultaneously with the distribution of proceeds to the Company
received upon exercise of the Warrant(s) so exercised shall, on behalf of the
Company, pay from the proceeds received upon exercise of the Warrant(s), a fee
of 8% of the Purchase Price to Patterson (of which 1% may be reallowed to the
dealer who solicited the exercise, which may also be Patterson). Within five
days after exercise, the Warrant Agent shall send Patterson a copy of the
reverse side of each Warrant exercised. Patterson shall reimburse the Warrant
Agent, upon request, for its reasonable expenses relating to compliance with
this Section. In addition, Patterson and the Company may at any time during
business hours, examine the records of the Warrant Agent, including its
6
<PAGE>
ledger of original Warrant Certificates returned to the Warrant Agent upon
exercise of Warrants. The provisions of this paragraph may not be modified,
amended or deleted without the prior written consent of Patterson.
5. Reservation of Shares; Listing; Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose
of issue upon exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrants shall, at the time of delivery, be duly and validly
issued, fully paid, nonassessable, and free from all taxes, liens, and charges
with respect to the issue thereof, (other than those which the Company shall
promptly pay or discharge) and that upon issuance such shares shall be listed
on each national securities exchange or eligible for inclusion in each
automated quotation system, if any, on which the other shares of outstanding
Common Stock of the Company are then listed or eligible for inclusion.
(b) The Company covenants that if any securities to be
reserved for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal securities
law before such securities may be validly issued or delivered upon such
exercise, then the Company will, to the extent the Purchase Price is less than
the Market Price (as hereinafter defined), in good faith and as expeditiously
as reasonably possible, endeavor to secure such registration or approval and
will use its reasonable efforts to obtain appropriate approvals or
registrations under state "blue sky" securities laws. With respect to any such
securities, however, Warrants may not be exercised by, or shares of Common
Stock issued to, any Registered Holder in any state in which such exercise
would be unlawful.
(c) The Company shall pay all documentary, stamp, or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance, or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock are to
be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
7
<PAGE>
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock issuable upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Warrants.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office,
and upon satisfaction of the terms and provisions hereof, the Company shall
execute and the Warrant Agent shall countersign, issue, and deliver in exchange
therefor the Warrant Certificate or Certificates which the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with its
regular practice. Upon due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and the Warrant
Agent shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or
his attorney-in-fact duly authorized in writing.
8
<PAGE>
(d) A service charge may be imposed by the Warrant Agent for
any exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of this Agreement or resignation as Warrant Agent, or disposed of
or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon 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. The Warrants which are being publicly offered with
shares of Common Stock pursuant to the Underwriting Agreement will be
immediately detachable from the Common Stock and transferable separately
therefrom.
7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction, or mutilation of any Warrant Certificate and (in case of loss,
theft, or destruction) of indemnity satisfactory to them, and (in the case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or
Warrant Agent that the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with
such other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
9
<PAGE>
8. Redemption.
(a) Subject to the provisions of paragraph 2(e) hereof, on
not less than thirty (30) days notice given at any time after the Initial
Warrant Exercise Date,the Warrants may be redeemed, at the option of the
Company, at a redemption price of $0.01 per Warrant, provided the Market Price
of the Common Stock receivable upon exercise of the Warrant shall equal or
exceed $9.00 per share (the "Target Price"), subject to adjustment as set forth
in Section 8(f) below. Market Price for the purpose of this Section 8 shall
mean (i) the average closing bid price for any twenty (20) consecutive trading
days within a period of thirty (30) consecutive trading days ending within five
(5) days prior to the date of the notice of redemption, which notice shall be
mailed no later than five days thereafter, of the Common Stock as reported by
the National Association of Securities Dealers, Inc. Automatic Quotation System
or (ii) the last reported sale price, for twenty (20) consecutive business
days, ending within five (5) days of the date of the notice of redemption, which
notice shall be mailed no later than five days thereafter, on the primary
exchange on which the Common Stock is traded, if the Common Stock is traded on
a national securities exchange.
