<PAGE>
As filed with the Securities and Exchange Commission on August 29, 1996
Registration No. 333-__________
----------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------------------------------------
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>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------- ----------------- ------------------ ---------------------------- --------------------
Title of Each Proposed
Class of Maximum Offering Proposed
Securities to be Amount to be Price Maximum Amount of
Registered Registered(1) per Security(2) Aggregate Offering Price Registration Fee
- --------------------- ----------------- ------------------ ---------------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock, 1,380,000 $5.00 $ 6,900,000 $2,379.12
$.0001 par value
per Share(3)
Warrants to 1,380,000 $0.10 $ 138,000 $ 47.58
purchase Common
Stock (3)
Common Stock 1,380,000 $6.00 $ 8,280,000 $2,854.94
issuable upon
exercise of Warrants
Representative's 120,000 $.001 $ 120 $ .04
Purchase Option(4)
Common Stock 120,000 $6.00 $ 720,000 $ 248.26
underlying
Representative's
Purchase Option(4)
Warrants 120,000 $0.12 $ 14,400 $ 4.97
underlying
Representative's
Purchase Option
Common Stock 120,000 $6.00 $ 720,000 $ 248.26
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 $19,522,520 $6,731.37
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 180,000 shares of Common Stock and 180,000 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 120,000 shares of Common Stock at 120% of the public
offering price per share of Common Stock and 120,000 Warrants at 120%
of the public offering price per Warrant (the Representative's Purchase
Option").
(5) Common Stock underlying options owned by stockholders of the Company.
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 1,380,000 shares of Common Stock and 1,380,000 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 AUGUST 29, 1996
PROSPECTUS
[LOGO] AMPLIDYNE, INC.
1,200,000 Shares of Common Stock
1,200,000 Redeemable Common Stock Purchase Warrants
--------------------
Amplidyne, Inc., a Delaware corporation (the "Company" or "Amplidyne"), is
hereby offering ("Offering") 1,200,000 shares of common stock, par value $.0001
per share ("Common Stock" or "Shares") and 1,200,000 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." 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 without the sole consent of Patterson Travis, Inc., as representative
("Representative") of the several underwriters of this Offering
("Underwriters"). Such consent may not be given for a period of six months from
the date of this Prospectus.
--------------------
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."
<PAGE>
--------------------
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.
-------------- ---------------------------- -----------
Price Proceeds
To Underwriting Discounts To
Public And Commissions (1) Company (2)
-------------- ---------------------------- -----------
Per Share... $ 5.00 $ .50 $ 4.50
Per Warrant... $ .10 $ .01 $ .09
- ------------------- -------------- ---------------------------- -----------
Total (3)... $6,120,000 $612,000 $5,508,000
(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
$183,600 ($211,140 if the Over-Allotment Option (defined below) is
exercised in full), and (ii) an option to purchase 120,000 shares of
Common Stock at $6.00 per Share and 120,000 Warrants at $.12 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 $483,600 ($511,140 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 180,000 additional Shares and 180,000 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 $7,038,000, $703,800, and $6,334,200, 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.
The date of this Prospectus is ______, 1996
2
<PAGE>
[PICTURE]
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.
3
<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)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"), (d) 233,000 Shares reserved for issuance
upon the exercise of options which may be granted pursuant to the Incentive
Option Plan, and (e) 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." 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 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
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 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 market for wireless communication services has grown substantially during
the past decade.
4
<PAGE>
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 75%. However, this
represents a worldwide penetration of only 1.35%. Industry officials project a
worldwide market penetration of 8% by the year 2000, 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.
In addition to cellular 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 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. Management believes that its 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. Amplidyne is continuing to develop products that incorporate
protocols which it believes will address the needs of established and emerging
wireless systems.
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 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
5
<PAGE>
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 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 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 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.
6
<PAGE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities Offered by the 1,200,000 shares of Common Stock, and Warrants which may
Company (1)............................ 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......... 4,050,000 Shares
1,200,000 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 without the sole consent of the
Representative. See "Selling Securityholders."
7
<PAGE>
Summary Financial Information
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 six months
ended June 30, 1996 are not necessarily indicative of the results to be expected
for the full year.
<TABLE>
<CAPTION>
Statement of Operations Data:
Year ended December 31 Six Months ended June 30,
---------------------- -------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $3,575 $1,810 $1,049 $1,272
Cost of goods sold 2,713 1,756 893 1,106
Gross profit 862 54 156 166
Selling, general and administrative 722 527 298 529
Research, engineering and development 333 372 85 531
----------------- ----------------- ----------------- ---------------
Operating Loss (193) (845) (227) (894)
Stock compensation and financing costs 1,180 1,383
----------------- ----------------- ----------------- ---------------
Net loss $(178) $(2,025) $(227) $(2,277)
====== ========
Net loss per share $(.05) $(.64) $ (.07) $ (.71)
======= ==========
Shares outstanding(1) 3,188 3,188 3,188 3,188
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
December 31, 1995 June 30, 1996 June 30, 1996
----------------- ------------- ------------------------
As Adjusted (2)
---------------
<S> <C> <C> <C>
Working capital (deficit) $ (578) $ (760) $4,264
Total assets 722 1,485 5,380
Total liabilities 1,276 2,238 1,109
Stockholders' equity (deficit) (554) (753) 4,271
</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 1,200,000 shares of Common Stock at an assumed
offering price of $5.00 per share and 1,200,000 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."
8
<PAGE>
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 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 $2,277,000 for the six months ended June 30, 1996,
although a substantial portion of the net loss for the year ended December 31,
1995 and the six months ended June 30, 1996 is due to a non-operating 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 multicarrier linear power amplifiers
(sometimes referred to as "MCLPA"). In addition, the Company had a working
capital deficit of $578,000 and $760,000 at December 31, 1995 and June 30, 1996,
respectively, and a stockholders deficit of $554,000 and $753,000 at December
31, 1995 and June 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 six months of 1996 increased 21% compared to the first six 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 power
amplifiers to MCLPAs . The Company anticipates that a substantial portion of the
Company's future revenues will be derived from sale of its new 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. Market acceptance of the
Company's MCLPAs will depend in large part upon the public demand for power
amplifiers in general and the Company's ability to demonstrate its MCLPAs
advantages, including its performance features and cost-effectiveness. There can
be no assurance that the 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, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
9
<PAGE>
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. 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. 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. Further, the Company has 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 June 30, 1996,
approximately 33% of net revenues were derived from sales to one customer (DSC
Communications). The Company anticipates that sales of its products to
relatively few customers (wireless telecommunications OEMs) will account for a
majority of the Company's revenues in 1996. 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
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<PAGE>
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). 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."
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 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. Since wireless telecommunications OEMs
have come under increasing price pressure from cellular and PCS service
providers, the Company expects to experience downward pricing pressure on its
products. In addition, competition among non-captive suppliers (i.e., suppliers
which do not operate their own wireless communication cell stations) has
increased the downward pricing pressure on the Company's products. 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's 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.
11
<PAGE>
Risks Associated with Sales Outside of the United States. International
sales represented approximately 8%, 30%, and 58% of the Company's net revenues
for the years ended December 31, 1994 and 1995 and for the six months ended June
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."
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
12
<PAGE>
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. 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.
Substantial Portion of Proceeds To Satisfy Indebtedness, Including
Indebtedness Owed to Executive Officer and Director. Approximately 23% of the
net proceeds of the Offering will be used to repay indebtedness, including
approximately 7% 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 2,309,400 or
46% 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.
Management of the Company will have broad discretion in the application of such
proceeds. See "Use of Proceeds."
Control by Management. 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 79% of the then issued
and outstanding Common Stock of the Company (approximately 56% if the
Over-Allotment Option is exercised in full). The Chairman and Chief Executive
Officer of the Company will own approximately 49% 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".
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 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
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<PAGE>
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 $3.95 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 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."
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
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<PAGE>
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 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
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<PAGE>
Stock." In addition, following this Offering the Company will become subject to
the anti-takeover 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."
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 together with 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 eighteen
(18) months and twelve (12) months, respectively, from the date of this
Prospectus without the prior consent of the Representative. In the case of the
Selling Securityholders, such consent may not be given for a period of six (6)
months from the date of this Prospectus.
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<PAGE>
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 900,000 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 after the date of the Prospectus pursuant to Rule 701,
subject to an eighteen (18) month lock-up. 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."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,200,000 shares
of Common Stock and 1,200,000 Warrants offered hereby, are estimated to be
$5,024,400 ($5,823,060 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:
<TABLE>
<CAPTION>
Approximate Approximate
Amount of Percentage(%)
Proceeds of Net Proceeds
----------- ---------------
<S> <C> <C>
Purchase of
Test Equipment (1) $ 410,000 8.16%
Research, Engineering
and Development(2) 550,000 10.95
Purchase of Manufacturing
Machinery(3) 600,000 11.94
Repayment of Indebtedness(4) 1,155,000 22.99
Working Capital(5) 2,309,400 45.96
------------ -----
Total................... $5,024,400 100%
</TABLE>
(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.
(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. 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
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<PAGE>
are payable on demand. Such funds were used for working capital
purposes. See "Certain Transactions." Also includes payment of $230,000
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.
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.
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<PAGE>
DILUTION
At June 30, 1996, the pro forma net tangible book value of the Company
was $(753,014) or $(.26) 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 1,200,000
shares of Common Stock and 1,200,000 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 June 30, 1996 would have been $4,271,386
or $1.05 per share, representing an immediate increase in net tangible book
value of $1.31 per share to the existing stockholders and an immediate dilution
of $3.95 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
Pro forma net tangible book value deficit per share
before Offering............................. (.26)
Increase per share attributable to new investors.. 1.31
As adjusted net tangible book value after Offering... 1.05
Dilution to new investors............................ $3.95
The following table sets forth, at June 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 70.37 $1,275,000 17.53% $ .45
New Investors 1,200,000 29.63 $6,000,000 82.47% $5.00
--------- -------- --------- ------
Total 4,050,000 100% $7,275,000 100%
========= ======== ========== =====
</TABLE>
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1996, on an as adjusted basis to give effect to the sale of 1,200,000
shares of Common Stock and 1,200,000 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>
June 30, 1996
------------------------------
Actual As Adjusted (1)
------ ---------------
(in thousands)
<S> <C> <C>
Debt:
Bank Line of Credit 230
Notes Payable 550
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 4,050,000 shares outstanding,
as adjusted
----- -----
Additional paid-in capital 4,361 9,385
Deferred financing costs (1,097) (1,097)
Accumulated deficit 4,017 4,017
Total stockholders' equity (deficit) $ (753) $4,271
------ -----
Total capitalization $ 377 $4,271
===== =====
</TABLE>
(1) Adjusted for the sale of 1,200,000 shares of common stock and
1,200,000 Warrants and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds."
21
<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.
22
<PAGE>
SELECTED FINANCIAL DATA
(in thousands except per share data)
The selected financial data set forth below for the six months
ended June 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 six months ended June
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>
Year ended December 31 Six Months ended June 30,
---------------------- -------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $3,575 $1,810 $1,049 $1,272
Cost of goods sold 2,713 1,756 893 1,106
Gross profit 862 54 156 166
Selling, general and 722 527 298 529
administrative
Research, engineering and development 333 372 85 531
Operating loss (193) (845) (227) (894)
Stock compensation and financing costs 1,180 --- 1,383
Loss before taxes (193) (2,025) (227) 2,277
Provision for income taxes (15)
Net loss(1) $ (178) $(2,025) $(227) $2,277
======== ====== ===== =======
Net loss per share $(.05) $(.64) $(.07) $ .71
Shares outstanding (2) 3,188 3,188 3,188 3,188
===== ====== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data
Year ended December 31 June 30,
------------------------ -------- As Adjusted
1995 1996 June 30, 1996(3)
---- ---- ----------------
<S> <C> <C> <C>
Working capital (deficit) $ (578) $(760) $4,264
Total assets 722 1,485 5,380
Total liabilities 1,276 2,238 1,109
Stockholders' equity (deficit) (554) (753) 4,271
</TABLE>
(1) Net loss for the year ended 1995 and six months ended June 30, 1996
include non-cash stock compensation expenses of $1,180,000 and
$1,383,125, 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 1,200,000 shares of Common Stock at an assumed
offering price of $5.00 per share and 1,200,000 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."
23
<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 Six months ended
December 31, June 30,
1994 1995 1995 1996
------------------------- ----------------------
<S> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 75.9 97.0 85.1 87.0
Gross profit 24.1 3.0 14.9 13.0
Selling, general and
administrative 20.2 29.1 28.4 41.6
Research, engineering and
development 9.3 20.6 8.2 41.8
Total operating expenses 29.5 49.7 36.6 83.4
Stock compensation and
financing costs 65.2 108.7
Loss before income taxes (5.4) (111.9) (21.7) 179.1
Provision (credit) for
income taxes (0.4)
Net loss (5.0)% (111.9)% (21.7)% 179.1%
</TABLE>
Results of operations - Six months ended June 30, 1996 compared to six months
ended June 30, 1995
Revenues for the first six months of 1996 increased 21% compared to the
first six months of 1995. The Company's principal business strategy since 1995
has been devoted to the engineering production of the 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
six 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 six
months of 1996, approximately 5% of all product shipments were prototypes
compared to about 19% for the same period in 1995.
Cost of sales as a percentage of sales was 87% during the six months
ended June 30, 1996, compared to 85% 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.
Selling, general and administrative expenses increased in 1996 by
$230,710 to $529,021 from
24
<PAGE>
$298,311 in 1995. Expressed as a percentage of sales, the selling, general and
administrative expenses were 42% 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 second quarter of 1996 because of
the outstanding bank debt and lease obligations.
Research, engineering and development expenses increased to 42% of net
sales in 1996 compared to 8% in 1995. For the first six 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 $1,383,125 relates 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
($2,277,729) or ($.71) per share for the six months ended June 30, 1996
compared with net losses of ($227,638) or ($.07) 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 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.
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.
25
<PAGE>
Liquidity and Capital Resources
As of June 30, 1996, the Company had a current ratio of 0.59 to 1. The
bank line of credit outstanding totaled $230,000 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 $550,000 were
incurred during the first six 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 $23,831 through 2001.
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. 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).
26
<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 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
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 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 75%. However, this represents a worldwide penetration of only
1.35%. Industry officials project a worldwide market penetration of 8% by the
year 2000, a 50% compounded annual growth rate ("CAGR"). The growth in cellular
communications has required, and will continue to require, substantial
investment by cellular service
27
<PAGE>
providers in wireless infrastructure equipment. Moreover, 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.
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 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
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.
28
<PAGE>
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 vast
experience in interference cancellation, the Company is pursuing a strategy,
focused on the need of cellular system operators, to develop technologically
advanced amplifier based products. The Company has recently developed products
which address the technical issues faced by cellular system operators as a
result of the rapid growth in cellular telephone use and the resulting need to
increase systems capacity.
Since early 1995 the Company has been involved in research, design and
development of MCLPAs for the wireless communications industry and most recently
for the emerging personal communications systems (PCS) industry. The Company has
a patent pending on its predistortion technology which has enabled the Company
to provide ultra linear amplifiers with its proprietary feed forward technology.
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
closely with OEM customers to offer innovative solutions to technical
requirements and problems. Based on the 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. Management believes that its 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.
29
<PAGE>
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 utilizes proprietary and patent-pending predistortion technology and
proprietary feed forward interference cancellation technology in its 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".
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.
Provide Support from Product Design through Installation and Operation.
The Company works 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
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.
30
<PAGE>
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
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 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 very 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 leading 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,
31
<PAGE>
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.
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.
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<PAGE>
[Figure 1]
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]
33
<PAGE>
In real life, however, distortion characteristics are produced. See
Figure 3 below.
[Figure 3]
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
34
<PAGE>
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]
[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").
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<PAGE>
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 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 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".
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
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<PAGE>
Company believes that cellular, SMR and PCS will share future markets. The
Company is currently developing products and has already shipped prototype
products for the PCS market.
Products
The Company designs and sells multicarrier transmit amplifiers and low
noise receive amplifiers for the cellular communications market, as well as the
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 exemplary reliability. Management
believes that Amplidyne's products with its patent pending
predistortion technology, 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
<TABLE>
<CAPTION>
OUTPUT
Product POWER
Model No. FREQUENCY STANDARD WATTS IMD (dBc)*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
* 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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<PAGE>
The following table lists the Company's high power linear amplifiers:
<TABLE>
<CAPTION>
Model No. FREQUENCY MHz STANDARD POWER WATTS IMD (dBc)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
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.
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
39
<PAGE>
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 June 30, 1996, the Company had a
backlog of approximately $3,000,000. It is anticipated that this backlog and any
orders received by October 1, 1996 will be filled during the balance of fiscal
1996 and 1997 fiscal year ending December 31, 1997.
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<PAGE>
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 Six Months Ended
December 31, June 30,
--------------------- -----------------------
Markets 1994 1995 1995 1996
-------
<S> <C> <C> <C> <C>
Cellular Analog. . . . . . . . . . . . . . . . . . . . . . . . . . $2,780 $ 308 $ 308 $ 35
Cellular Digital. . . . . . . . . . . . . . . . . . . . . . . . . . 143 591 305 353
Wireless Telephony. . . . . . . . . . . . . . . . . . . . . . . . . 187 435 166 537
Satellite Communications, Custom and other Products. . 465 476 270 105
Digital PCS Products. . . . . . . . . . . . . . . . . . . . . . . . --- --- --- 242
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $3,575 $1,810 $1,049 $1,272
</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.
* Cellular Analog. 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 digital
cellular industry have increased from less than 4% in 1994 to
approximately 28% of total sales in 1995. For the first six
months of 1996 sales in this area are approximately 23% of
total revenues.
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<PAGE>
* 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 42% of total
revenue for the six months ended June 30, 1996.
* Digital PCS. The Company has shipped prototype amplifiers to
its OEM customers as of April 1996 accounting for 19% of sales
in the period ended June 1996. Management expects this sector
of the market to show substantial growth during fiscal 1996.
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 4%, 20% and 45% of net sales during
fiscal 1994, fiscal 1995 and the six month period ended June
30, 1996, respectively. The Company believes that cellular 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, 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 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
42
<PAGE>
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.
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 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
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<PAGE>
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 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 fiscal 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 manufacturabilty of
existing products.
The Company has historically devoted a significant portion of its
resources to research, engineering
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<PAGE>
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
six months ended June 30, 1996 were approximately $531,000 representing 45% 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."
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) 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."
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<PAGE>
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.
See "Business-Regulations."
Employees
As of June 30, 1996, the Company had a total of 51 employees, including
28 in operations, 16 in engineering, 2 in sales and marketing, 3 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
The Company leases 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.
The Company leases 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.
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.
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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.
47
<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 for Strategic Alliances
Sharon Will 36 Vice President for 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
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<PAGE>
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.
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 for Strategic Alliances 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. His business experience has encompassed
developing significant business contacts and acting as an officer or director 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 for Corporate Communications and Investor
Relations 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.
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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 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 49.38
Tarlochan Bains(3) --- --- ---
Nirmal Bains(2)(4) 2,000,000 70.18 49.38
Robert S. Benou 50,000 1.75 1.23
Harris Freedman(5) 151,667 5.21 3.75
Sharon Will(6) 165,000 5.68 4.02
All Officers and
Directors as a group
(6 persons) 2,366,667 79.76 56.80
</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 545 Madison Avenue, New York, New York
10022. Mr. Freedman is the Vice President for Strategic Alliances.
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 208 East 51 Street, New York, New York
10022. Ms. Will is the Vice President for Corporate Communications and
Investor Relations. 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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<PAGE>
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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<PAGE>
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, 4,050,000 shares of Common Stock and
1,200,000 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.
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.
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,
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<PAGE>
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 120,000 shares of
Common Stock ("Representative's Common Stock") and warrants to purchase an
additional 120,000 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.
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.
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<PAGE>
Options
Between January and February 1996 the Company sold an aggregate of
250,000 shares of Common Stock. 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. 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."
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 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.
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<PAGE>
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 4,050,000
shares of Common Stock outstanding. Only those sold in this Offering (1,200,000
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 300,000 Shares together with 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 eighteen
(18) months and twelve (12) months, respectively, from the date of this
Prospectus without the prior consent of the Representative. In the case of the
Selling Securityholders, such consent may not be given for a period of six (6)
months from the date of this prospectus.
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,
57
<PAGE>
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, subject to
earlier release at the sole discretion of the Representative. Such earlier
release may not be granted during the six (6) month period commencing on the
date of this Prospectus. 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 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.
58
<PAGE>
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, 1,200,000 shares of Common Stock and 1,200,000
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 1,200,000
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 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 180,000 additional Shares and 180,000 additional Warrants at
the Offering prices, less the underwriting discount, to cover over-allotments,
59
<PAGE>
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, 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 $120, an option (the
"Representative's Purchase Option") to purchase up to an aggregate of 120,000
Shares and 120,000 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 twenty percent
(120%) 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 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 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
60
<PAGE>
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.
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 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 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.
61
<PAGE>
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.
62
<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 consolidated 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., and
Subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their consolidated cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
- ------------------------
GRANT THORNTON LLP
Parsippany, New Jersey
May 17, 1996
F-2
<PAGE>
Amplidyne, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1994 1995 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 3,337 $153,747 $ 13,393
Accounts receivable, net of allowance
for doubtful accounts of $10,000 in
1995 and 1996 408,835 165,702 585,307
Inventory 285,366 281,078 469,235
Refundable income taxes 19,479 28,235 5,665
-------- -------- ------------
Total current assets 717,017 628,762 1,073,600
PROPERTY AND EQUIPMENT
Machinery and equipment 99,697 132,067 381,988
Furniture and fixtures 9,444 13,144 37,240
Autos and trucks 19,923 19,923 19,923
Leasehold improvements 16,070 21,220 24,876
-------- -------- -----------
145,134 186,354 464,027
Less accumulated depreciation and amortization 73,940 103,951 132,179
-------- ------- ----------
71,194 82,403 331,848
DEFERRED REGISTRATION COSTS 45,000
OTHER ASSETS 26,245 11,100 35,000
-------- -------- -----------
$814,456 $722,265 $1,485,448
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
Amplidyne, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND December 31,
STOCKHOLDERS' EQUITY ------------------------------- June 30,
1994 1995 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Bank line of credit $ 230,000 $ 230,000
Notes payable 550,000
Current maturities of lease obligations $ 9,425 78,365 157,936
Accounts payable 196,010 287,498 420,620
Accrued expenses 150,928 184,429 113,651
Customer advances 35,980 155,932 11,800
Stockholders' loan 120,716 270,716 350,000
------- ---------- -----------
Total current liabilities 513,059 1,206,940 1,834,007
LONG-TERM LIABILITIES
Lease obligations 9,846 69,451 404,455
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 June 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 4,360,431
Deferred financing costs (1,096,875)
Retained earnings (accumulated deficit) 286,551 (1,739,126) (4,016,855)
------- ---------- ----------
291,551 (554,126) (753,014)
------- ----------- -----------
$814,456 $ 722,265 $ 1,485,448
======= =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Amplidyne, Inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31, Six months ended June 30,
----------------------------- -----------------------------
1994 1995 1995 1996
--------- --------- ---------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $3,575,132 $ 1,810,222 $1,049,441 $1,272,207
Cost of goods sold 2,712,960 1,756,365 893,401 1,106,426
--------- --------- ---------- ---------
Gross profit 862,172 53,857 156,040 165,781
Operating expenses
Selling, general and administrative 721,993 527,150 298,311 529,021
Research, engineering and development 333,306 372,334 85,367 531,364
---------- ----------- ----------- ----------
Operating loss (193,127) (845,627) (227,638) (894,604)
Other nonoperating expense
Stock compensation and financing
costs 1,180,000 1,383,125
---------- ----------- ----------- ----------
Loss before income taxes (193,127) (2,025,627) (227,638) (2,277,729)
Provision for income taxes (benefit) (15,260) 50
---------- ----------- ----------- ----------
NET LOSS $ (177,867) $(2,025,677) $ (227,638) $(2,277,729)
========== ========== ========== ==========
Net loss per share $(.05) $(.64) $(.07) $(.71)
==== ==== ==== ====
Weighted average number of shares
outstanding 3,187,500 3,187,500 3,187,500 3,187,500
========= ========= ========= =========
</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 Deferred Retained
------------------------- paid-in financing earnings
Shares Par value capital cost (deficit) Total
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <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) (2,277,729) (2,277,729)
Private placement 550,000 55 549,945 550,000
Financing expense 2,480,000 $(1,096,875) 1,383,125
Contributed capital 125,716 125,716
Exercise of options 200,000 20 19,980 20,000
----------- ----------- ----------- ----------- ---------- -----------
Balance at June 30, 1996
(unaudited) 2,850,000 $ 285 $ 4,360,431 $(1,096,875) $(4,016,855) $ (753,014)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Amplidyne, Inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31, Six months ended June 30,
---------------------------- ----------------------------
1994 1995 1995 1996
-------- ---------- -------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(177,867) $(2,025,677) $(227,638) $(2,277,729)
-------- ---------- -------- ----------
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities
Depreciation and amortization 22,676 30,011 16,146 28,228
Stock compensation expense 1,180,000 1,383,125
Changes in assets and liabilities
Accounts receivable (14,247) 243,133 204,062 (419,605)
Inventories 45,914 4,288 92,607 (188,157)
Prepaid expenses and other assets (18,633) 6,389 (8,806) (46,330)
Accounts payable and accrued
expenses 97,674 124,989 (19,034) 62,344
Income taxes payable (8,259)
Customer advances 35,980 119,952 (35,980) (144,132)
---------- ----------- --------- ------------
Total adjustments 161,105 1,708,762 248,995 675,473
---------- ----------- --------- ------------
Net cash (used in) provided by
operating activities (16,762) (316,915) 21,357 (1,602,256)
---------- ----------- --------- ------------
Cash flows from investing activities
Purchase of fixed assets (40,443) (41,220) (22,029) (79,563)
---------- ----------- --------- ------------
Cash flows from financing activities
Proceeds from bank line of credit 230,000 50,000
Proceeds from notes payable 550,000
Lease obligations 19,271 128,545 (4,550) 216,465
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 45,450 1,541,465
---------- ----------- --------- ------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (52,634) 150,410 44,778 (140,354)
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 $ 48,115 $ 13,393
========== =========== ========= ============
Supplemental disclosures of cash flow
information:
Cash paid during the year for
Interest $ 229 $ 11,426 $ 1,629 $ 19,377
Income taxes 14,479 9,496 7,596 -
</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 June 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 June 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 June 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 (OEM's). 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 six months ended June
30, 1996, one customer accounted for 33% of net sales. Export sales for
the same period were 58%.
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 June 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 June 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 June 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 1,200,000 shares of common stock at a proposed
public offering price of $5.00 per share and 1,200,000 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.
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
F-12
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE C (continued)
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):
Number
of shares
Reserved for issuable
------------ ---------
Underwriters' warrants 240,000
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
-----------
2,670,000
===========
F-13
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 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 will be 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 will be 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 will be charged in the first quarter ($281,250) and 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 June 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 June 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 leases certain equipment for use in its research and
development activities. The discounted present value of such leases have
been expensed to research, engineering and development at lease inception.
At June 30, 1996, $188,855 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:
December 31, June 30,
1995 1996
------------- -----------
(unaudited)
1996 $ 90,360 $191,479
1997 73,169 264,160
1998 126,635
1999 53,386
2000 6,781
Thereafter 525
------------- ----------
163,529 642,966
Less amount representing interest (15,713) (80,575)
-------- --------
Present value of minimum lease payments $147,816 $562,391
======= =======
F-16
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 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 $70,000
for the six months ended June 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 June 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 (337,500 shares
for each period presented). The total shares outstanding for purposes of
loss per share calculations is 3,187,500.
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.
F-18
<PAGE>
Amplidyne, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994 and 1995
(Amounts and information applicable to June 30, 1995 and 1996 are unaudited)
NOTE J - SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company acquired equipment under capital lease obligations totalling
$198,110 during the six months ended June 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.........
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.
1,200,000 Shares of Common Stock
1,200,000 Redeemable Common Stock
Purchase Warrants
AMPLIDYNE, INC.
[LOGO]
--------------------
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,
subject to earlier release at the sole discretion of Patterson Travis, Inc. the
representative of the several underwriters of the Company's initial public
offering (the"Representative"). Such consent may not be given for a period of
six (6) months from the date of this Prospectus. The Representative may release
the transfer restrictions regarding the securities held by the Selling
Securityholders at any time after all securities subject to the Over-Allotment
Option (as hereinafter defined) have been sold or such option has expired. 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.
Alt-1
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 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 1,200,000
shares of Common Stock and 1,200,000 Warrants. 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
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.............. 4,050,000 Shares
.................. 1,200,000 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) ........... Stock - AMPD; Warrants - AMPDW
- -----------
(1) Concurrently with this Offering, the Company is offering 1,200,000
shares of Common Stock and 1,200,000 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 1,200,000
shares of Common Stock and 1,200,000 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, subject to earlier release at the
sole discretion of the Representative. Such consent may not be given for a
period of six (6) months from the date of this Prospectus. 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 .28
Ronny Doran 12,500 6,250 6,250 .14
Joseph Giamanco 50,000 25,000 25,000 .56
Marvin Ginsberg 25,000 12,500 12,500 .28
Gerald Kay 50,000 25,000 25,000 .56
Jerome Belson 50,000 25,000 25,000 .56
Robert Wax 25,000 12,500 12,500 .28
Bernice Brauser 50,000 25,000 25,000 .56
Milton Greiss 18,750 9,375 9,375 .21
</TABLE>
Alt - 4
<PAGE>
<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>
Evan Stern 18,750 9,375 9,375 .21
Bircherest Industries 50,000 25,000 25,000 .56
Wellington 12,500 6,250 6,250 .14
Corporation, N.V
Jaminsville 31,250 15,625 15,625 .36
Corporation, N.V.
Carol Shiller 50,000 25,000 25,000 .28
Chana Sasha Foundation 50,000 25,000 25,000 .28
Katherine Gaston 12,500 6,250 6,250 .14
Phil Lifschitz 50,000 25,000 25,000 .56
Alan Grodko 25,000 12,500 12,500 .28
Israel Cohen 25,000 12,500 12,500 .28
Jeffrey Grodko 25,000 12,500 12,500 .28
General Capital Associates 50,000 25,000 25,000 .56
Quad Capital Partners 50,000 25,000 25,000 .56
ATM Partners 25,000 12,500 12,500 .28
The Bridge Fund N.V. 18,750 9,375 9,375 .21
Alan Cohen 25,000 12,500 12,500 .14
Raymond Agoglia 25,000 12,500 12,500 .14
Isaac Dweck 100,000 50,000 50,000 .56
Universal Partners, L.P. 50,000 25,000 25,000 .28
Michael Rubin 25,000 12,500 12,500 .14
Tissera Overseas 50,000 25,000 25,000 .28
Fund N.V
Diane Weiser 25,000 12,500 12,500 .14
- ------------------------------------------------------------------------------------------------------------------------
Total 1,100,000 550,000 550,000 12.50
========================================================================================================================
</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 1,200,000
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........
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.......................... $ 6,731.37
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*................... $ 27,316.38
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 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. 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. 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
II-2
<PAGE>
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."
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 *
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
II-3
<PAGE>
23.1 Consent of Bernstein & Wasserman, LLP (included in Exhibit
5.1)*
23.2 Consent of Grant Thornton, LLP, Independent Certified
Public Accountants.
-------------
* To be filed by amendment.
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
II-4
<PAGE>
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
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-5
<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 August 29, 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.
Signature Title Date
/s/ Devendar S. Bains Chief Executive Officer, August 29, 1996
- -------------------------
Devendar S. Bains President, Treasurer,
Principal Accounting Officer
and Director
/s/ Tarlochan Bains Vice President and Director August 29, 1996
- -------------------------
Tarlochan Bains
/s/ Nirmal Bains Secretary August 29, 1996
- -------------------------
Nirmal Bains
/s/ Robert S. Benou Director August 29, 1996
- -------------------------
Robert S. Benou
II-6
<PAGE>
1,200,000 Shares of Common Stock
1,200,000 Class A Redeemable Warrants
AMPLIDYNE, INC.
UNDERWRITING AGREEMENT
September , 1996
Patterson Travis, Inc.
12835 E. Arapahoe Road #1-700
Englewood, Colorado 80112
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 1,200,000 shares of
Common Stock ("Shares") and 1,200,000 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 180,000 additional Shares and 180,000 Warrants. Unless the context otherwise
indicates, the term "Securities" shall include the 180,000 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-______) 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 430 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 June 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 1,200,000 Shares (the "First Shares") and (ii) at $.09 per
Warrant, the 1,200,000 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 __________, 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 180,000 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 120,000 Shares and 120,000 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) 90 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,
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including, but not limited to, all of the expenses itemized in Section 8, on an
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
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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 twenty-four 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, 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 June 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 and
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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;
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.
(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 best knowledge of such counsel,
in the performance or observance of any material
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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 (other than necessary amendments to
the Registration Statement) other than (a) registrations or qualifications of
the Securities under applicable state or foreign securities or Blue Sky laws
and (b) registration under the Act, and (c) "clearance" from the National
Association of Securities Dealers, Inc.
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(xii) the statements in the Registration Statement under the captions
"Business," "Use of Proceeds," "Management" and "Description of Securities"
have been reviewed by such counsel and insofar as they refer to descriptions of
agreements, statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material respects.
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) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related matters
shall be satisfactory to or approved by Gerald A. Kaufman, counsel to the
Underwriter, and you shall have received from such counsel a signed opinion,
dated as of the Closing Date, with respect to the validity of the issuance of
the Securities, the form of the Registration Statement and Prospectus (other
than the financial statements and other financial data contained therein), the
execution of this Agreement and other related matters as you may reasonably
require. The Company shall have furnished to counsel to the Underwriter such
document as he may reasonably request for the purpose of enabling him to render
such opinion.
(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
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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).
(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, 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
18
<PAGE>
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, the Selling 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 $183,600. 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 (except if such prevention is based
upon a breach by the Company of any covenant, representation or warranty
contained herein or because any other condition to the Underwriter' obligations
hereunder required to be fulfilled by the Company is not fulfilled) 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 $55,000.
(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
19
<PAGE>
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.
20
<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 120,000 Shares and 120,000 Warrants. The PO shall
be for a five year term and the exercise prices shall be $6.00 per Share and
$.12 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 __________________________ ___________________________ with a copy to
Bernstein & Wasserman, 950 Third Avenue, New York, New York 10022.
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.
21
<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:
----------------------------------
, 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(j), and
(o) and 12 hereof.
- --------------------------- ---------------------------
Principal Stockholder Principal Stockholder
- --------------------------
Principal Stockholder
<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.
1,200,000 SHARES OF COMMON STOCK, $.0001 PAR VALUE
AND
1,200,000 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, 1,200,000 shares of Common Stock, $.0001 par value per
share ("Common Stock") of Amplidyne, Inc. (the "Company") and 1,200,000 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) Article III, Sections 1, 8, 24, 25, 26 and 36 of the Rules of
Fair Practice 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
5
<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 Section 24 of Article III of the Rules of Fair Practice of the
NASD, 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 Sections 8 and 36 of Article III thereof as that Section applies
to non-member foreign dealers.
Name of
Dealer:
-----------------------------
By:
-----------------------------
Address:
-----------------------------
-----------------------------
Dated: , 1996
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "AMPLIDYNE, INC.", FILED IN THIS OFFICE ON THE FOURTEENTH DAY
OF DECEMBER, A.D. 1995, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
__________________________________
Edward J. Freel, Secretary of State
AUTHENTICATION: 7751872
DATE: 12-14-95
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/14/1995
950294463 - 2571953
CERTIFICATE OF INCORPORATION
OF
AMPLIDYNE, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "corporation")
is AMPLIDYNE, INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington 19805, County of New Castle; and the name of the
registered agent of the corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is twenty-six million, which are
divided into one million Preferred shares of a par value of one tenth of one
mill each and twenty-five million Common shares of a par value of one tenth of
one mill each.