(b) If the conditions set forth in Section 8(a) are met, and
the Company desires to exercise its right to redeem the Warrants, it shall mail
a notice of redemption to each of the Registered Holders of the Warrants to be
redeemed, first class, postage prepaid, not later than the thirtieth day before
the date fixed for redemption, at their last address as shall appear on the
records maintained pursuant to Section 6(b). Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price paid, and (iv) that
the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time)
on the business day immediately preceding the date fixed for redemption. The
date fixed for the redemption of the Warrant shall be the Redemption Date. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the
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<PAGE>
proceedings for such redemption except as to a Registered Holder (a) to whom
notice was not mailed or (b) whose notice was defective. An affidavit of the
Warrant Agent or of the Secretary or an Assistant Secretary of the Company that
notice of redemption has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, Holders of the Warrants shall have no
further rights except to receive, upon surrender of the Warrant, the Redemption
Price.
(e) From and after the Redemption Date specified for, the
Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrant Certificates evidencing Warrants to be
redeemed, deliver or cause to be delivered to or upon the written order of such
Holder a sum in cash equal to the redemption price of each such Warrant. From
and after the Redemption Date and upon the deposit or setting aside by the
Company of a sum sufficient to redeem all the Warrants called for redemption,
such Warrants shall expire and become void and all rights hereunder and under
the Warrant Certificates, except the right to receive payment of the redemption
price, shall cease.
(f) If the shares of the Company's Common Stock are
subdivided or combined into a greater or smaller number of shares of Common
Stock, the Target Price shall be proportionally adjusted by the ratio which the
total number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock to be outstanding
immediately after such event.
9. Adjustment of Exercise Price and Number of Shares of Common Stock
or Warrants.
(a) Subject to the exceptions referred to in Section 9(g)
below, in the event the Company shall, at any time or from time to time after
the date hereof, sell any shares of Common Stock for a consideration per share
less than the Market Price of the Common Stock (as defined in Section 8) on the
date of the sale or issue any shares of Common Stock as a stock dividend to the
holders
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<PAGE>
of Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision,
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
9(f)(G) below) for the issuance of such additional shares would purchase at such
current market price per share of Common Stock, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant
to this Section 9, the total number of shares of Common Stock purchasable upon
the exercise of each Warrant shall (subject to the provisions contained in
Section 9(b) hereof) be such number of shares (calculated to the nearest tenth)
purchasable at the Purchase Price in effect immediately prior to such
adjustment multiplied by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately after
such adjustment.
(b) The Company may elect, upon any adjustment of the
Purchase Price hereunder, to adjust the number of Warrants outstanding, in lieu
of the adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment of
the number of Warrants shall become that number of Warrants (calculated to the
nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Purchase Price in effect immediately prior to
such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment. Upon each adjustment of the
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number of Warrants pursuant to this Section 9, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrant
Certificates on the date of such adjustment Warrant Certificates evidencing,
subject to Section 10 hereof, the number of additional Warrants to which such
Holder shall be entitled as a result of such adjustment or, at the option of the
Company, cause to be distributed to such Holder in substitution and replacement
for the Warrant Certificates held by him prior to the date of adjustment (and
upon surrender thereof, if required by the Company) new Warrant Certificates
evidencing the number of Warrants to which such Holder shall be entitled after
such adjustment.
(c) In case of any reclassification, capital reorganization,
or other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization, or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage, or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization, or other change,
consolidation, merger, sale, or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital reorganization, or other
change, consolidation, merger, sale, or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The Company
shall not effect any such consolidation, merger, or sale unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant Agent, the obligation
to deliver to the holder of each Warrant such shares of stock, securities, or
assets as, in
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accordance with the foregoing provisions, such holders may be entitled to
purchase and the other obligations under this Agreement. The foregoing
provisions shall similarly apply to successive reclassification, capital
reorganizations, and other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales, or conveyances.
(d) Irrespective of any adjustments or changes in the
Purchase Price or the number of shares of Common Stock purchasable upon
exercise of the Warrants, the Warrant Certificates theretofore and thereafter
issued shall, unless the Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(d) hereof, continue to express the Purchase
Price per share, the number of shares purchasable thereunder, and the
Redemption Price therefor as the Purchase Price per share, and the number of
shares purchasable and the Redemption Price therefore were expressed in the
Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to
this Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to Patterson and to each
registered holder of Warrants at his last address as it shall appear on the
registry books of the Warrant Agent. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity thereof
except as to the holder to whom the Company failed to mail such notice, or
except as to the holder whose notice was defective. The affidavit of an officer
of the Warrant Agent or the Secretary or an Assistant Secretary of the Company
that such notice has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
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(f) For purposes of Section 9(a) and 9(b) hereof, the
following provisions (i) to (vii) shall also be applicable:
(i) The number of shares of Common Stock outstanding
at any given time shall include shares of Common Stock owned or held by or for
the account of the Company and the sale or issuance of such treasury shares or
the distribution of any such treasury shares shall not be considered a Change
of Shares for purposes of said sections.
(ii) No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase or decrease of at least
$.10 in such price; provided that any adjustments which by reason of this
subsection (ii) are not required 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(s) so carried forward, shall require an increase
or decrease of at least $.10 in the Purchase Price then in effect hereunder.
(iii) In case of (1) the sale by the Company for
cash of any rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or any securities convertible into or
exchangeable for Common Stock without the payment of any further consideration
other than cash, if any (such convertible or exchangeable securities being
herein called "Convertible Securities"), or (2) the issuance by the Company,
without the receipt by the Company of any consideration therefor, of any rights
or warrants to subscribe for or purchase, or any options for the purchase of,
Common Stock or Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants, or options shall consist of cash, whether or not such rights,
warrants, or options, or the right to convert or exchange such Convertible
Securities, are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such rights, warrants, or options
or upon the conversion or exchange of such Convertible Securities (determined
by dividing (x) the minimum aggregate consideration payable to the Company upon
the exercise of such rights, warrants, or options, plus the consideration
received by the Company for the issuance or sale of such rights, warrants, or
options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional
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<PAGE>
consideration, if any, other than such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights, warrants, or options or
upon the conversion or exchange of such Convertible Securities issuable upon the
exercise of such rights, warrants, or options) is less than the fair market
value of the Common Stock on the date of the issuance or sale of such rights,
warrants, or options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants, or options or upon the
conversion or exchange of such Convertible Securities (as of the date of the
issuance or sale of such rights, warrants, or options) shall be deemed to be
outstanding shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to such price
per share.
(iv) In case of the sale by the Company for cash of
any Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which Common
Stock is issuable upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the total amount of consideration
received by the Company for the sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities) is less than the fair market value
or the Common Stock on the date of the sale of such Convertible Securities,
then the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities (as of the date of the
sale of such Convertible Securities) shall be deemed to be outstanding shares
of Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall be
deemed to have been sold for cash in an amount equal to such price per share.
(v) In case the Company shall modify the rights of
conversion, exchange, or exercise of any of the securities referred to in
subsection (iii) above or any other securities of the Company convertible,
exchangeable, or exercisable for shares of Common Stock, for any reason other
than an event that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is less
than the
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<PAGE>
market price on the date prior to such modification, the Purchase Price to be in
effect after such modification shall be determined by multiplying the Purchase
Price in effect immediately prior to such event by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding multiplied
by the market price on the date prior to the modification plus the number of
shares of Common Stock which the aggregate consideration receivable by the
Company for the securities affected by the modification would purchase at the
market price and of which the denominator shall be the number of shares of
Common Stock outstanding on such date plus the number of shares of Common Stock
to be issued upon conversion, exchange, or exercise of the modified securities
at the modified rate. Such adjustment shall become effective as of the date upon
which such modification shall take effect.
(vi) On the expiration of any such right, warrant,
or option or the termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect hereunder shall
forthwith be readjusted to such Purchase Price as would have obtained (a) had
the adjustments made upon the issuance or sale of such rights, warrants,
options, or Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually delivered (and
the total consideration received therefor) upon the exercise of such rights,
warrants, or options or upon the conversion or exchange of such Convertible
Securities and (b) had adjustments been made on the basis of the Purchase Price
as adjusted under clause (a) for all transactions (which would have affected
such adjusted Purchase Price) made after the issuance or sale of such rights,
warrants, options, or Convertible Securities.
(vii) In case of the sale for cash of any shares of
Common Stock, any Convertible Securities, any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company therefore
shall be deemed to be the gross sales price therefor without deducting
therefrom any expense paid or incurred by the Company or any underwriting
discounts or commissions or concessions paid or allowed by the Company in
connection therewith.