Subject to the provision of Section 151 of the General Corporation Law of
the State of Delaware, authority is expressly granted to the Board of Directors
of the corporation to issue the Preferred shares of the corporation, from time
to time, in one or more series and to fix the number of shares to be included in
each series, the distinctive serial designation, the rate or rates of
preferential cumulative, non-participating dividends payable in cash annually,
semi-annually, or quarterly, the times of payment of and the dates from which
such dividends shall be cumulative, the price or prices at which the same may be
redeemed, which shall be not less than the par value thereof, plus arrearages,
if any, the notice of redemption,
-1-
<PAGE>
the amount and terms of any sinking or purchase fund, if any, for the purchase
or redemption thereof, provided such sinking fund is payable only out of funds
legally available therefor, the terms, conditions, rights, privileges, and other
provisions, if any, respecting the conversion of any or all series of Preferred
shares into Common shares, and the preferential amount or amounts which shall be
paid to the holders thereof in the event of the liquidation, dissolution, or
winding up of the corporation, whether voluntary or involuntary, which shall be
not less than the par value thereof, plus arrearages, if any.
No holder of any of the shares of the stock of the corporation, whether now
or hereafter authorized and issued, shall be entitled as of right to purchase or
subscribe for any unissued stock of any class, or any additional shares of any
class to be issued by reason of any increase of the authorized capital stock of
any class of the corporation, or bonds, certificates of indebtedness,
debentures, or other securities convertible into stock of any class of the
corporation, or carrying any right to purchase stock of any class of the
corporation, but any such unissued stock or any such additional authorized issue
of any stock or of other securities convertible into stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to resolution of
the Board of Directors to such persons, firms, corporations, or associations,
and upon such terms, as may be deemed advisable by the Board of Directors in the
exercise of its discretion.
FIFTH: The name and the mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
Maris Kruze 375 Hudson Street
New York, NY 10014
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
coprporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation and
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a major in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
-2-
<PAGE>
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the Bylaws. The phrase "whole Board" and
the phrase "total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the corporation would
have if there were no vacancies. No election of directors need be by written
ballot.
2. After the original or other Bylaws of the corporation have
been adopted, amended, or repealed, as the case may be, in accordance with
the provisions of SECTION 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the Bylaws of the corporation
may be exercised by the Board of Directors of the corporation; provided,
however, that any provision for the classification of directors of the
corporation for staggered terms pursuant to the provisions of subsection (d)
of SECTION 141 of the General Corporation Law of the State of Delaware shall
be set forth in an initial Bylaw or in a Bylaw adopted by the stockholders
entitled to vote of the corporation unless provisions for such
classification shall be set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except as
the provisions of paragraph (2) of subsection (b) of SECTION 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder
-3-
<PAGE>
thereof to vote upon the increase or decrease in the number of authorized
shares of said class.
NINTH: The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7) of
subsection (b) of SECTION 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
provisions of SECTION 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on December 12, 1995.
/s/ Maris Kruze
_____________________
Maris Kruze, Incorporator
-4-
<PAGE>
CERTIFICATE OF MERGER
OF
AMPLIDYNE, INC.
(a New Jersey corporation)
AND
AMPLIDYNE, INC.
(a Delaware corporation)
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are:
(i) Amplidyne, Inc., which is incorporated under the laws of the
State of New Jersey ("Amplidyne New Jersey"); and
(ii) Amplidyne, Inc., which is incorporated under the laws of the
State of Delaware ("Amplidyne Delaware").
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of subsection (c) of Section 252
of the General Corporation Law of the State of Delaware, to wit, by Amplidyne
New Jersey in accordance with the State of its incorporation and by Amplidyne
Delaware in the same manner as is provided in Section 251 of the General
Corporation Law of the State of Delaware.
3. The name of the surviving corporation in the merger herein
certified is Amplidyne Delaware, which will continue its existence as said
surviving corporation under its present name upon the effective date of said
merger pursuant to the provisions of the General Corporation Law of the State of
Delaware.
4. The Certificate of Incorporation of Amplidyne Delaware, as now in
force and effect, shall continue to be the Certificate of Incorporation of said
surviving corporation until amended and changed pursuant to the provisions of
the General Corporation Law of the State of Delaware.
5. The executed Agreement and Plan of Merger between the aforesaid
constituent corporations is on file at the principal place of business of the
aforesaid surviving corporation, the address of which is as follows:
<PAGE>
Unit 9, Building 7
Ilene Court
Belle Mead, NJ 08502
8. A copy of the aforesaid Agreement and Plan of Merger will be
furnished by the aforesaid surviving corporation, on request, and without cost,
to any stockholder of each of the aforesaid constituent corporations.
9. The authorized capital stock of Amplidyne New Jersey consists of
2,500 shares without par value.
Dated: December 15, 1995
AMPLIDYNE, INC. (New Jersey)
By: /s/ Devendar S. Bains
Name: Devendar S. Bains
Title: President
Dated: December 15, 1995
AMPLIDYNE, INC. (Delaware)
By: /s/ Devendar S. Bains
Name: Devendar S. Bains
Title: President
2
<PAGE>
CERTIFICATE OF SECRETARY
OF
AMPLIDYNE, INC.
The undersigned, being the Secretary of Amplidyne, Inc., does
hereby certify that the foregoing Certificate of Merger has been
adopted upon behalf of said corporation pursuant to the provisions
of Subsection (f) of Section 251 of the General Corporation Law of
the State of Delaware, and that, as of the date of this
Certificate, the outstanding shares of said corporation were such
as to render the provisions of said Subsection (f) applicable.
Dated: December 15, 1995.
/s/Nirmal Bains
Nirmal Bains, Secretary
<PAGE>
CERTIFICATE OF MERGER
OF
AMPLIDYNE, INC.
(a New Jersey corporation)
AND
AMPLIDYNE, INC.
(a Delaware corporation)
To the Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:10-7 of the New Jersey Business
Corporation Act, it is hereby certified that:
1. The names of the merging corporations are Amplidyne, Inc., which
is a business corporation organized under the laws of the State of New Jersey
("Amplidyne New Jersey"), and Amplidyne, Inc., which is a business corporation
organized under the laws of the State of Delaware ("Amplidyne Delaware").
2. Annexed hereto and made a part hereof is the Agreement and Plan
of Merger for merging Amplidyne New Jersey with and into Amplidyne Delaware as
approved by the Board of Directors of each of said corporations.
3. The number of shares of Amplidyne New Jersey which were entitled
to vote at the time of the approval of the Agreement and Plan of Merger by its
shareholders is 100, all of which are of one class.
All of the shareholders entitled to vote of the aforesaid
corporation approved the Agreement and Plan of Merger pursuant to their written
consents without a meeting of shareholders; and the number of shares represented
by such consents is 100. The date of said consents and approval was December
15, 1995.
4. The applicable provision of the laws of the jurisdiction of
organization of Amplidyne Delaware relating to the merger of Amplidyne New
Jersey with and into Amplidyne Delaware have been complied with.
5. Amplidyne Delaware hereby agrees that it may be served with process in
the State of New Jersey in any proceeding for the enforcement of any obligation
of Amplidyne New Jersey or any obligation of Amplidyne Delaware for which it is
previously amenable to suit in the State of New Jersey and in any proceeding for
the enforcement of the rights of a dissenting shareholder of Amplidyne New
Jersey against Amplidyne Delaware; and Amplidyne Delaware hereby
<PAGE>
irrevocably appoints the Secretary of State of the State of New Jersey as its
agent to accept service of process in any such proceeding and designates the
following post office address within the State of New Jersey to which said
Secretary of State shall mail a copy of the process in such proceeding:
Unit 9, Building 7
Ilene Court
Belle Mead, NJ 08502
Amplidyne Delaware hereby agrees that it will promptly pay to the
dissenting shareholders of Amplidyne New Jersey the amount, if any, to which
they are entitled under the provisions of the New Jersey Business Corporation
Act with respect to the rights of dissenting shareholders.
6. Amplidyne Delaware will continue its existence as the surviving
corporation under its present name pursuant to the provisions of the laws of the
jurisdiction of its organization.
Executed on: December 15, 1995
AMPLIDYNE, INC. (New Jersey)
By: /s/Devendar S. Bains
Name: Devendar S. Bains
Title: President
Executed On: December 15, 1995
AMPLIDYNE, INC. (Delaware)
By: /s/Devendar S. Bains
Name: Devendar S. Bains
Title: President
2
<PAGE>
AGREEMENT AND PLAN OF MERGER approved on December 15, 1995 by
Amplidyne, Inc., a business corporation organized under the laws of the State of
New Jersey, and by its Board of Directors on said date ("Amplidyne New Jersey"),
and approved on December 15, 1995 by Amplidyne, Inc., a business corporation
organized under the laws of the State of Delaware, and by its Board of Directors
on said date ("Amplidyne Delaware").
1. Amplidyne New Jersey and Amplidyne Delaware shall pursuant to the
provisions of the New Jersey Business Corporation Act and the provisions of the
laws of the jurisdiction of organization of Amplidyne Delaware, be merged with
and into a single corporation, to wit, Amplidyne Delaware, which shall be the
surviving corporation upon the effective date of the merger and which is
sometimes hereinafter referred to as the "surviving corporation", and which
shall continue to exist as said surviving corporation under its present name
pursuant to the provisions of the laws of the jurisdiction of its organization.
The separate existence of Amplidyne New Jersey, which is sometimes hereinafter
referred to as the "terminating corporation", shall cease upon the effective
date of the merger in accordance with the provisions of the New Jersey Business
Corporation Act.
2. The certificate of incorporation of the surviving corporation
upon the effective date of the merger in the jurisdiction of its organization
shall be the certificate of incorporation of said surviving corporation; and
said certificate of incorporation shall continue in full force and effect until
amended and changed in the manner prescribed by the provisions of the laws of
the jurisdiction of organization of the surviving corporation.
3. The by-laws of the surviving corporation upon the effective date
of the merger in the jurisdiction of its organization will be the by-laws of
said surviving corporation and will continue in full force and effect until
changed, altered, or amended as therein provided and in the manner prescribed by
the provisions of the laws of the jurisdiction of its organization.
4. The directors and officers in office of the surviving corporation
upon the effective date of the merger in the jurisdiction of its organization
shall be the members of the first Board of Directors and the first officers of
the surviving corporation, all of whom shall hold their directorships and
offices until the election and qualification of their respective successors or
until their tenure is otherwise terminated in accordance with the by-laws of the
surviving corporation.
5. Each issued share of the terminating corporation shall, upon the
effective date of the merger, be converted into 21,000 shares of the surviving
corporation. The issued shares of the surviving corporation shall not be
converted in any manner, but each said share which is issued as of the effective
date of the merger shall continue to represent one issued share of the surviving
corporation.
6. The Agreement and Plan of Merger herein made and approved shall
be submitted to the shareholders of the terminating corporation for their
approval or rejection in the manner prescribed by the provisions of the New
Jersey Business Corporation Act, and the merger of the
<PAGE>
terminating corporation with and into the surviving corporation shall be
authorized in the manner prescribed by the laws of the jurisdiction of
organization of the surviving corporation.
7. In the event that the Agreement and Plan of Merger shall have
been approved by the shareholders entitled to vote of the terminating
corporation in the manner prescribed by the provisions of the New Jersey
Business Corporation Act, and in the event that the merger of the terminating
corporation with and into the surviving corporation shall have been duly
authorized in compliance with the laws of the jurisdiction of organization of
the surviving corporation, the terminating corporation and the surviving
corporation hereby stipulate that they will cause to be executed and filed
and/or recorded any document or documents prescribed by the laws of the State of
New Jersey and of the State of Delaware, and that they will cause to be
performed all necessary acts therein and elsewhere to effectuate the merger.
8. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation, respectively, are hereby
authorized, empowered and directed to do any and all things, and to make,
execute, deliver, file, and/or record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Agreement and Plan of Merger or
of the merger herein provided for.
9. The effective date in the State of New Jersey of the merger
herein provided for shall be the date of filing of the Certificate of Merger.
IN WITNESS WHEREOF, each of the constituent corporations are
executing this Agreement and Plan of Merger as of the 15th day of December, 1995
AMPLIDYNE, INC. (New Jersey)
By: /s/Devendar S. Bains
Name: Devendar S. Bains
Title: President
AMPLIDYNE, INC. (Delaware)
By: /s/Devendar S. Bains
Name: Devendar S. Bains
Title: President
2
<PAGE>
BYLAWS
OF
AMPLIDYNE, INC.
(a Delaware corporation)
------------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certficate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certficate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General
Corporation Law, the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any
<PAGE>
uncertificated shares, the corporation shall send to the registered owner
thereof any written notice prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the asssets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distibuted to the holders of
scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the resgistered holder thereof,
or by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting. In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a
<PAGE>
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining the stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by the General Corporation Law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
<PAGE>
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided that the first annual meeting
shall be held on a date within thirteen months after the organization of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of Delaware, as the directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meetng, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be tranacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
<PAGE>
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointments made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before
<PAGE>
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots,
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots, or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspector or inspectors, if any, shall make a
report in writing of any challenge, question, or matter determined by him or
them and execute a certificate of any fact found by him or them. Except as
otherwise required by subsection (e) of Section 231 of the General Corporation
Law, the provisions of that Section shall not apply to the corporation.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one vote.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. Any other action shall be authorized by a majority of the
votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Action taken pursuant to this paragraph shall be subject to the provisions of
Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITIONS. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors of the
corporation. The
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Board of Directors shall have the authority to fix the compensation of the
members thereof. The use of the phrase "whole board" herein refers to the total
number of directors which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of 3 persons. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be 3. The number of
directors may be increased or decreased by action of the stockholders or of the
directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may
resign at any time upon written notice to the corporation. Thereafter,
directors who are elected at an annual meeting of stockholders, and directors
who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal. Except as the General Corporation Law may otherwise
require, in the interim between annual meetings of stockholders or of special
meetings of stockholders called for the election of directors and/or for the
removal of one or more directors and for the filling of any vacancy in that
connection, newly created directorships and any vacancies in the Board of
Directors, including unfilled vacancies resulting from the removal of directors
for cause or without cause, may be filled by the vote of a majority of the
remaining directors then in office, although less than a quorum, or by the
sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
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- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the
Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General
Corporation Law, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a Secretary,
a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers with such
titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
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Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform such
duties in the management and operation of the corporation as shall be prescribed
in the resolutions of the Board of Directors designating and choosing such
officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
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ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
I HEREBY CERITIFY that the foregoing is a full, true, and correct copy of
the Bylaws of Amplidyne, Inc., a Delaware corporation, as in effect on the date
hereof.
Date: December 14, 1995
/s/ Nirmal Bains
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Secretary of
(SEAL)
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AMPLIDYNE, INC.
Incorporated Under the Laws of the State of Delaware
CUSIP: 032103103
COMMON STOCK
This certifies that
is the owner of
fully paid and non-assessable shares of Common Stock of $.0001 par value of
Amplidyne, Inc. transferable on the books of the Corporation by the holder
hereof in person of by a duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent. This certificate and the shares
represented hereby are issued and shall be held subject to all of the provisions
of the Certificate of Incorporation and Bylaws of the Corporation, and all
amendments thereto, copies of which are on file with the Transfer Agent, to all
of which the holder of this certificate, by acceptance hereof, assents.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by
the facsimile signatures of its duly authorized officers and to be sealed with
the facsimile seal of the Corporation.
Dated:
President:
Secretary:
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Option to Purchase
120,000 Shares of Common Stock
and
120,000 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 120,000 shares
of Common Stock, par value $.0001 per share ("Common Stock"), and 120,000 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-_____) declared effective by the Securities and Exchange
Commission on ________ __, 1996 (the "Registration Statement"). This Option (the
"Option") to purchase 120,000 shares of Common Stock and 120,000 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 1,200,000 shares of Common Stock and 1,200,000 Warrants
(collectively, the "Public Securities") through the Underwriter, in
consideration of $120.00 received for the Option.
Except as specifically otherwise provided herein, the Common
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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 Effective Date)
and ________ __, 2001, inclusive, the Holder shall have the option to purchase
Common Stock and Warrants hereunder at prices of $6.00 and $.12, 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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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.
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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
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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
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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 lockup as a result
of an underwritten
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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
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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
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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
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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.
11
<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 1,380,000
shares of Common Stock, par value $.0001 per share, and 1,380,000
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 120,000 additional shares of Common Stock
and 120,000 Warrants (the "Purchase Option"), the Company will issue
up to 1,500,000 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
2
<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.
3
<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
1,500,000 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 120,000 shares of Common Stock and 120,000
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
10
<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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<PAGE>
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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<PAGE>
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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<PAGE>
(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
15
<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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<PAGE>
(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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<PAGE>
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
21
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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,
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<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
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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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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
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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
4
<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
AMPLIDYNE, INC.
1996 INCENTIVE STOCK OPTION PLAN
(Adopted by the Board of Directors as of
May 1, 1996 and by the Stockholders
of the Company as of May 1, 1996)
1. Purpose. The purpose of the 1996 Incentive Stock Option Plan (the
"Plan") is to enable Amplidyne, Inc. (the "Company") to encourage key employees
and Directors to contribute to the success of the Company by granting such
individuals qualified options. In addition, non-employee directors may
participate in the Plan as provided herein. Options granted pursuant to the
Plan shall consist of qualified stock options.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company or by a Stock Option and Compensation Committee (the
"Committee") appointed by the Board of Directors and consisting of not less
than three (3) members of the Board of Directors, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"). The Board of Directors may from time to time appoint members
of the Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, on the Committee. No member
of the Board of Directors who is at the time, or within the preceding year was,
eligible to participate in the Plan or in any similar plan of the Committee or
any of its affiliates shall be a member of the Committee.
The Board of Directors shall determine the purchase price of the stock
covered by each options, employees and directors to whom, and the time or times
at which, options shall be granted, the number of shares to be covered by each
option, and the term of each option. In addition, the Board of Directors shall
have the power and authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements (which need not be identical),
and to make all other determinations deemed necessary or advisable for the
administration of the Plan. If the Committee is appointed, it shall exercise
such powers and duties, subject to the consent of the Board of Directors and
the provisions of the Plan.
If the Committee is appointed, the Board of Directors shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings at such times and places as it shall
2
deem advisable. A majority of the Committee members shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members.
Any decision or determination reduced to writing and signed by all the
Committee members shall be fully as effective as if it had been made by a vote
at a meeting duly called and held. The committee shall keep minutes of its
meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
3. Grantees. Subject to Section 2 hereof, options may be granted to
such key employees and directors (including non-employee directors) of the
Company and its subsidiaries as determined by the Board of Directors or the
Committee (each such employee a "Grantee").
4. Effectiveness and Termination of Plan. The Plan shall terminate
on the earliest of:
(a) The tenth anniversary of the effective date as determined
under this Section 4;
(b) The date when all shares of the Company's Common Stock, par
value $.0001 per share (the "Shares"), reserved for issuance under the Plan
shall have been acquired through exercise of options granted under the Plan; or
3
(c) Such earlier date as the Board of Directors may determine.
The Plan shall become effective as of the date of adoption thereof by
the Board of Directors of the Company, or the date the Plan is approved by the
stockholders, whichever is earlier. Any option outstanding under the Plan at
the time of the Plan's termination shall remain in effect in accordance with
its terms and conditions and those of the Plan.
5. The Shares. Subject to the provisions of Section 7, the
aggregate number of Shares which may be issued under the Plan shall be
1,500,000. Such number of Shares may be set aside out of the authorized but
unissued Shares not reserved for any other purpose or out of Shares held in
or acquired for the treasury of the Company. If all or part of an option is
unexercised, the Shares which were not exercised may again be available for
grant under the Plan.
6. Grant, Terms and Conditions of Option. Options may be granted by
the Board of Directors or the Committee at any time and from time to time prior
to the termination of the Plan. Except as hereinafter provided, options granted
pursuant to the Plan shall be subject to the following terms and conditions.
4
(a) The purchase price of the Shares subject to an option shall be
determined by the Board of Directors or the Committee whose determination shall
be final; it being understood and agreed that the purchase price need not be,
nor may it be less than, the fair market value of the Common Stock on the date
that the option is granted.
The exercise price shall be paid in full in United States dollars in
cash or by check at the time of exercise. At the discretion of the Board of
Directors or the Committee, the exercise price may be paid with (i) Shares
already owned by, and in the possession of, the Grantee or (ii) any combination
of United States dollars or Shares. Anything contained herein to the contrary
notwithstanding, any required withholding tax shall be paid by the Grantee in
full in United States dollars in cash or by check at the time of exercise of
an option. Shares used to satisfy the exercise price of an option shall be
valued at their fair market value as of the close of business on the day
immediately preceding the date of exercise. The exercise price shall be
subject to adjustment, but only as provided in Section 7 hereof. The Company may
lend the Grantee funds sufficient to pay the exercise price, subject to
5
limitations that may be established by the Board of Directors or the Committee.
(b) Duration and Exercise of Options. An option may be granted for
a term not exceeding ten (10) years from the date of grant; provided, however,
that no grant for more than five (5) years can be made to a holder of ten
percent (10%) or more of the Company's outstanding Common Stock. Further,
options may not be granted to an individual to the extent that in the calendar
year in which such options first becomes exercisable, the Common Stock subject
to such options has a fair market value on the date of grant in excess of
$100,000. Options shall be exercisable at such time and in such amounts (up to
the full amount thereof) as may be determined by the Board of Directors or the
Committee at the time of grant. If an option is exercisable in installments,
the Board of Directors or the Committee shall determine what events, if any,
will accelerate the exercise of the option.
The Plan shall be subject to approval by the Company's stockholders
within one (1) year from the date on which it was adopted. Prior to such
stockholder approval, options may be granted under the Plan, but any such
option shall not be exercisable prior to such stockholder approval. If the
Plan is not
6
approved by the Company's stockholders, the Plan shall terminate and all
options theretofore granted under the Plan shall terminate and become null
and void.
(c) Termination of Employment or Directorship. Except as otherwise
provided by the Board of Directors or the Committee, upon termination of the
Grantee's employment or resignation or termination from the Board of Directors,
the Grantee's rights to exercise an option shall be as follows:
(i) If the Grantee's employment or directorship is terminated
on account of total and permanent disability, any option may be exercised, to
the extent exercisable on the date of the Grantee's termination of employment
or directorship, by the Grantee (or by the Grantee's estate if the Grantee dies
after termination of employment or directorship) at any time within one (1)
year after termination of employment or directorship but in no event after the
expiration of the term of the option or stock appreciation right. For purposes
of the Plan, total and permanent disability means a mental or physical
condition that prevents a Grantee from performing his customary duties for the
Company for nine consecutive months or an aggregate of nine months in any
12-month period.
7
(ii) In the case of a Grantee whose employment or
directorship is terminated by death, the Grantee's estate shall have the right
for a period of one (1) year following the date of such death to exercise the
option to the extent the right to exercise had accrued prior to the date of the
Grantee's death but in no event after the expiration of the term of the option.
(iii) In the case of a Grantee whose employment or
directorship is terminated for any reason other than death or disability, the
Grantee (or the Grantee's estate in the event of the Grantee's death after such
termination) may, within thethree-month period following such termination,
exercise an option to the extent the right to exercise had accrued prior to
such termination but in no event after the expiration of the term of the
option. Notwithstanding the foregoing, except as otherwise provided by the Board
of Directors or the Committee, if the Grantee's termination of employment or
directorship is on account of material misconduct or any act that is materially
adverse to the Company, the Grantee's option shall expire as of the date of
termination of employment.
(iv) A Grantee's "estate" shall mean the Grantee's legal
representative of any person who acquires the right to exercise an option by
reason of the Grantee's death. The Board of
8
Directors or the Committee may in its discretion require the transferee of a
Grantee to supply it with written notice of the Grantee's death or disability
and to supply it with a copy of the will (in the case of the Grantee's death)
or such other evidence as the Board of Directors or the Committee deems
necessary to establish the validity of the transfer of an option. The Board of
Directors or the Committee may also require the agreement of the transferee to
be bound by all of the terms and conditions of the Plan.
(d) Transferability of Options. Options shall be transferable
only by will or the laws of descent and distribution and shall be exercisable
during the Grantee's lifetime only by the Grantee.
(e) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the Board of
Directors or the Committee may modify, extend or renew outstanding options
granted under the Plan, or accept the surrender of outstanding options (up to
the extent not theretofore exercised) and authorize the granting of new options
in substitution therefor (to the extent no theretofore exercised).
Notwithstanding the foregoing, however, no modification of an
9
option shall, without the consent of the Grantee, alter or impair any rights
or obligations under any option theretofore granted under the Plan.
(f) Other Terms and Conditions. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms of
the Plan, as the Board of Directors or the Committee shall deem appropriate.
7. Adjustments in the Shares.
(a) In the event the Shares, as presently constituted, shall be
changed into or exchanged for a different number or kind of stock or other
securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse
split, combination of shares, or otherwise) or if the number of such Shares
shall be increased through the payment of a stock dividend, there shall be
substituted for or added to each Share theretofore appropriated or thereafter
subject or which may become subject to an option under the Plan, the number of
kind of shares of stock or other securities into which each outstanding Share
shall be so changed, or for which each such Share shall be exchanged, or to
which each such Share shall be entitled, as the case may be.
10
<PAGE>
Outstanding options shall also be appropriately amended as to price and other
terms as may be necessary to reflect the foregoing events. In the event there
shall be any other change in the number or kind of the outstanding Shares, or
of any stock or other securities into which such Shares shall have been
changed, or for which such Shares shall have been exchanged, then, if the Board
of Directors shall, in its sole discretion, determine that such change
equitably requires an adjustment in any option theretofore granted or which may
be granted under the Plan, such adjustments shall be made in accordance with
such determination.
(b) Fractional Shares resulting from any adjustment in options
pursuant to this Section 7 may be settled in cash or otherwise as the Board of
Directors or the Committee may determine. Notice of any adjustment shall be
given by the Board of Directors or the Committee to each Grantee whose option
has been adjusted and such adjustment (whether or not such notice is given)
shall be effective and binding for all purposes of the Plan.
(c) The Committee or the Board of Directors shall have the power,
in the event of the disposition of all or substantially all of the assets of
the Company, or the dissolution of the Company, or the merger or consolidation
of the Company with or into
11
any other corporation, or the merger or consolidation of any other corporation
into the Company, or the making of a tender offer to purchase all or a
substantial portion of the Shares of the Company, to amend all outstanding
options (upon such conditions as it shall deem fit) in order to permit the
exercise of all such options prior to the effective date of any such
transaction and to terminate such options as of such effective date. If the
Board of Directors or the Committee shall exercise such power, all options
then outstanding and subject to such requirement shall be deemed to have been
amended to permit the exercise thereof in whole or in part by the Grantee at
any time or from time to time as determined by the Board of Directors or the
Committee prior to the effective date of such transaction and such options
shall be deemed to terminate upon such effective date.
8. Securities Law Requirements. No option granted pursuant to the
Plan shall be exercisable in whole or in part, nor shall the Company be
obligated to sell any Shares subject to any such option or stock appreciation
right, if such exercise, sale or settlement would, in the opinion of counsel
for the Company, violate the Securities Act of 1933 (or other Federal or
State statutes having similar requirements), as it may be in effect at that
time. Each
12
option shall be subject to the further requirement that, if at any time
the Board of Directors shall determine in its discretion that the listing,
registration or qualification of the Shares subject to such option under any
securities exchange requirements or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of,
or in connection with, the granting of such option or the issuance of Shares
thereunder, such option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors.
9. Amendment of the Plan.
(a) Options shall be evidenced by such form of agreement as is
approved by the Board of Directors or the Committee. The Board of Directors may
amend the Plan, may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option in the manner and to the extent it
shall deem desirable; provided, however, except as provided in Section 7 and
this Section 9, unless the stockholders of the Company shall have first
approved thereof: (i) no option shall be exercisable more than ten years after
the date it is granted; (ii) the expiration
13
date of the Plan shall not be extended; and (iii) no amendment shall be of any
force and effect if such amendment increases the number of Shares available for
the granting of options may be granted, materially increases the benefits
accruing the Grantees or materially modifies the requirements as to eligibility
or participation in the Plan. In addition, no amendment of the Plan shall,
without the consent of a Grantee, adversely affect the Grantee's rights under
any option.
(b) The Board of Directors also shall have the power to amend or
terminate the Plan in such respect as the Board of Directors shall deem
advisable in order to ensure favorable Federal income tax treatment for the
Company.
10. Application of Funds. The proceeds received by the Company from
the sale of Shares will be used for general corporate purposes.
11. No Obligation to Exercise Option. The granting of a option shall
impose no obligation upon the Grantee (or upon a transferee of a Grantee) to
exercise such option.
12. Plan Not a Contract of Employment. The Plan is not a contract
of employment, and the terms of employment of any Grantee shall not be affected
in any way by the Plan or related instruments
14
except as specifically provided therein. The establishment of the Plan shall
not be construed as conferring any legal rights upon any Grantee for a
continuation of employment, nor shall it interfere with the right of the
company or any subsidiary to discharge any Grantee and to treat him without
regard to the effect which such treatment might have upon him as a Grantee.
13. Expenses of the Plan. All of the expenses of the Plan shall be
paid by the Company.
14. Compliance with Applicable Law. Notwithstanding anything herein
to the contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for Shares pursuant to the exercise of an option,
unless and until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations or governmental authority and the requirements of any exchange upon
which Shares are traded. The Company shall in no event be obligated to
register any securities pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended) or to take any other action in order to cause
the issuance and delivery of such certificates to comply with any such law,
regulation or requirement. The Board of Directors or Committee may require, as
15
a condition of the issuance and delivery of such certificates and in order to
ensure compliance with such laws, regulations and requirements, that the
Grantee make such covenants, agreements and representations as the Board of
Directors or Committee, in its sole discretion, deems necessary or desirable.
15. Governing Law. Except the extent preempted by Federal law, the
Plan shall be construed and enforced in accordance with, and governed by, the
laws of the State of Delaware.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 1, 1996, by and between Amplidyne,
Inc., a Delaware corporation, with offices located at 144 Belmont Drive,
Somerset, NJ 08873 (the "Company"), and Devendar S. Bains, an individual
residing at 78 Westcott Road, Neshanic, NJ 08853 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to secure the unique experience, ability and
services of the Executive upon the terms and conditions hereinafter set forth
and to prevent any other competitive business from securing his services; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as the President and Chief Executive
Officer of the Company, subject to the terms and conditions set forth in this
Agreement.
Section 2. Duties. The Executive shall serve as President and Chief
Executive Officer of the Company and shall properly perform such duties as may
be assigned to him from time to time by
<PAGE>
the Board of Directors of the Company. If requested by the Company, the
Executive shall serve on the Board of Directors or any committee thereof
without additional compensation. During the term of this Agreement, the
Executive shall devote substantially all of his business time to the
performance of his duties hereunder unless otherwise authorized by the Board of
Directors. Executive agrees to be examined by a physician at the Company's
expense in order for the Company to obtain a key man life insurance policy in
an amount not to exceed $1,000,000 upon terms and conditions acceptable to the
Company.
Section 3. Term of Employment.
The term of the Executive's employment shall be for a period of sixty
(60) months commencing on the date hereof (the "Term"), subject to earlier
termination by the parties pursuant to Sections 4,6 and 7 hereof. The Term of
this Agreement shall be automatically extended for additional one (1) year
renewals, unless either party notifies to other in writing at least ninety (90)
days prior to the expiration of the then existing Term of its intention not to
extend the Term.
Section 4. Compensation of Executive.
4.1 Salary. Company shall pay to Executive the following annual
compensation for his services hereunder, less such
2
<PAGE>
deductions as shall be required to be withheld by applicable law and
regulations: a base salary of One Hundred Sixty-Two Thousand Dollars ($162,000)
per annum (the "Base Salary"). All salaries payable to Executive shall be paid
at such regular weekly, biweekly or semi-monthly time or times as the Company
makes payment of its regular payroll in the regular course of business.
4.2 Discretionary Bonus. During the Term and in addition to the
annual salary set forth in Section 4.1 above, the Executive shall be entitled
to such bonus compensation as the Board of Directors of the Company may
determine from time to time in its sole discretion payable in cash, options
and/or in capital stock of the Company.
4.3 Expenses. During the Term, the Company shall provide the
Executive with an allowance for automobile expenses and reimburse the Executive
for all reasonable and necessary travel expenses and other bona fide
disbursements incurred by the Executive on behalf of the Company, in
performance of the Executive's duties hereunder.
4.4 Benefits. The Executive shall be permitted during the Term to
participate in any hospitalization or disability insurance plans, health
programs, pension plans, bonus plans or similar benefits that may be available
to other executives of the
3
<PAGE>
Company to the extent the Executive is eligible under the terms of such plans
or programs. The Company agrees to provide the Executive with a paid health
insurance plan.
4.5 Change of Control.
(a) In the event that there occurs a "Change of Control" (as defined
below) during the term of this Agreement and as a result thereof the Executive
resigns or this Agreement is terminated, the Company expressly agrees that upon
such resignation or termination, the Company shall pay to the Executive a sum
equal to two times the then unpaid balance of the entire compensation that the
Executive would have been entitled to through the end of the Term, but in no
event less than $200,000. As used herein, the term "Change of Control" shall
mean, subject to Section 4.5(b) hereof, either
(i) a sale of all or substantially all of the assets
of the Company other than by way of a public
offering of the Company's securities,
(ii) a merger or consolidation of the Company, whereby
the holders of equity securities of the Company prior
to the transaction, hold less than 50% of the total
voting power of the surviving corporation, or
(iii) the sale or transfer of shares of the Company by
the Company and/or any one or more of its shareholders,
in one transaction or a series of transactions, to one
or more parties under circumstances whereby the holders
of equity
4
<PAGE>
securities of the Company prior to the transaction,
hold less than 50% of the total voting power of the
surviving corporation.
(b) Notwithstanding anything set forth herein to the contrary, in the
event that the Executive, as a member of the Company's Board of Directors,
votes in favor of any of the transactions described in either Section 4.6(i) or
4.6(ii) below, then in such event, there shall not be deemed to have occurred a
"Change of Control" for the purposes of this Agreement.
4.6 Acceleration of Compensation. In the event that either: (i) a
tender offer for shares of the Company's Common Stock is made, which tender is
not approved by the Company's Board of Directors and a majority of the
Company's outstanding stock is tendered thereunder, or (ii) a Board of
Directors, not recommended by management is empaneled, then and in either of
those events, two times the then unpaid balance of the entire compensation
required to be paid pursuant to this Agreement through the end of the Term,
shall be immediately due and payable to the Executive.
5. Vacations. The Executive shall be entitled to a vacation of four (4)
weeks per year, during which period his salary shall be paid in full. The
Executive shall take his vacation at such time or times as the Executive and
the Company shall determine is mutually convenient.
5
<PAGE>
6. Disability of the Executive. If the Executive is incapacitated or
disabled by accident, sickness or otherwise (including, without limitation, as
a result of abuse of alcohol or other drugs or controlled substances) so as to
render the Executive mentally or physically incapable of performing the
services required to be performed under this Agreement for a period of one
hundred twenty (120) consecutive days or longer or for any one hundred eighty
(180) days in any period of three hundred sixty (360) consecutive days (a
"Disability"), the Company may, at that time or any time thereafter, at its
option, terminate the employment of the Executive under this Agreement
immediately upon giving the Executive notice to that effect. In the event of
the Disability of the Executive, the Executive shall receive severance
compensation equal to the Base Salary for the greater of (a) the remainder of
the Term of this Agreement and (b) the twelve (12) month period commencing on
the Termination Date (as defined below).
Section 7. Termination.
7.1 Termination for Cause. The Company may terminate the employment of the
Executive and all of the Company's obligations under this Agreement at any time
for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean (i) the
6
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Executive's misconduct could reasonably be expected to have a material adverse
effect on the business and affairs of the Company, (ii) the Executive's
disregard of lawful instructions of the Company's Board of Directors consistent
with the Executive's position relating to the business of the Company or
neglect of duties or failure to act, which, in each case, could reasonably be
expected to have a material adverse effect on the business and affairs of the
Company, (iii) the commission by the Executive of an act constituting common
law fraud, or a felony, or criminal act against the Company or any affiliate
thereof or any of the assets of any of them, (iv) conviction of a crime
involving moral turpitude or (v) the Executive's material breach of any of the
agreements contained herein. A termination pursuant to Section 7.1(i), (ii)or
(v) shall take effect thirty (30) days after the giving of the notice
contemplated hereby unless the Executive shall, during such thirty (30) day
period, remedy to the satisfaction of the Board of Directors of the Company the
misconduct, disregard or breach specified in such notice; provided, however,
that such termination shall take effect immediately upon the giving of such
notice if the Board of Directors of the Company shall, in its sole discretion,
have determined that such misconduct, disregard or breach is not remediable
(which
7
<PAGE>
determination shall be stated in such notice). A termination pursuant to
Section 7.1(iii) or (iv) shall take effect immediately upon the giving of the
notice contemplated hereby.