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(g) No adjustment to the Purchase Price of the Warrants or to
the number of shares of Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the sale or exercise of the Warrants,
including without limitation the sale or exercise of any of the Warrants
comprising the Purchase Option; or
(ii) upon the sale of any shares of Common Stock in
the Company's initial public offering, including, without limitation, shares
sold upon the exercise of any over-allotment option granted to the Underwriters
in connection with such offering; or
(iii) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants, or options were
outstanding on the date of the original sale of the Warrants or were thereafter
issued or sold other than issuances of preferred stock in connection with
acquisitions by the Company; or
(iv) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made upon the
issuance or sale of such Convertible Securities and whether or not such
Convertible Securities were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(v) upon the issuance or sale of Common Stock or
Convertible Securities in a private placement unless the issuance or sale price
is less than 85% of the fair market value of the Common Stock on the date of
issuance, in which case the adjustment shall only be for the difference between
85% of the fair market value and the issue or sale price; or
(vi) upon the issuance or sale of Common Stock or
Convertible Securities to shareholders of any corporation which merges into the
Company or from which the Company acquires assets and some or all of the
consideration consists of equity securities of the Company, in proportion to
their stock holdings of such
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<PAGE>
corporation immediately prior to the acquisition but only if no adjustment is
required pursuant to any other provision of this Section 9.
(h) Intentionally Omitted.
(i) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 9, or as to
the amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(j) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant, or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding,
the rights, warrants, or options to which each Registered Holder would have
been entitled if, on the record date used to determine the stockholders
entitled to the rights, warrants, or options being granted by the Company, the
Registered Holder were the holder of record of the number of whole shares of
Common Stock then issuable upon exercise (assuming, for purposes of this
section 9(j), that exercise of warrants is permissible during periods prior to
the Initial Warrant Exercise Date) of his Warrants. Such grant by the Company
to the holders of the Warrants shall be in lieu of any adjustment which
otherwise might be called for pursuant to this Section 9.
10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon any exercise hereof, the Company shall pay to the Holder an amount in cash
equal
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to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(i) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the NASDAQ Quotation System, the current value shall
be the last reported sale price of the Common Stock on such exchange on the
last business day prior to the date of exercise of this Warrant or if no such
sale is made on such day, the average of the closing bid and asked prices for
such day on such exchange; or
(ii) If the Common Stock is not listed or admitted
to unlisted trading privileges, the current value shall be the mean of the last
reported bid and asked prices reported by the National Quotation Bureau, Inc.
on the last business day prior to the date of the exercise of this Warrant; or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the current value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to
no par value, consolidation, merger, or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
Holder shall have exercised such Warrants and been issued shares of Common
Stock in accordance with the provisions hereof.
12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of
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<PAGE>
the Warrants, and any Registered Holder of a Warrant, without consent of the
Warrant Agent or of the holder of any other Warrant, may, in his own behalf and
for his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificate and this Agreement.
13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a warrant that:
(a) The warrants are transferable only on the registry books
of the Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant Agent,
duly endorsed or accompanied by a proper instrument of transfer satisfactory to
the Warrant Agent and the Company in their sole discretion, together with
payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and as
the absolute, true, and lawful owner of the Warrants represented thereby for
all purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice or knowledge to the contrary, except as otherwise expressly
provided in Section 7 hereof.
14. Cancellation of Warrant Certificates. If the Company shall purchase
or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and cancelled by it and retired. The Warrant Agent shall also cancel
Common Stock following exercise of any or all of the Warrants represented
thereby or delivered to it for transfer, splitup, combination, or exchange.