7.2 Termination without Cause. The Company may terminate the employment of
the Executive and all of the Company's obligations under this Agreement (except
as hereinafter provided) at any time during the Term without Cause
(hereinafter, "Not for Cause") by giving the Executive written notice of such
termination, to be effective fifteen (15) days following the giving of such
written notice.
7.3 Termination for Good Reason; Resignation. The Executive may (i) resign
or (ii) terminate his employment and all of his obligations under this
Agreement at any time during the Term for Good Reason (as hereinafter defined)
by giving the Company notice of such termination, with reasonable specificity
of the details thereof, to be effective thirty (30) days following the giving
of such written notice. Good Reason shall mean the occurrence of any of the
following events or conditions:
(i)(A) the assignment to the Executive of any duties materially
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as
8
<PAGE>
contemplated by Section 2 of this Agreement, or (B) any other action by the
Company which results in a material diminution in such position, authority,
duties or responsibilities, other than an insubstantial and inadvertent action
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive; or (ii) any failure by the Company to comply with the
provisions of Section 4 or 5 of this Agreement, other than an insubstantial and
inadvertent failure which is remedied by the Company promptly after receipt of
notice thereof given by the Executive; or (iii) the Company's requiring the
Executive to be based at any office or location outside a fifteen (15) mile
radius from the Company's principal executive offices, except for travel
reasonably required in the performance of the Executive's
responsibilities; or (iv) any purported termination by the Company of the
Executive's employment otherwise than as permitted by this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement.
For purposes of this subsection, any good faith determination of Good
Reason made by the Executive shall be conclusive.
For convenience of reference, the date upon which any termination of
the employment of the Executive pursuant to Sections
9
<PAGE>
6 or 7 shall be effective shall be hereinafter referred to as the "Termination
Date".
8. Effect of Termination of Employment.
(a) Upon the termination of the Executive's employment for Cause, neither
the Executive nor the Executive's beneficiaries or estate shall have any
further rights under this Agreement or any claims against the Company arising
out of this Agreement, except the right to receive (i) the unpaid portion of
the Base Salary provided for in Section 4.1, computed on a pro rata basis to
the Termination Date (the "Unpaid Salary Amount") and (ii) reimbursement
for any expenses for which the Executive shall not have theretofore been
reimbursed, as provided in Section 4.5 (the "Expense Reimbursement Amount").
(b) Upon the termination of the Executive's employment by the Company Not
for Cause or by the Executive for Good Reason, neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement,
except the right to receive (i) the Unpaid Salary Amount, (ii) the Expense
Reimbursement Amount, and (iii) severance compensation equal to the Base Salary
for the remainder of the Term.
10
<PAGE>
(c) In the event the Executive resigns from the employment by the Company
prior to the end of the Term, neither the Executive nor the Executive's
beneficiaries or estate shall have any further rights under this Agreement or
claims against the Company arising out of this Agreement except the right to
receive (i) the Unpaid Salary Amount, and (ii) the Expense Reimbursement
Amount.
Notwithstanding the preceding provisions of this Section 8, in the
event the payments to be received by the Executive would constitute an "excess
parachute payment" under the Internal Revenue Code of 1986, and applicable
regulations as then in effect, then such payments shall be reduced accordingly
so as not to constitute an "excess parachute payment."
Section 9. Disclosure of Confidential Information. The Executive
recognizes that he has had and will continue to have access to secret and
confidential information regarding the Company, including but not limited to
its customer list, products, formulae, know-how, and business and marketing
plans ("Confidential Information"). The Executive acknowledges that such
information is of great value to the Company, is the sole property of the
Company, and has been and will be acquired by his in confidence. In
consideration of the obligations undertaken by the Company herein,
11
<PAGE>
the Executive will not, at any time, during or after his employment hereunder,
reveal, divulge or make known to any person, any Confidential Information
acquired by the Executive during the course of his employment. The provisions
of this Section 9 shall survive the Executive's employment hereunder for a
period of two years.
Section 10. Covenant Not To Compete.
(a) The Executive recognizes that the services to be performed by him
hereunder are special, unique and extraordinary. The parties confirm that it is
reasonably necessary for the protection of Company that the Executive agree,
and accordingly, the Executive does hereby agree, that he shall not, directly
or indirectly, at any time during the term of the Agreement and the "Restricted
Period" (as defined in Section 10(e) below):
(i) except as provided in Subsection (c) below,
be engaged in the linear power amplifier industry
or provide technical assistance, advice or
counseling regarding the linear power amplifier
industry in any state in the United States or any
other country in which the Company or any affiliate
thereof is engaged in business, either on his own
behalf or as an officer, director, stockholder,
partner,
12
<PAGE>
consultant, associate, employee, owner, agent,
creditor, independent contractor, or co-venturer
of any third party; or
(ii) employ or engage, or cause or authorize, directly
or indirectly, to be employed or engaged, for or
on behalf of himself or any third party, any
employee or agent of Company or any affiliate
thereof.
(b) The Executive hereby agrees that he will not, directly or indirectly,
for or on behalf of himself or any third party, at any time during the term of
the Agreement and during the Restricted Period solicit any customers of the
Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 10 shall be
deemed to be unenforceable by reason of the extent, duration or geographical
scope thereof, or otherwise, then the court making such determination shall
have the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form this Section shall then be
enforceable in the manner contemplated hereby.
(d) This Section 10 shall not be construed to prevent Executive from
owning, directly or indirectly, in the aggregate, an amount not exceeding one
percent (1%) of the issued and outstanding
13
<PAGE>
voting securities of any class of any company whose voting capital stock is
traded on a national securities exchange or on the over-the-counter market
other than securities of the Company.
(e) The term "Restricted Period," as used in this Section 10, shall mean
the period of the Executive's actual employment hereunder plus: (i) in the
event that this Agreement expires or the Executive is terminated for Cause, the
twenty four (24) months after the Termination Date or (ii) in the event that
the Executive is terminated without Cause, for Good Reason or for a Disability,
six (6) months after the Termination Date.
(f) The provisions of this Section 10 shall survive the end of the
Restricted Period as provided in Section 10(e) hereof.
Section 11. Miscellaneous.
11.1 Injunctive Relief. The Executive acknowledges that the services
to be rendered under the provisions of this Agreement are of a special, unique
and extraordinary character and that it would be difficult or impossible to
replace such services. Accordingly, the Executive agrees that any breach or
threatened breach by him of Sections 9 or 10 of this Agreement shall entitle
the Company, in addition to all other legal remedies available to it, to apply
to any court of competent jurisdiction to seek to enjoin such breach or
threatened breach. The parties understand
14
<PAGE>
and intend that each restriction agreed to by Executive hereinabove shall be
construed as separable and divisible from every other restriction, that the
unenforceability of any restriction shall not limit the enforceability, in
whole or in part, of any other restriction, and that one or more or all of such
restrictions may be enforced in whole or in part as the circumstances warrant.
In the event that any restriction in this Agreement is more restrictive than
permitted by law in the jurisdiction in which Company seeks enforcement
thereof, such restriction shall be limited to the extent permitted by law.
11.2 Assignments. Neither the Executive nor the Company may assign or
delegate any of their rights or duties under this Agreement without the express
written consent of the other.
11.3 Entire Agreement. This Agreement constitutes and embodies the
full and complete understanding and agreement of the parties with respect to
the Executive's employment by the Company, supersedes all prior understandings
and agreements, whether oral or written, between the Executive and the Company,
and shall not be amended, modified or changed except by an instrument in
writing executed by the party to be charged. The invalidity or partial
invalidity of one or more provisions of this Agreement shall not invalidate any
other provision of this Agreement. No waiver by
15
<PAGE>
either party of any provision or condition to be performed shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same time or
any prior or subsequent time.
11.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
11.5 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered, sent by
registered or certified mail, return receipt requested, postage prepaid, or by
private overnight mail service (e.g. Federal Express) to the party at the
address set forth above or to such other address as either party may hereafter
give notice of in accordance with the provisions hereof. Notices shall be
deemed given on the sooner of the date actually received or the third business
day after sending.
11.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New
16
<PAGE>
Jersey without giving effect to such State's conflicts of laws provisions and
each of the parties hereto irrevocably consents to the jurisdiction and venue
of the federal and state courts located in the State of New Jersey, County of
Somerset.
11.8 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one of the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
AMPLIDYNE, INC.
By:/s/ Tarlochan Bains
---------------------
Name: Tarlochan Bains
Title: Vice President
/s/ Devendar S. Bains
-------------------
Devendar S. Bains
17
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 1, 1996, by and between
Amplidyne, Inc., a Delaware corporation, with offices located at 144 Belmont
Drive, Somerset, NJ 08873 (the "Company"), and Tarlochan Bains, an individual
residing at 16 Drake Road, Neshanic, NJ 08853 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to secure the unique experience, ability
and services of the Executive upon the terms and conditions hereinafter set
forth and to prevent any other competitive business from securing his services;
and
WHEREAS, the Executive desires to render services to the Company upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as the Vice President-Sales and
Marketing of the Company, subject to the terms and conditions set forth in this
Agreement.
Section 2. Duties. The Executive shall serve as Vice President-Sales
and Marketing of the Company and shall properly perform such duties as may be
assigned to him from time to time by
<PAGE>
the Board of Directors of the Company. If requested by the Company, the
Executive shall serve on the Board of Directors or any committee thereof without
additional compensation. During the term of this Agreement, the Executive shall
devote substantially all of his business time to the performance of his duties
hereunder unless otherwise authorized by the Board of Directors.
Section 3. Term of Employment.
The term of the Executive's employment shall be for a period
of sixty (60) months commencing on the date hereof (the "Term"), subject to
earlier termination by the parties pursuant to Sections 4,6 and 7 hereof. The
Term of this Agreement shall be automatically extended for additional one (1)
year renewals, unless either party notifies to other in writing at least ninety
(90) days prior to the expiration of the then existing Term of its intention not
to extend the Term.
Section 4. Compensation of Executive.
4.1 Salary. Company shall pay to Executive the following annual
compensation for his services hereunder, less such deductions as shall be
required to be withheld by applicable law and regulations: a base salary of One
Hundred Thousand Dollars ($100,000) per annum (the "Base Salary"). All salaries
payable to Executive shall be paid at such regular weekly, biweekly or
semi-
2
<PAGE>
monthly time or times as the Company makes payment of its regular payroll in the
regular course of business.
4.2 Discretionary Bonus. During the Term and in addition to
the annual salary set forth in Section 4.1 above, the Executive shall be
entitled to such bonus compensation as the Board of Directors of the Company may
determine from time to time in its sole discretion payable in cash, options
and/or in capital stock of the Company.
4.3 Expenses. During the Term, the Company shall provide the
Executive with an allowance for automobile expenses and reimburse the Executive
for all reasonable and necessary travel expenses and other bona fide
disbursements incurred by the Executive on behalf of the Company, in performance
of the Executive's duties hereunder.
4.4 Benefits. The Executive shall be permitted during the Term
to participate in any hospitalization or disability insurance plans, health
programs, pension plans, bonus plans or similar benefits that may be available
to other executives of the Company to the extent the Executive is eligible under
the terms of such plans or programs. The Company agrees to provide the Executive
with a paid health insurance plan.
4.5 Change of Control.
3
<PAGE>
(a) In the event that there occurs a "Change of Control" (as
defined below) during the term of this Agreement and as a result thereof the
Executive resigns or this Agreement is terminated, the Company expressly agrees
that upon such resignation or termination, the Company shall pay to the
Executive a sum equal to two times the then unpaid balance of the entire
compensation that the Executive would have been entitled to through the end of
the Term, but in no event less than $200,000. As used herein, the term "Change
of Control" shall mean, subject to Section 4.5(b) hereof, either
(i) a sale of all or substantially all of the assets of the Company
other than by way of a public offering of the Company's
securities,
(ii) a merger or consolidation of the Company, whereby the holders
of equity securities of the Company prior to the transaction,
hold less than 50% of the total voting power of the surviving
corporation, or
(iii) the sale or transfer of shares of the Company by the Company
and/or any one or more of its shareholders, in one transaction
or a series of transactions, to one or more parties under
circumstances whereby the holders of equity securities of
the Company prior to the transaction, hold less than 50% of the
total voting power of the surviving corporation.
(b) Notwithstanding anything set forth herein to the contrary, in
the event that the Executive, as a member of the
4
<PAGE>
Company's Board of Directors, votes in favor of any of the transactions
described in either Section 4.6(i) or 4.6(ii) below, then in such event, there
shall not be deemed to have occurred a "Change of Control" for the purposes of
this Agreement.
4.6 Acceleration of Compensation. In the event that either: (i) a
tender offer for shares of the Company's Common Stock is made, which tender is
not approved by the Company's Board of Directors and a majority of the Company's
outstanding stock is tendered thereunder, or (ii) a Board of Directors, not
recommended by management is empaneled, then and in either of those events, two
times the then unpaid balance of the entire compensation required to be paid
pursuant to this Agreement through the end of the Term, shall be immediately due
and payable to the Executive.
5. Vacations. The Executive shall be entitled to a vacation of four (4)
weeks per year, during which period his salary shall be paid in full. The
Executive shall take his vacation at such time or times as the Executive and the
Company shall determine is mutually convenient.
6. Disability of the Executive. If the Executive is incapacitated or
disabled by accident, sickness or otherwise (including, without limitation, as a
result of abuse of alcohol or other drugs or controlled substances) so as to
render the Executive
5
<PAGE>
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of one hundred twenty (120)
consecutive days or longer or for any one hundred eighty (180) days in any
period of three hundred sixty (360) consecutive days (a "Disability"), the
Company may, at that time or any time thereafter, at its option, terminate the
employment of the Executive under this Agreement immediately upon giving the
Executive notice to that effect. In the event of the Disability of the
Executive, the Executive shall receive severance compensation equal to the Base
Salary for the greater of (a) the remainder of the Term of this Agreement and
(b) the twelve (12) month period commencing on the Termination Date (as defined
below).
Section 7. Termination.
7.1 Termination for Cause. The Company may terminate the employment of
the Executive and all of the Company's obligations under this Agreement at any
time for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean (i) the Executive's misconduct could reasonably be expected to have a
material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of Directors
consistent with the Executive's
6
<PAGE>
position relating to the business of the Company or neglect of duties or failure
to act, which, in each case, could reasonably be expected to have a material
adverse effect on the business and affairs of the Company, (iii) the commission
by the Executive of an act constituting common law fraud, or a felony, or
criminal act against the Company or any affiliate thereof or any of the assets
of any of them, (iv) conviction of a crime involving moral turpitude or (v) the
Executive's material breach of any of the agreements contained herein. A
termination pursuant to Section 7.1(i), (ii)or (v) shall take effect thirty (30)
days after the giving of the notice contemplated hereby unless the Executive
shall, during such thirty (30) day period, remedy to the satisfaction of the
Board of Directors of the Company the misconduct, disregard or breach specified
in such notice; provided, however, that such termination shall take effect
immediately upon the giving of such notice if the Board of Directors of the
Company shall, in its sole discretion, have determined that such misconduct,
disregard or breach is not remediable (which determination shall be stated in
such notice). A termination pursuant to Section 7.1(iii) or (iv) shall take
effect immediately upon the giving of the notice contemplated hereby.
7
<PAGE>
7.2 Termination without Cause. The Company may terminate the employment
of the Executive and all of the Company's obligations under this Agreement
(except as hereinafter provided) at any time during the Term without Cause
(hereinafter, "Not for Cause") by giving the Executive written notice of such
termination, to be effective fifteen (15) days following the giving of such
written notice.
7.3 Termination for Good Reason; Resignation. The Executive may (i)
resign or (ii) terminate his employment and all of his obligations under this
Agreement at any time during the Term for Good Reason (as hereinafter defined)
by giving the Company notice of such termination, with reasonable specificity of
the details thereof, to be effective thirty (30) days following the giving of
such written notice. Good Reason shall mean the occurrence of any of the
following events or conditions:
(i)(A) the assignment to the Executive of any duties materially
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2 of this Agreement, or (B) any
other action by the Company which results in a material diminution in such
position, authority, duties or responsibilities, other than an
8
<PAGE>
insubstantial and inadvertent action which is remedied by the Company promptly
after receipt of notice thereof given by the Executive; or (ii) any failure by
the Company to comply with the provisions of Section 4 or 5 of this Agreement,
other than an insubstantial and inadvertent failure which is remedied by the
Company promptly after receipt of notice thereof given by the Executive; or
(iii) the Company's requiring the Executive to be based at any office or
location outside a fifteen (15) mile radius from the Company's principal
executive offices, except for travel reasonably required in the performance
of the Executive's responsibilities; or (iv) any purported termination by the
Company of the Executive's employment otherwise than as permitted by this
Agreement, it being understood that any such purported termination shall not be
effective for any purpose of this Agreement.
For purposes of this subsection, any good faith determination of Good
Reason made by the Executive shall be conclusive.
For convenience of reference, the date upon which any termination of
the employment of the Executive pursuant to Sections 6 or 7 shall be effective
shall be hereinafter referred to as the "Termination Date".
8. Effect of Termination of Employment.
9
<PAGE>
(a) Upon the termination of the Executive's employment for Cause,
neither the Executive nor the Executive's beneficiaries or estate shall have any
further rights under this Agreement or any claims against the Company arising
out of this Agreement, except the right to receive (i) the unpaid portion of the
Base Salary provided for in Section 4.1, computed on a pro rata basis to the
Termination Date (the "Unpaid Salary Amount") and (ii) reimbursement for any
expenses for which the Executive shall not have theretofore been reimbursed,
as provided in Section 4.5 (the "Expense Reimbursement Amount").
(b) Upon the termination of the Executive's employment by the
Company Not for Cause or by the Executive for Good Reason, neither the Executive
nor the Executive's beneficiaries or estate shall have any further rights under
this Agreement or any claims against the Company arising out of this Agreement,
except the right to receive (i) the Unpaid Salary Amount, (ii) the Expense
Reimbursement Amount, and (iii) severance compensation equal to the Base Salary
for the remainder of the Term.
(c) In the event the Executive resigns from the employment by
the Company prior to the end of the Term, neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights under this
Agreement or claims against the
10
<PAGE>
Company arising out of this Agreement except the right to receive (i) the Unpaid
Salary Amount, and (ii) the Expense Reimbursement Amount.
Notwithstanding the preceding provisions of this Section 8, in the
event the payments to be received by the Executive would constitute an "excess
parachute payment" under the Internal Revenue Code of 1986, and applicable
regulations as then in effect, then such payments shall be reduced accordingly
so as not to constitute an "excess parachute payment."
Section 9. Disclosure of Confidential Information. The Executive
recognizes that he has had and will continue to have access to secret and
confidential information regarding the Company, including but not limited to its
customer list, products, formulae, know-how, and business and marketing plans
("Confidential Information"). The Executive acknowledges that such information
is of great value to the Company, is the sole property of the Company, and has
been and will be acquired by his in confidence. In consideration of the
obligations undertaken by the Company herein, the Executive will not, at any
time, during or after his employment hereunder, reveal, divulge or make known to
any person, any Confidential Information acquired by the Executive during the
course of his employment. The provisions of this Section 9 shall
11
<PAGE>
survive the Executive's employment hereunder for a period of two years.
Section 10. Covenant Not To Compete.
(a) The Executive recognizes that the services to be performed by him
hereunder are special, unique and extraordinary. The parties confirm that it is
reasonably necessary for the protection of Company that the Executive agree, and
accordingly, the Executive does hereby agree, that he shall not, directly or
indirectly, at any time during the term of the Agreement and the "Restricted
Period" (as defined in Section 10(e) below):
(i) except as provided in Subsection (c) below, be engaged in the
linear power amplifier industry or provide technical assistance,
advice or counseling regarding the linear power amplifier
industry in any state in the United States or any other country in
which the Company or any affiliate thereof is engaged in business,
either on his own behalf or as an officer, director, stockholder,
partner, consultant, associate, employee, owner, agent,
creditor, independent contractor, or co-venturer of any third
party; or
12
<PAGE>
(ii) employ or engage, or cause or authorize, directly or indirectly,
to be employed or engaged, for or on behalf of himself or any
third party, any employee or agent of Company or any affiliate
thereof.
(b) The Executive hereby agrees that he will not, directly or indirectly,
for or on behalf of himself or any third party, at any time during the term of
the Agreement and during the Restricted Period solicit any customers of the
Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 10 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
(d) This Section 10 shall not be construed to prevent Executive from
owning, directly or indirectly, in the aggregate, an amount not exceeding one
percent (1%) of the issued and outstanding voting securities of any class of any
company whose voting capital stock is traded on a national securities exchange
or on the over-the-counter market other than securities of the Company.
13
<PAGE>
(e) The term "Restricted Period," as used in this Section 10, shall
mean the period of the Executive's actual employment hereunder plus: (i) in the
event that this Agreement expires or the Executive is terminated for Cause, the
twenty four (24) months after the Termination Date or (ii) in the event that the
Executive is terminated without Cause, for Good Reason or for a Disability, six
(6) months after the Termination Date.
(f) The provisions of this Section 10 shall survive the end of the
Restricted Period as provided in Section 10(e) hereof.
Section 11. Miscellaneous.
11.1 Injunctive Relief. The Executive acknowledges that the
services to be rendered under the provisions of this Agreement are of a special,
unique and extraordinary character and that it would be difficult or impossible
to replace such services. Accordingly, the Executive agrees that any breach or
threatened breach by him of Sections 9 or 10 of this Agreement shall entitle the
Company, in addition to all other legal remedies available to it, to apply to
any court of competent jurisdiction to seek to enjoin such breach or threatened
breach. The parties understand and intend that each restriction agreed to by
Executive hereinabove shall be construed as separable and divisible from every
other restriction, that the unenforceability of any restriction shall not
14
<PAGE>
limit the enforceability, in whole or in part, of any other restriction, and
that one or more or all of such restrictions may be enforced in whole or in part
as the circumstances warrant. In the event that any restriction in this
Agreement is more restrictive than permitted by law in the jurisdiction in which
Company seeks enforcement thereof, such restriction shall be limited to the
extent permitted by law.
11.2 Assignments. Neither the Executive nor the Company may
assign or delegate any of their rights or duties under this Agreement without
the express written consent of the other.
11.3 Entire Agreement. This Agreement constitutes and embodies
the full and complete understanding and agreement of the parties with respect to
the Executive's employment by the Company, supersedes all prior understandings
and agreements, whether oral or written, between the Executive and the Company,
and shall not be amended, modified or changed except by an instrument in writing
executed by the party to be charged. The invalidity or partial invalidity of one
or more provisions of this Agreement shall not invalidate any other provision of
this Agreement. No waiver by either party of any provision or condition to be
performed shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or any prior or subsequent time.
15
<PAGE>
11.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
11.5 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered, sent by
registered or certified mail, return receipt requested, postage prepaid, or by
private overnight mail service (e.g. Federal Express) to the party at the
address set forth above or to such other address as either party may hereafter
give notice of in accordance with the provisions hereof. Notices shall be deemed
given on the sooner of the date actually received or the third business day
after sending.
11.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey without giving
effect to such State's conflicts of laws provisions and each of the parties
hereto irrevocably consents to
16
<PAGE>
the jurisdiction and venue of the federal and state courts located in the State
of New Jersey, County of Somerset.
11.8 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one of the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
AMPLIDYNE, INC.
By: /s/ Devendar S. Bains
--------------------------------------
Name: Devendar S. Bains
Title: Vice President
/s/ Tarlochan Bains
--------------------------------------
Tarlochan Bains
17
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 1, 1996, by and between Amplidyne,
Inc., a Delaware corporation, with offices located at 144 Belmont Drive,
Somerset, NJ 08873 (the "Company"), and Nirmal Bains, an individual residing at
78 Westcott Road, Neshanic, NJ 08853 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to secure the unique experience, ability and
services of the Executive upon the terms and conditions hereinafter set forth
and to prevent any other competitive business from securing her services; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as the Secretary of the Company,
subject to the terms and conditions set forth in this Agreement.
Section 2. Duties. The Executive shall serve as Secretary of the
Company and shall properly perform such duties as may be assigned to her from
time to time by the Board of Directors of the
<PAGE>
Company. If requested by the Company, the Executive shall serve on the
Board of Directors or any committee thereof without additional compensation.
During the term of this Agreement, the Executive shall devote substantially all
of her business time to the performance of her duties hereunder unless otherwise
authorized by the Board of Directors.
Section 3. Term of Employment.
The term of the Executive's employment shall be for a period of sixty (60)
months commencing on the date hereof (the "Term"), subject to earlier
termination by the parties pursuant to Sections 4,6 and 7 hereof. The Term of
this Agreement shall be automatically extended for additional one (1) year
renewals, unless either party notifies to other in writing at least ninety (90)
days prior to the expiration of the then existing Term of its intention not to
extend the Term.
Section 4. Compensation of Executive.
4.1 Salary. Company shall pay to Executive the following annual
compensation for her services hereunder, less such deductions as shall be
required to be withheld by applicable law and regulations: a base salary of
Fifty Thousand Dollars ($50,000) per annum (the "Base Salary"). All salaries
payable to Executive shall be paid at such regular weekly, biweekly or
semi-monthly time
2
<PAGE>
or times as the Company makes payment of its regular payroll in the regular
course of business.
4.2 Discretionary Bonus. During the Term and in addition to the annual
salary set forth in Section 4.1 above, the Executive shall be entitled to such
bonus compensation as the Board of Directors of the Company may determine from
time to time in its sole discretion payable in cash, options and/or in capital
stock of the Company.
4.3 Expenses. During the Term, the Company shall provide the Executive with
an allowance for automobile expenses and reimburse the Executive for all
reasonable and necessary travel expenses and other bona fide disbursements
incurred by the Executive on behalf of the Company, in performance of the
Executive's duties hereunder.
4.4 Benefits. The Executive shall be permitted during the Term to
participate in any hospitalization or disability insurance plans, health
programs, pension plans, bonus plans or similar benefits that may be available
to other executives of the Company to the extent the Executive is eligible under
the terms of such plans or programs. The Company agrees to provide the Executive
with a paid health insurance plan.
4.5 Change of Control.
3
<PAGE>
(a) In the event that there occurs a "Change of Control" (as defined below)
during the term of this Agreement and as a result thereof the Executive resigns
or this Agreement is terminated, the Company expressly agrees that upon such
resignation or termination, the Company shall pay to the Executive a sum equal
to two times the then unpaid balance of the entire compensation that the
Executive would have been entitled to through the end of the Term, but in no
event less than $200,000. As used herein, the term "Change of Control" shall
mean, subject to Section 4.5(b) hereof, either
(i) a sale of all or substantially all of the assets of
the Company other than by way of a public offering of
the Company's securities,
(ii) a merger or consolidation of the Company, whereby
the holders of equity securities of the Company prior
to the transaction, hold less than 50% of the total
voting power of the surviving corporation, or
(iii) the sale or transfer of shares of the Company by the
Company and/or any one or more of its shareholders,
in one transaction or a series of transactions, to
one or more parties under circumstances whereby the
holders of equity securities of the Company prior to
the transaction, hold less than 50% of the total voting
power of the surviving corporation.
(b) Notwithstanding anything set forth herein to the contrary,
in the event that the Executive, as a member of the
4
<PAGE>
Company's Board of Directors, votes in favor of any of the transactions
described in either Section 4.6(i) or 4.6(ii) below, then in such event, there
shall not be deemed to have occurred a "Change of Control" for the purposes of
this Agreement.
4.6 Acceleration of Compensation. In the event that either:
(i) a tender offer for shares of the Company's Common Stock is made, which
tender is not approved by the Company's Board of Directors and a majority of the
Company's outstanding stock is tendered thereunder, or (ii) a Board of
Directors, not recommended by management is empaneled, then and in either of
those events, two times the then unpaid balance of the entire compensation
required to be paid pursuant to this Agreement through the end of the Term,
shall be immediately due and payable to the Executive.
5. Vacations. The Executive shall be entitled to a vacation of four (4)
weeks per year, during which period her salary shall be paid in full. The
Executive shall take her vacation at such time or times as the Executive and the
Company shall determine is mutually convenient.
6. Disability of the Executive. If the Executive is incapacitated or
disabled by accident, sickness or otherwise (including, without limitation, as a
result of abuse of alcohol or other drugs or controlled substances) so as to
render the Executive
5
<PAGE>
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of one hundred twenty (120)
consecutive days or longer or for any one hundred eighty (180) days in any
period of three hundred sixty (360) consecutive days (a "Disability"), the
Company may, at that time or any time thereafter, at its option, terminate the
employment of the Executive under this Agreement immediately upon giving the
Executive notice to that effect. In the event of the Disability of the
Executive, the Executive shall receive severance compensation equal to the Base
Salary for the greater of (a) the remainder of the Term of this Agreement and
(b) the twelve (12) month period commencing on the Termination Date (as defined
below).
Section 7. Termination.
7.1 Termination for Cause. The Company may terminate the employment of
the Executive and all of the Company's obligations under this Agreement at any
time for Cause (as hereinafter defined) by giving the Executive notice of such
termination, with reasonable specificity of the details thereof. "Cause" shall
mean (i) the Executive's misconduct could reasonably be expected to have a
material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of Directors
consistent with the Executive's
6
<PAGE>
position relating to the business of the Company or neglect of duties or failure
to act, which, in each case, could reasonably be expected to have a material
adverse effect on the business and affairs of the Company, (iii) the commission
by the Executive of an act constituting common law fraud, or a felony, or
criminal act against the Company or any affiliate thereof or any of the assets
of any of them, (iv) conviction of a crime involving moral turpitude or (v) the
Executive's material breach of any of the agreements contained herein. A
termination pursuant to Section 7.1(i), (ii)or (v) shall take effect thirty (30)
days after the giving of the notice contemplated hereby unless the Executive
shall, during such thirty (30) day period, remedy to the satisfaction of the
Board of Directors of the Company the misconduct, disregard or breach specified
in such notice; provided, however, that such termination shall take effect
immediately upon the giving of such notice if the Board of Directors of the
Company shall, in its sole discretion, have determined that such misconduct,
disregard or breach is not remediable (which determination shall be stated in
such notice). A termination pursuant to Section 7.1(iii) or (iv) shall take
effect immediately upon the giving of the notice contemplated hereby.
7
<PAGE>
7.2 Termination without Cause. The Company may terminate the employment
of the Executive and all of the Company's obligations under this Agreement
(except as hereinafter provided) at any time during the Term without Cause
(hereinafter, "Not for Cause") by giving the Executive written notice of such
termination, to be effective fifteen (15) days following the giving of such
written notice.
7.3 Termination for Good Reason; Resignation. The Executive may (i)
resign or (ii) terminate her employment and all of her obligations under this
Agreement at any time during the Term for Good Reason (as hereinafter defined)
by giving the Company notice of such termination, with reasonable specificity of
the details thereof, to be effective thirty (30) days following the giving of
such written notice. Good Reason shall mean the occurrence of any of the
following events or conditions:
(i)(A) the assignment to the Executive of any duties
materially inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2 of this Agreement, or (B) any
other action by the Company which results in a material diminution in such
position, authority, duties or responsibilities, other than an
8
<PAGE>
insubstantial and inadvertent action which is remedied by the Company promptly
after receipt of notice thereof given by the Executive; or (ii) any failure by
the Company to comply with the provisions of Section 4 or 5 of this Agreement,
other than an insubstantial and inadvertent failure which is remedied by the
Company promptly after receipt of notice thereof given by the Executive; or
(iii) the Company's requiring the Executive to be based at any office or
location outside a fifteen (15) mile radius from the Company's principal
executive offices, except for travel reasonably required in the performance of
the Executive's responsibilities; or (iv) any purported termination by the
Company of the Executive's employment otherwise than as permitted by this
Agreement, it being understood that any such purported termination shall not be
effective for any purpose of this Agreement.
For purposes of this subsection, any good faith determination
of Good Reason made by the Executive shall be conclusive.
For convenience of reference, the date upon which any termination of the
employment of the Executive pursuant to Sections 6 or 7 shall be effective shall
be hereinafter referred to as the "Termination Date".
8. Effect of Termination of Employment.
9
<PAGE>
(a) Upon the termination of the Executive's employment for Cause, neither
the Executive nor the Executive's beneficiaries or estate shall have any further
rights under this Agreement or any claims against the Company arising out of
this Agreement, except the right to receive (i) the unpaid portion of the Base
Salary provided for in Section 4.1, computed on a pro rata basis to the
Termination Date (the "Unpaid Salary Amount") and (ii) reimbursement for any
expenses for which the Executive shall not have theretofore been reimbursed, as
provided in Section 4.5 (the "Expense Reimbursement Amount").
(b) Upon the termination of the Executive's employment by the Company Not
for Cause or by the Executive for Good Reason, neither the Executive nor the
Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement,
except the right to receive (i) the Unpaid Salary Amount, (ii) the Expense
Reimbursement Amount, and (iii) severance compensation equal to the Base Salary
for the remainder of the Term.
(c) In the event the Executive resigns from the employment by the Company
prior to the end of the Term, neither the Executive nor the Executive's
beneficiaries or estate shall have any further rights under this Agreement or
claims against the
10
<PAGE>
Company arising out of this Agreement except the right to receive (i) the Unpaid
Salary Amount, and (ii) the Expense Reimbursement Amount.
Notwithstanding the preceding provisions of this Section 8, in the event
the payments to be received by the Executive would constitute an "excess
parachute payment" under the Internal Revenue Code of 1986, and applicable
regulations as then in effect, then such payments shall be reduced accordingly
so as not to constitute an "excess parachute payment."
Section 9. Disclosure of Confidential Information. The Executive
recognizes that she has had and will continue to have access to secret and
confidential information regarding the Company, including but not limited to its
customer list, products, formulae, know-how, and business and marketing plans
("Confidential Information"). The Executive acknowledges that such information
is of great value to the Company, is the sole property of the Company, and has
been and will be acquired by her in confidence. In consideration of the
obligations undertaken by the Company herein, the Executive will not, at any
time, during or after her employment hereunder, reveal, divulge or make known to
any person, any Confidential Information acquired by the Executive during the
course of his employment. The provisions of this Section 9 shall
11
<PAGE>
survive the Executive's employment hereunder for a period of two years.
Section 10. Covenant Not To Compete.
(a) The Executive recognizes that the services to be performed by her
hereunder are special, unique and extraordinary. The parties confirm that it is
reasonably necessary for the protection of Company that the Executive agree, and
accordingly, the Executive does hereby agree, that she shall not, directly or
indirectly, at any time during the term of the Agreement and the "Restricted
Period" (as defined in Section 10(e) below):
(i) except as provided in Subsection (c) below, be engaged in the
linear power amplifier industry or provide technical assistance,
advice or counseling regarding the linear power amplifier industry
in any state in the United States or any other country in which the
Company or any affiliate thereof is engaged in business, either on
her own behalf or as an officer, director, stockholder, partner,
consultant, associate, employee, owner, agent, creditor,
independent contractor, or co-venturer of any third party; or
12
<PAGE>
(ii) employ or engage, or cause or authorize, directly or indirectly, to
be employed or engaged, for or on behalf of herself or any third
party, any employee or agent of Company or any affiliate thereof.
(b) The Executive hereby agrees that she will not, directly or indirectly,
for or on behalf of herself or any third party, at any time during the term of
the Agreement and during the Restricted Period solicit any customers of the
Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 10 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
(d) This Section 10 shall not be construed to prevent Executive from
owning, directly or indirectly, in the aggregate, an amount not exceeding one
percent (1%) of the issued and outstanding voting securities of any class of any
company whose voting capital stock is traded on a national securities exchange
or on the over-the-counter market other than securities of the Company.