15. Concerning the Warrant Agent. The Warrant Agent acts hereunder as
agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make any representations as to the validity, value, or authorization
of the
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Warrant Certificates or the Warrants represented thereby or of any securities or
other property delivered upon exercise of any Warrant or whether any stock
issued upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided in
this Agreement, or to determine whether any fact exists which may require any
such adjustments, or with respect to the nature or extent of any such
adjustment, when made, or with respect to the method employed in making the
same. It shall not (i) be liable for any recital or statement of facts
contained herein or for any action taken, suffered, or omitted by it in
reliance on any warrant Certificate or other document or instrument believed by
it in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations contained in this
Agreement or in any Warrant Certificate, or (iii) be liable for any act or
omission in connection with this Agreement except for its own negligence or
wilful misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction,
order, or demand of the Company shall be sufficiently evidenced by an
instrument signed by the Chairman of the Board, President, any Vice President,
its Secretary, or Assistant Secretary, (unless other evidence in respect
thereof is herein specifically prescribed). The Warrant Agent shall not be
liable for any action taken, suffered or omitted by it in accordance with such
notice, statement, instruction, request, direction, order, or demand believed
by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; it further agrees to indemnify the Warrant Agent and save
it harmless against any and all losses,
22
<PAGE>
expenses, and liabilities, including judgments, costs, and counsel fees, for
anything done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses, and liabilities arising as a result of
the Warrant Agent's negligence or wilful misconduct.
The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising
as a result of the Warrant Agent's own negligence or wilful misconduct), after
giving 60 days' prior written notice to the Company. At least 15 days prior to
the date such resignation is to become effective, the Warrant Agent shall cause
a copy of such notice of resignation to be mailed to the Registered Holder of
each Warrant Certificate at the Company's expense. Upon such resignation, or
any inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for
the appointment of a new warrant agent. Any new warrant agent, whether
appointed by the Company or by such a court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
stockholders, of not less than $10,000,000 or a stock transfer company. After
acceptance in writing of such appointment by the new warrant agent is received
by the Company, such new warrant agent shall be vested with the same powers,
rights, duties, and responsibilities as if it had been originally named herein
as the Warrant Agent, without any further assurance, conveyance, act, or deed;
but if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act, or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any
23
<PAGE>
new warrant agent shall be a party or any corporation succeeding to the trust
business of the Warrant Agent shall be a successor warrant agent under this
Agreement without any further act, provided that such corporation is eligible
for appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any
of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
16. Modification of Agreement. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Warrant Certificates;
provided, however, that this Agreement shall not otherwise be modified,
supplemented, or altered in any respect except with the consent in writing of
the Registered Holders of Warrant Certificates representing not less than 50%
of the Warrants then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed
or are made in compliance with applicable law.
17. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first class registered or certified mail, postage prepaid
as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as
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<PAGE>
shown on the registry books maintained by the Warrant Agent; if to the Company,
144 Belmont Avenue, Somerset, NJ 08873, Attention: President, with a copy sent
to Bernstein & Wasserman, LLP, 950 Third Avenue, NY, NY 10022, Attention: Stuart
Neuhauser, Esq. or at such other address as may have been furnished to the
Warrant Agent in writing by the Company; and if to the Warrant Agent, at its
Corporate office.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws.
19. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy, or claim, in equity or at law,
or to impose upon any other person any duty, liability, or obligation.
20. Termination. This Agreement shall terminate at the close of
business on the Warrant Expiration Date of all the Warrants or such earlier
date upon which all Warrants have been exercised, except that the Warrant Agent
shall account to the Company for cash held by it and the provisions of Section
15 hereof shall survive such termination.
21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
AMPLIDYNE, INC.
By: _____________________________
Devendar S. Bains
Its: President
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ______________________________
Its: Authorized Officer
<PAGE>
EXHIBIT A
[Form of Face of Warrant Certificate]
No. W Warrants
VOID AFTER ________ __, 2001
STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
AMPLIDYNE, 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, par value $.0001 per share ("Common Stock"), of AMPLIDYNE,INC., a
Delaware corporation (the "Company"), at any time between the Initial Warrant
Exercise Date and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of AMERICAN
STOCK TRANSFER & TRUST COMPANY as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $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 Amplidyne, 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 ________ __,
1996, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.
<PAGE>
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Initial Warrant Exercise Date" shall mean ________ __, 1997.
The term "Expiration Date" shall mean 5:00 p.m. (New York time on
________ __, 2001, 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 unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. This Warrant shall not be exercisable by a Registered Holder in any
state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any transfer
fee 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.
2
<PAGE>
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.01 per Warrant at any time after ________ __, 1997,
provided the Market Price (as defined in the Warrant Agreement) for the
securities issuable upon exercise of such Warrant shall exceed $9.00 per share.
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 $.01 per Warrant upon
surrender of this Certificate.
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 Delaware.
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.
AMPLIDYNE, INC.