13
<PAGE>
(e) The term "Restricted Period," as used in this Section 10, shall
mean the period of the Executive's actual employment hereunder plus: (i) in the
event that this Agreement expires or the Executive is terminated for Cause, the
twenty four (24) months after the Termination Date or (ii) in the event that the
Executive is terminated without Cause, for Good Reason or for a Disability, six
(6) months after the Termination Date.
(f) The provisions of this Section 10 shall survive the end of the
Restricted Period as provided in Section 10(e) hereof.
Section 11. Miscellaneous.
11.1 Injunctive Relief. The Executive acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, the Executive agrees that any breach or threatened
breach by him of Sections 9 or 10 of this Agreement shall entitle the Company,
in addition to all other legal remedies available to it, to apply to any court
of competent jurisdiction to seek to enjoin such breach or threatened breach.
The parties understand and intend that each restriction agreed to by Executive
hereinabove shall be construed as separable and divisible from every other
restriction, that the unenforceability of any restriction shall not
14
<PAGE>
limit the enforceability, in whole or in part, of any other restriction, and
that one or more or all of such restrictions may be enforced in whole or in part
as the circumstances warrant. In the event that any restriction in this
Agreement is more restrictive than permitted by law in the jurisdiction in which
Company seeks enforcement thereof, such restriction shall be limited to the
extent permitted by law.
11.2 Assignments. Neither the Executive nor the Company may assign or
delegate any of their rights or duties under this Agreement without the express
written consent of the other.
11.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to the
Executive's employment by the Company, supersedes all prior understandings and
agreements, whether oral or written, between the Executive and the Company, and
shall not be amended, modified or changed except by an instrument in writing
executed by the party to be charged. The invalidity or partial invalidity of one
or more provisions of this Agreement shall not invalidate any other provision of
this Agreement. No waiver by either party of any provision or condition to be
performed shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or any prior or subsequent time.
15
<PAGE>
11.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
11.5 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by registered or
certified mail, return receipt requested, postage prepaid, or by private
overnight mail service (e.g. Federal Express) to the party at the address set
forth above or to such other address as either party may hereafter give notice
of in accordance with the provisions hereof. Notices shall be deemed given on
the sooner of the date actually received or the third business day after
sending.
11.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey without giving
effect to such State's conflicts of laws provisions and each of the parties
hereto irrevocably consents to
16
<PAGE>
the jurisdiction and venue of the federal and state courts located in the State
of New Jersey, County of Somerset.
11.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
AMPLIDYNE, INC.
By: /s/ Devendar S. Bains
---------------------------------
Name: Devendar S. Bains
Title: President
/s/ Nirmal Bains
---------------------------------
Nirmal Bains
17
<PAGE>
LEASE
THIS LEASE is made as of the 7th day of March, 1996, by
and between:
LAUFFER BUILDING ASSOCIATES, LTD.
having an address
c/o Berger and Bornstein
237 South Street, Morristown, New Jersey 07960,
(hereinafter referred to as "Landlord")
and
AMPLIDYNE, INC.
having an address at
144 Belmont Drive, Township of Franklin,
Somerset County, New Jersey
(hereinafter referred to as "Tenant")
WITNESSETH:
Landlord and Tenant hereby agree with each other as
follows:
1. Demised Premises. Landlord hereby leases to the
Tenant and Tenant hereby rents from Landlord a portion of a
building, located at 144 Belmont Drive, Township of Franklin,
Somerset County, New Jersey, hereinafter the "Building". The
Building and the land upon which it is situated is hereinafter
referred to as the "Property". The portion of the Building being
leased to Tenant hereunder is outlined in red on Exhibit A
annexed hereto and is hereinafter referred to as the "Demised
Premises." The Demised Premises contains approximately 21,000
square feet of space and is more particularly shown in red on
Exhibit A annexed hereto. The Demised Premises shall also
include the non-exclusive right, in common with the Landlord and
other tenants at the Property (now or hereinafter existing) and
their employees, customers, visitors, guests and invitees to use
the landscaped areas, common egress and ingress, driveways, non-
exclusive parking areas, walkaways and roadways, and common areas
which service the Building and Property ("Common Area"). Tenant
shall only utilize the parking areas for employees working in the
Building and business invitees. During the period of time when
Tenant shall be the sole occupant of the Building, Tenant may
utilize the entire parking area servicing the Building.
<PAGE>
Landlord, during any time that Tenant shall not be the sole
occupant of the Building, may assign to other tenants of the
Building the exclusive use of parking spaces provided that Tenant
shall have, at all times, exclusive use of that number of parking
spaces equal to the sum of 170 multiplied by Tenant's
Proportionate Share. Landlord shall designate, from time to
time, those parking spaces that are for Tenant'a exclusive use.
Tenant shall be solely responsible, at its cost, to police the
use of those spaces designated by Landlord for Tenant's exclusive
use.
2. Term.
a. The term of this Lease shall be for three (3)
lease years ("Initial Term") with full rights of occupancy
commencing on the "Commencement Date". The Commencement Date
shall be April 1, 1996.
b. The term "lease year" shall mean a period of
twelve (12) successive months. The initial lease year shall
begin from the Commencement Date, with each succeeding lease year
beginning immediately on each anniversary of the Commencement
Date. The first anniversary of the Commencement Date shall be
the first day of the second lease year. In the event the Initial
Term is not extended pursuant to Paragraph 3 below, the term
"Termination Date" as may be used herein shall mean March 31,
1999 or such date upon which this Lease has been sooner
terminated. In the event the Initial Term is extended pursuant
to Paragraph 3 below, the term "Termination Date" shall mean the
last day of such extended term or such date upon which this Lease
has been sooner terminated.
3. Rent and Option.
a. Tenant's obligation to pay rent shall commence
on April 1, 1996. In consideration of the leasing of the Demised
Premises, Tenant hereby covenants and agrees to pay Landlord,
during the Initial Term of the Lease, a fixed annual rental for
the Demised Premises in the amount of ONE HUNDRED SIXTY-EIGHT
THOUSAND and 00/100 ($168,000.00) DOLLARS payable in equal
- 2 -
<PAGE>
monthly installments of FOURTEEN THOUSAND and 00/100 ($14,000.00)
DOLLARS.
b. Tenant shall have the option to extend the
term of this Lease by three (3) lease years with the option
period commencing on April 1, 1999 and terminating on March 31,
2002 ("Option Period"). This option to extend, as well as the
commencement of the Option Period, shall be expressly conditioned
upon Tenant, as of the date upon which the Option Period is to
begin, having fully and timely complied with all its monthly
rental obligations under this Lease and not having committed a
breach or default of its other obligations under this Lease which
has not then been cured.
The option is exercisable by Tenant, if at all, only in
strict compliance of the aforesaid conditions and by giving
Landlord written notice of its election to extend the Initial
Term not later than one-hundred fifty (150) days prior to the
Termination Date of the Initial Term. Strict compliance with the
conditions of this option is deemed material to the parties and
time for exercise is of the essence. Tenant's failure to timely
exercise this option shall be deemed a waiver thereof, in which
event this Lease shall expire on the Termination Date for the
Initial Term.
c. This Option shall be exercisable only for the
entire Building (36,405 square feet) less the square footage of
any space leased to third parties as of April 1, 1999,
hereinafter the "Option Space". The Option Space shall
constitute the Demised Premises as of April 1, 1999.
d. The fixed annual rent during the Option Period
shall be equal to the sum of ten ($10.00) dollars multiplied by
the square footage of the Option Space as of April 1, 1999, which
square footage shall be determined pursuant to Paragraph 3c
above.
e. Except as otherwise provided herein, all
payments of fixed rent and additional rent shall be made by the
Tenant to the Landlord without notice or demand in equal monthly
-3-
<PAGE>
installments, in advance, without setoff or abatement, and shall
be due and payable on the first day of each and every calendar
month throughout the term of this Lease commencing on April 1,
1996.
f. In the event Tenant shall fail to pay any
fixed rent, or additional rent installment as provided herein, or
any part thereof, on or before the tenth (10th) day following the
due date for such installment, Landlord shall impose a late
charge of five (5%) percent of the installment due. Said late
charge to be immediately due and payable with the installment.
It is agreed that this late charge has been reasonably calculated
to offset Landlord's added expense in handling the late payment
and other costs to Landlord, including, but not limited to, the
costs Landlord may incur for late charges on its mortgages.
g. Whenever under the terms of this Lease any sum
of money is required to be paid by Tenant in addition to the
fixed annual rent reserved hereunder, said additional sum shall
be deemed additional rent and shall be payable, if not otherwise
provided, within ten (10) days after written notice to Tenant.
Nothing contained in this subparagraph shall be deemed to suspend
or delay the obligation of Tenant to pay any and all other sums
as and when due hereunder, nor otherwise limit or circumscribe
any other remedy of Landlord.
4. Proportionate Share.
a. The term "Proportionate Share", as used in
this Lease, shall mean the fraction, the denominator of which is
the total square feet of rentable space in the Building (36,405)
and the numerator of which is the square feet of the Demised
Premises, 21,000 or 57.7% percent. The Tenant's Proportionate
Share shall be adjusted in the event the total square feet of the
Demised Premises or Building may increase or decrease due to fire
damage or eminent domain, in which event the Tenant's
Proportionate Share shall be equitably adjusted.
5. Additional Space.
a. It it contemplated by Landlord and Tenant that
-4-
<PAGE>
Tenant may desire to expand the Demised Premises to include all
or a part of the Building outlined in blue as shown on Exhibit A
annexed hereto (hereinafter "Additional Space"). Provided Tenant
shall not be in default of any terms of this Lease, and provided
Tenant shall first notify Landlord in writing, Tenant may elect,
from time to time, to expand the Demised Premises to include all
or a part of the Additional Space. Tenant may only elect to
occupy portions of the Additional Space that shall be in
increments of not less than 1,000 square feet, all such
increments must run the entire width of the Building and must be
contiguous to the Demised Premises.
As of the date(s) Landlord receives Tenant's written
notice of Tenant's election to occupy increment(s) of the
Additional Space:
(i) the term "Demised Premises" shall be
deemed to include that increment(s) of the
Additional Space and the term "Additional
Space" shall mean the remaining portion of
the Building;
(ii) Tenant's Proportionate Share shall be
increased accordingly.
(iii) The fixed annual rent shall be increased by
the sum equal to Eight ($8.00) Dollars multiplied
by the square footage of the increment(s) of the
Additional Space.
b. In the event Landlord shall receive a bona
fide offer, acceptable to Landlord, to lease all or a part of the
Additional Space, Landlord shall notify Tenant in writing of
Landlord's receipt of such offer ("Landlord's Notice") and shall
include within its notice the terms of the offer to lease all or
a part of the Additional Space, which space is referred to herein
as the "Offered Space". Tenant shall have the option to elect to
lease the Offered Space pursuant to the same terms as the offer
received by Landlord ("Right of First Refusal"). Tenant must
exercise its Right of First Refusal, within ten (10) days of
receipt of Landlord's notice, by delivering written notice to
Landlord, time being of the essence. If Tenant shall fail to
exercise its Right of First Refusal within said ten (10) day
period, or shall fail to execute a lease pursuant to the terms of
said offer within ten (10) days of exercising its Right of First
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Refusal, time being of the essence, Tenant shall be deemed to
have waived its Right of First Refusal.
c. In the event Tenant shall occupy any portion
of the Additional Space without first notifying Landlord in
writing, Tenant shall be liable to Landlord for rent, as of the
date of such occupancy, at the rate of $16.00 per square foot on
a per diem basis for each square foot of the Additional Space so
occupied by Tenant.
6. Real Estate Taxes and Asessments
a. The Tenant agrees during the term of the Lease
to pay monthly as additional rent, together with the monthly
installment of fixed annual rent, an amount equal to its
Proportionate Share of all the real estate taxes, assessments and
other governmental charges, whether general or special, ordinary
and extraordinary, unforeseen as well as foreseen, of every kind
and nature ("Taxes"), assessed against the Property during the
term of this Lease of which the Demised Premises are a part.
Such sum shall be due and payable on an estimated basis in
monthly installments in such amounts as shall be reasonably
determined by Landlord, until the actual sum is known, at which
time an adjustment shall be made. Tenant shall be solely
responsible for one hundred (100%) percent of any increase in the
real estate tax for the Property as a result of assessments for
Tenant's improvements to the Demised Premises. Tenant may
institute a proceeding challenging the amount of the real estate
assessment for the Property of which the Demised Premises is a
part provided that Tenant shall be viable for 100% of any
increase in the assessment for the Property resulting from such
proceeding. Landlord shall cooperate with Tenant in the event
Tenant institutes a challenge to the real estate assessment,
provided there shall be no cost to Landlord. Landlord shall not
be obligated to bring any such action seeking a reduction in the
assessment nor shall Landlord be in any way liable to Tenant in
the event any such action results in an increase in the
assessment.
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b. If at any time during the term of this Lease,
under the laws of the State of New Jersey, or any political sub-
division thereof, a tax on rents is assessed against the Landlord
as a substitution, in whole or in part, for a real estate tax or
assessment, water or sewer charge, or other governmental
imposition or charge, Tenant shall pay, accordingly, its
Proportionate Share of same and only as such substitution shall
apply to the Property referred to herein.
c. Landlord represents that it has no knowledge
of any added or omitted assessments presently due and owing, nor
does Landlord have knowledge of any current assessment for off-
site improvements.
7. Utilities.
a. As additional rent, Tenant shall pay monthly,
together with the monthly installment of fixed annual rent, its
Proportionate Share for all sewer and water charges for the
Building. Landlord shall cause notice of said charges to be sent
by Landlord to the Tenant and the sum so shown shall be due and
payable by Tenant as additional rent. In the event separate
meters are installed to monitor Tenant's use of water and sewer,
Tenant shall be responsible for its actual use as determined by
the meter, rather than for its Proportionate Share.
Notwithstanding the foregoing, during the period of time when
Tenant shall be the sole occupant of the Building, Tenant shall
pay 100% of sewer and water charges. Landlord shall separately
meter space occupied by other tenants for all utilities other
than water and sewer.
b. Except as set forth in paragraph 7(a) above,
Tenant shall arrange to have all utilities servicing the Demised
Premises billed in its own name and shall pay all charges
therefor directly to the utility company furnishing the services.
Notwithstanding the foregoing, during the period of time when
Tenant shall be the sole occupant of the Building, Tenant shall
pay one-hundred (100%) percent of electric and gas charges for
the Building. During the periods of time when Tenant shall not
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be the sole occupant of the Building, Tenant shall pay its
Proportionate Share of electric and gas utilities not separately
metered for the Demised Premises. Removal of Tenant's trash from
the Building and Property shall be Tenant's responsibility and
shall be done at Tenant's cost.
c. Landlord reserves the right to enter upon the
Demised Premises, at its own cost, for the purpose of connecting
to wires, cables, conduits and pipes and the like within the
Demised Premises which supply utilities to the Building in order
to supply other tenants of the Building with gas, electric, water
and such other utilities. Landlord's entry shall be outside
normal business hours (9:00 a.m. - 5:00 p.m.) and Landlord shall
not disrupt Tenant's use of its computers.
8. Common Area Maintenance.
a. Tenant shall pay monthly, together with the
monthly installment of fixed annual rent, an amount as additional
rent equal to its Proportionate Share of all reasonable costs and
expenses incurred by Landlord for the operation, management,
repair, replacement and maintenance of the Property, Building and
Common Area including, but not limited to, interior and exterior
items, landscaping and lawn care, painting, snow and ice removal,
parking areas and driveways, cleaning, common Area utilities and
mechanical systems ("Operating Costs"). Notwithstanding the
foregoing, during the period of time when Tenant shall be the
sole occupant of the Building, Tenant shall pay 100% of Operating
Costs.
9. Use and Operations of Premises.
a. Throughout the term of this Lease, Tenant
covenants to use the Demised Premises solely for general office
use and light manufacturing.
b. The use by the Tenant of the Demised Premises
shall be in careful, lawful, safe and proper manner, and the
Tenant shall not permit the same to be used for any unlawful
purpose, nor commit nor suffer any waste; and the Tenant will
carefully preserve, protect, control and guard the same from
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damage. Tenant covenants to comply with all reasonable rules and
regulations which Landlord may, at any time or from time to time
during the term of this Lease, impose on other tenants, their
employees, agents, licensees and customers. Tenant shall not
store any materials, products or equipment outside the Demised
Premises. Tenant shall not park vehicles outside overnight
unless the vehicle belongs to an employee who is working in the
Building at the time the vehicle is parked at the Property, it
being understood that there shall be one vehicle per such
employee.
10. Insurance.
a. As additional rent, Tenant agrees to pay
monthly its Proportionate Share of the cost for all insurance the
Landlord maintains for the Property including, but not limited
to, all insurance for loss or damage by fire and all other
casualties ordinarily included in extended coverage for public
liability, insurance for the payment of rent, personal injury,
property damage and all other insurance of any type, kind or
description which may be reasonably required for the Demised
Premises.
b. Other than the use permitted in Paragraph 9(a)
above, Tenant shall not do or permit to be done any act or thing
on the Demised Premises which shall invalidate or be in conflict
with, or cause any additional premium for, any insurance policy
insuring the Property or Building.
c. Tenant shall, during the entire term hereof,
at its sole cost and expense, keep in full force and effect a
policy of comprehensive public liability and property damage
insurance with respect to the Demised Premises and the business
operated by Tenant in the Demised Premises as to which the limits
of public liability shall not be less than ONE MILLION
($1,000,000.00) DOLLARS per person and THREE MILLION
($3,000,000.00) DOLLARS per accident or occurrence and in which
the property damage liability shall not be less than FIVE HUNDRED
THOUSAND ($500,000.00) DOLLARS. The policy shall be from a New
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Jersey licensed insurance company, with at least a Best's rating
of "A", and shall name the Landlord and Landlord's mortgagee(s)
as additional insureds. The policy shall contain clauses that:
(i) the insurer will not cancel or modify the insurance coverage
without first giving the Landlord thirty (30) days prior written
notice; and (ii) insuring Tenant under any "hold harmless" and
"indemnity" provisions of this Lease. A certificate of insurance
shall be delivered to Landlord on or before the Commencement
Date, together with proof that the premium has been paid on a
current basis.