By:
------------------------------
Devendar S. Bains
Its: President
Date: ______________________________
3
<PAGE>
[Seal]
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: ______________________________
Its: Authorized Officer
<PAGE>
[Form of Reverse of Warrant Certificate]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to
exercise _____ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
--------------------------------------------
(please insert social security or other identifying number)
and be delivered to
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below:
--------------------------------------------
--------------------------------------------
--------------------------------------------
(Address)
<PAGE>
---------------------------------
(Date)
---------------------------------
(Taxpayer Identification Number)
If this Warrant has been solicited by a member of the National Association of
Securities Dealers, Inc., the name of such firm is:__________:
SIGNATURE GUARANTEED
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto
--------------------------------------------
(please insert social security or other identifying number)
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints _________________________________ Attorney to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
2
<PAGE>
---------------------------------
(Date)
SIGNATURE GUARANTEED
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
3
<PAGE>
November 25, 1996
Board of Directors
Amplidyne, Inc.
144 Belmont Drive
Somerset, NJ 08873
Re: AMPLIDYNE, INC.
Registration Statement on Form SB-2
-----------------------------------
Gentlemen:
We have acted as counsel for Amplidyne, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing by the Company
of a registration statement (the "Registration Statement") on Form SB-2, File
No. 333-11015, underr the Securities Act of 1933, relating to the public
offering of 1,400,000 shares of the Company's Common Stock, par value $.0001
per share (the "Common Stock") and 1,400,000 Redeemable Common Stock Purchase
Warrant (the " Warrant"). The offering also involves the grant to the
Representative of an option to purchase an additional 210,000 shares of Common
Stock and 210,000 Warrants to cover over-allotments in connection with the
offering, the sale to the Representative of an option (the "Representative's
Option") to purchase up to 140,000 shares of Common Stock and 140,000 Warrants,
and the registration of an additional 550,000 shares of Common Stock underlying
certain options held by selling stockholders (the "Selling Securityholders'
Securities").
We have examined the Certificate of Incorporation and the By-Laws of
the Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, drafts of the Underwriting Agreement relating to the
offering of the Common Stock and Warrants, drafts of the Warrant Agreement and
Representative's Option, draft forms of certificates representing the Common
Stock and the Warrants, originals or copies of such records of the Company,
agreements, certificates of public officials, certificates of officers and
representatives of the Company and others, and such other documents,
certificates, records, authorizations, proceedings, statutes and judicial
decisions as we have deemed necessary to form the basis of the opinion
expressed below. In such examination, we have assumed the genuiness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as copies thereof.
As to various questions of fact material to such
<PAGE>
opinion, we have relied upon statements and certificates of officers and
representatives of the Company and others.
Based on the foregoing, we are of the opinion that:
1. All shares of Common Stock have been duly authorized and, when
issued and sold in accordance with the Prospectus, will be validly issued,
fully paid and non-assessable.
2. The Warrants and the Representative's Option have been duly
authorized and, when issued and sold in accordance with the Prospectus, will be
validly issued fully paid and non-assessable.
3. The shares of Common Stock will be included in the Selling
Securityholders' Securities have been duly authorized, and when issued and sold
in accordance with the Selling Securityholder options will be, validly issued,
fully paid and nonassessable; and, when sold in accordance with the appropriate
prospectus (the "Selling Securityholder Prospectus") forming a part of the
Registration Statement, will continue to be duly authorized, validly issued,
fully paid and nonassessable.
4. The shares of Common Stock issuable upon exercise of the Warrants
and the Representative's Option have been duly authorized and reserved for
issuance and, when issued in accordance with the terms of the Warrants and the
Representative's Option, as the case may be, will be duly authorized, validly
issued, fully paid and nonassessable.
We hereby consent to be named in the Registration Statement, the
Prospectus and the Selling Securityholder Prospectus as attorneys who have
passed upon legal matters in connection with the offering of the securities
offered thereby under the caption "Legal Matters."
We further consent to your filing a copy of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
BERNSTEIN & WASSERMAN, LLP
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated May 17, 1996, except for the fourth
paragraph of Note C, as to which the date is September 30, 1996, accompanying
the financial statements and schedules of Amplidyne, Inc. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
GRANT THORNTON LLP
Parsippany, New Jersey
November 26, 1996