11. Estimated Payments. The initial monthly
additional rent charges for Tenant's share of utilities, taxes,
insurance, and Operating Costs all as referred to in paragraphs
6, 7, 8 and 10 above shall be estimated at the sum of THREE
THOUSAND FIVE HUNDRED and 00/100 ($3,500.00) DOLLARS, which sum
commencing as of the Commencement Date shall be payable monthly
on the first day of each month throughout the term of this Lease.
An adjustment to the estimated payments shall be made by the
Landlord after the actual cost and expense data is known and any
overpayments or underpayments shall be paid or credited with the
next month's additional rent charges after Tenant is notified of
same. Tenant, after full payment, shall have the right, at its
own cost and expense, to audit Landlord's books, which shall be
kept at Landlord's office in Morristown, New Jersey. If there
shall be a three (3%) percent or greater overcharge, the sum
overcharged shall be returned with interest at two (2%) percent
per annum over the prime rate charged by Chase Manhattan Bank,
New York. Landlord shall, upon Tenant's written request, and
after full payment by Tenant, deliver to Tenant copies of all
bills and invoices pursuant to which Landlord has calculated
Operating Costs.
12. Repairs and Alterations.
a. Tenant covenants that throughout the term of
this Lease it will take good care of the Demised Premises,
including all alterations, changes and improvements at any time
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erected thereon, and shall keep and maintain same in good order
and condition subject to normal wear and tear.
b. Landlord shall deliver and Tenant shall accept
the Demised Premises in an "as is" condition except for
Landlord's Work in Exhibit B annexed hereto. Except for
structural repairs and roof repairs, Tenant shall promptly make,
at its sole cost and expense, all repairs and replacements to the
Demised Premises, including but not limited to all electrical,
air-conditioning, heating, plumbing and other mechanical
installations servicing the Demised Premises. Tenant shall also,
at its sole cost and expense, maintain and repair any glass
windows in the Demised Premises, if damaged or broken. Landlord
represents that the HVAC System and all electric, mechanical and
plumbing systems shall be in good working order as of the
Commencement Date. Tenant shall keep and maintain the Demised
Premises clean and orderly, free and clear of accumulations of
dirt and debris. Tenant shall be responsible to arrange for and
pay for all cleaning within the Demised Premises and for the
replacement of all light bulbs.
a. Tenant shall, during the term of this Lease,
at its sole cost and expense, promptly comply with and make any
repair, alteration or improvement resquired by any statute,
ordinance, rule, order, regulation or requirement of the Federal,
State and Municipal Government and any and all departments,
agencies, bureaus and subdivisions thereof having jurisdiction
thereover, for the correction, prevention and abatement of
nuisances (to the extent caused by Tenant), or violations in,
upon or connected with the Demised Premises, and Tenant agrees to
observe and promptly comply with (i) all reasonable rules, orders
and regulations of the Board of Fire Underwriters or like agency;
and (ii) the requirements of all standard insurance policies
maintained by the Landlord on the Demised Premises or on the
Building and Property of which the Demised Premises are a part.
d. Tenant shall have the right during the term of
this Lease to make interior non-structural alterations to the
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Demised Premises provided that no alteration shall be constructed
or installed until the following conditions have been satisfied:
(i) any and all governmental permits and authorizations, if any,
required therefor shall have been obtained prior to the under-
taking of said alterations or improvements (Landlord, at no cost
or expense, shall cooperate with Tenant to obtain such
approvals); and (ii) detailed plans and specifications have first
been submitted to and approved in writing by the Landlord, which
approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Tenant shall not be required to
submit plans and specifications to Landlord for improvements that
will cost less then TWENTY FIVE THOUSAND ($25,000.00) DOLLARS nor
shall Tenant be required to submit plans and specifications to
Landlord for Tenant's initial fixturing and interior
improvements. All alterations and improvements when completed
shall be of such a character as shall not reduce, or otherwise
adversely affect, the value of the Demised Premises, reduce the
cubic content of the Building, affect the structural soundness of
the Building, nor change the character of the Building. All work
done in connection with any alterations and improvements shall be
done promptly and in a good and workmanlike manner and in
compliance with all building and zoning laws, and with all laws,
ordinances, orders, rules, regulations and requirements of all
Federal, State and Municipal governments and the appropriate
departments, commissions, boards and officers thereof, and in
accordance with the orders, rules and regulations of the Board of
Fire Underwriters where the Demised Premises are situated or any
other body exercising similar functions and having jurisdiction
thereof. The alteration or improvement shall be completed free
of liens for labor and materials supplied or claimed to have been
supplied to the Demised Premises. Tenant or its contractors
shall, at their sole cost and expense, maintain adequate
insurance, including statutory workmen's compensation insurance
(or certificates for contractors indicating workmen's
compensation insurance is in force) covering all persons employed
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in connection with the construction and installment of
improvements and with respect to whom death or injury claims
could be asserted against the Landlord, the Tenant or the Demised
Premises; and general liability insurance naming the Landlord and
it mortgagees as additional insureds, which policy shall have
limits of not less than ONE MILLION ($1,000,000.00) DOLLARS in
the event of injury to one person and THREE MILLION
($3,000,000.00) DOLLARS per accident or occurrence and FIVE
HUNDRED THOUSAND ($500,000.00) DOLLARS for property damage. The
policy shall contain clauses that: (i) that the insurer will not
cancel or modify the insurance coverage without first giving the
Landlord thirty (30) days prior written notice; and (ii) insuring
Tenant under any "hold harmless" and "indemnity" provisions of
this Lease. All such insurance will be in a company or companies
authorized to do business in New Jersey, and all such policies or
certificates of insurance shall be delivered to the Landlord
prior to the commencement of any work, endorsed "premium paid" by
the company or agency issuing the same.
13. Eminent Domain.
a. If the total Demised Premises are taken, ac-
quired or purchased by or through condemnation proceedings or any
right of eminent domain or any other authority of law, with or
without the entry of an order in a judiciary proceeding, this
Lease shall terminate as of the date of taking without further
liability by the parties hereto.
b. The date of any taking shall be the date
specified in the official notice of the condemning authority, or
in the absence of such notice, the vesting of title in said
authority. Subject to the provisions as hereinafter provided in
this paragraph, all rent or other charges paid or payable by
Tenant to Landlord shall be abated as of the date of said taking.
Upon any termination or cancellation of this Lease, as provided
in this section, and provided Tenant shall not be in default of
any of its obligations under this Lease, all rent or other
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charges paid in advance for any period after the effective date
hereof shall be refunded to Tenant.
c. Landlord reserves to itself all rights to da-
mages or compensation accruing on account of any such taking of
the real property comprising and included in the Demised Premises
as aforesaid or by reason of any act or any public or quasi-
public authority for which damages are payable. Tenant shall not
be entitled to any portion of the award as a result of the loss
of its leasehold interest, however, Tenant may seek compensation
for Tenant's fixtures and moving expenses.
d. In the event that only a portion of the
Demised Premises are taken, this Leave shall remain in full force
and effect and the rental payable hereunder shall be equitably
adjusted. If a partial taking shall materially and adversely
interfere with Tenant's use of the Demised Premises, such taking
shall be deemed a total taking pursuant to Paragraph 13a above.
14. Indemnity and Liability for Injury and Loss.
a. Landlord, unless the following shall be caused
by the negligence of Landlord, its employees or agents: (1) shall
not be liable to Tenant or any other person on the Demised
Premises, Building or Property for any damage either to person or
property, (2) shall not be liable for the quality, quantity,
impairment, interruption, stoppage of or other interference with
services involving water, heat, gas, electrical current for light
and power, telephone or any other service by any public utility
(3) nor be liable for any damage or injury by water, steam, elec-
tricity, gas, rain, ice or snow which may be sustained by Tenant
or other person.
b. Tenant shall indemnify, defend and save Land-
lord harmless from and against all liability, judgment expense or
claim for any damage or injury to any person or property while on
the Demised Premises, Building or Property, arising out of the
use or occupancy of the Demised Premises by Tenant, unless same
shall result from the negligence of Landlord, its employees or
agents.
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15. Lease Subordination.
a. This Lease shall not be a lien against the
Demised Premises in respect to any mortgages that are now or
hereafter may be placed against the Property or Building or any
part thereof, and such mortgage or mortgages shall have
preference and precedence and be superior and prior to the lien
of this Lease, irrespective of the date of granting or recording,
provided Tenant receives a non-disturbance agreement stating
that, provided Tenant is not in default, its tenancy shall not be
terminated in the event of foreclosure. (Landlord shall obtain
said non-disturbance agreement in a form reasonably satisfactory
to Tenant, from the present and future mortgagees). Tenant does
hereby agree to accept any mortgagee as the Landlord hereunder
and to perform its obligation as Tenant under this Lease, if any
mortgagee acquires title to the Property by foreclosure or
otherwise.
b. The term "mortgage" as used in this section
includes mortgages, deeds of trust or any similar instruments and
modifications, extensions, renewals and replacements thereof.
c. The provisions of the subordination and at-
tornment contained in this paragraph shall be self-operative and
no further instrument of subordination shall be required in order
to bind Tenant hereunder. In the event Landlord desires
confirmation of such subordination and attornment, Tenant shall
deliver any instrument which may be reasonably required to
further evidence the subordination of this Lease to the lien of
any such mortgage or mortgages and the agreement by Tenant to
accept the mortgagee as the Landlord and perform under this Lease
if the mortgagee acquires title to the Building by foreclosure or
otherwise, as shall be desired by any aforesaid mortgagee or
proposed mortgagee, provided such instrument shall not alter the
terms of this Lease.
d. Tenant does hereby agree to any assignment by
Landlord, now or hereafter, of the rentals under this Lease to a
mortgagee, and all extensions, renewals, modifications and re-
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placements thereof. Upon request, Tenant shall, within ten (10)
days after receipt, execute and deliver to Landlord an estoppel
certificate, in a form required by any mortgagee, stating, to the
extent such statements are accurate: (i) it is the Tenant under
this Lease; (ii) the Demised Premises have been unconditionally
accepted and occupied and rent payments have commenced; (iii) the
Lease is in full force and effect and fully sets forth the
agreement of the parties; (iv) the Lease has not been modified,
amended, assigned or sublet, or if it has been in what manner;
and (v) no claim or right of setoff exists and neither Landlord
nor Tenant is in default and no grounds for reducing the rent or
canceling the Lease exist. Tenant's failure to timely supply the
estoppel certificate shall be a material breach under this Lease.
16. Fire Damage.
a. If, after the date hereof, the Demised
Premises, Building or Property are damaged by fire, enemy action,
or other casualty (such damage being hereafter called "fire
damage"), Landlord shall at its option repair and restore said
Demised Premises. In such event there shall be a fair and
proportionate abatement of all rent payable hereunder according
to the time during which and the portion or extent to which the
Demised Premises may not be used by Tenant. If Landlord shall
elect to repair or restore but shall fail to substantially
complete the repair or restoration within one hundred-eighty
(180) days of the occurrence of the fire damage, Tenant may
terminate this Lease by delivering to Landlord written notice of
its election to terminate by on or before one hundred-ninety
(190) days following the fire damage, time being of the essence.
Tenant's failure to timely exercise said option to terminate
shall be deemed a waiver hereof.
b. If Landlord shall elect not to repair or re-
store the Demised Premises, this Lease shall terminate as of the
date of occurrence of the fire damage. Landlord shall notify
Tenant in writing not more than thirty (30) days after the occur-
rence of the fire damage if it elects not to restore, and return
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to Tenant a fair and proportionate rebate of all rent paid in
advance to Landlord by Tenant; if any, prorated as of the date of
the occurrence of the fire damage.
17. ECRA Compliance.
a. Anything contained in paragraph 17(b) below to
the contrary notwithstanding, Landlord shall be responsible for
all environmental conditions existing as of the Commencement Date
of this Lease, and Tenant shall have no liability for any
environmental conditions pre-existing the Commencement Date of
this Lease, and Tenant shall only be liable for those environ-
mental conditions caused by Tenant or its agents, employees or
invitees. Landlord shall indemnify Tenant for any costs or
expenses incurred by Tenant due to environmental conditions pre-
existing the Commencement Date.
b. Tenant shall, at Tenant's own expense, comply
with the Environmental Cleanup Responsibility Act, N.J.S.A.
13:lk1 et seq. and the regulations promulgated thereunder
("ECRA"), as well as all other environmental laws now or hereafter
enacted and applicable to the Demised Premises and Tenant's use
thereof. Tenant shall, at Tenant's own expense, make all
submissions to, provide all information to, and comply with all
requirements of the New Jersey Department of Environmental
Protection (the "NJDEP") or such other appropriate agency charged
with the administration of ECRA or other applicable environmental
laws. Should NJDEP determine that a cleanup plan be prepared and
that a cleanup be undertaken because of any spills or discharges
of hazardous substances or wastes at the Demised Premises which
occur during the term of this Lease as a result of Tenant's use
and occupancy of the Demised Premises, then Tenant shall, at
Tenant's own expense, prepare and submit the required plans and
financial assurances, and carry out the approved plans. Tenant's
obligations under this paragraph shall arise if there is any
closing, termination or transferring of operations or ownership
of an industrial establishment at the Demised Premises pursuant
to ECRA or any other triggering event under ECRA or other
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environmental law which would necessitate compliance. At no
expense to Landlord, Tenant shall promptly provide all
information requested by Landlord for preparation of non-
applicability affidavits and shall promptly sign such affidavits
when requested by Landlord. Tenant shall indemnify, defend and
save Landlord harmless from all fines, suits, procedures, claims
and actions of any kind arising out of or in any way connected
with any spills or discharges of hazardous substances or wastes
at the Demised Premises which occur during the term of this Lease
as a result of Tenant's use and occupancy of the Demised
Premises; and from all fines, suits, procedures, claims and
actions of any kind arising out of Tenant's failure to provide
all information, make all submissions and take all actions
required by the ECRA or any division of NJDEP or under any other
environmental law. Tenant's obligations and liabilities under
this paragraph shall continue so long as Landlord remains respon-
sible for any spills or discharges of hazardous substances or
wastes at the Demised Premises which occur during the term of
this Lease. Tenant's failure to abide by the terms of this
paragraph shall be restrainable by injunction. Tenant shall
effectuate and complete full compliance with ECRA and any other
applicable environmental law, including but not limited to any
necessary cleanup, prior to the Termination Date of this Lease,
and will be liable for any damages sustained by Landlord if
Tenant fails to do so. Tenant shall commence its compliance with
such laws in sufficient time prior to the Termination Date so as
to complete its obligations under this Paragraph by no later than
the Termination Date. In the event ECRA shall apply to Tenant's
occupancy of the Demised Premises and its termination of
operations at the Demised Premises, Tenant shall deliver to
Landlord a non-qualified approval of Tenant's negative
declaration on or before the Termination Date. In the event ECRA
shall not apply to Tenant's occupancy of the Demised Premises and
its termination of operations at the Demised Premises, Tenant
shall furnish Landlord with a letter of ECRA non-applicability
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from the NJDEP on or before the Termination Date. Tenant's
obligations under this paragraph shall survive the termination of
this lease.
c. Landlord represents that: (i) there is no
asbestos within the Demised Premises which does not comply with
governmental regulations; and (ii) the Property is presently in
compliance with the requirements of ECRA; and (iii) Landlord,
during its ownership of the Property, has not leased space
therein to an industrial establishment.
d. Tenant covenants and represents that its
Standard Industrial Code is 3679, and shall remain 3679 during
the term of this Lease.
18. Defaults and Remedies.
a. The following shall constitute events of de-
fault under this Lease:
(1) failure to pay when due any installment
of fixed rent or additional rent or any part thereof;
(2) failure in the performance of or com-
pliance with any of the other covenants, conditions and/or terms
of this Lease, which failure shall continue for more than thirty
(30) days after written notice thereof by Landlord to Tenant,
provided however that if the default is of a nature that cannot
be cured within thirty (30) days, Tenant shall not be in default
if it commences the cure of the default within thirty (30) days
of Landlord's notice and thereafter diligently proceeds to cure
the default;
(3) if this Lease shall be assigned or
sublet except as permitted in Paragraph 19 below;
(4) (the following shall not be an event of
default provided all rental payments are kept current) the filing
by or against Tenant of any petition with respect to its own
financial condition under any bankruptcy law or any amendment
thereto (including, without limitation, a petition for
reorganization, arrangement or extension), or under any other
insolvency law or laws providing for the relief of debtors (which
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petition, if filed against Tenant shall not be dismissed within
ninety (90) days); the appointment of a receiver, trustee,
custodian, conservator or liquidator for Tenant on all or
substantially all of Tenant's assets, and the underlying pro-
ceeding is not dismissed within ninety (90) days after the com-
mencement thereof; the admission by Tenant of its insolvency;
making of a general assignment for the benefit of creditors;
(5) if Tenant liquidates or ceases to exist.
(6) Tenant recording this Lease or a
memorandum thereof.
b. Upon the occurrence of any event of default,
Landlord, in addition to any and all rights and remedies it may
have at law and equity, may exercise any one or more of the
following remedies:
(1) Landlord may give Tenant a notice (the
"Termination Notice") of its intention to terminate this Lease
specifying a date not less than ten (10) days thereafter, upon
which date this Lease, the term and estate hereto granted and all
rights of Tenant hereunder shall expire and terminate.
Notwithstanding the foregoing, Tenant shall remain liable for
damages as hereinafter set forth and Landlord may institute
dispossess proceedings for non-payment of rent or such other
actions at law or equity for the enforcement of this Lease. Upon
any such termination or expiration of this Lease, Tenant shall
peaceably quit and surrender the Demised Premises to Landlord,
and Landlord may without further notice enter upon, re-enter,
possess and repossess itself thereof, by force, summary
proceedings, ejectment or otherwise and may have, hold and enjoy
the Demised Premises and the right to receive all rental and
other income of and from the same.
(2) Landlord may, at Landlord's sole option
(without imposing any duty upon Landlord to do so), and Tenant
hereby authorizes and empowers Landlord to: (i) re-enter the
Demised Premises for its own account or otherwise, (ii) relet the
same for any term, (iii) remodel the same if reasonably necessary
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or desirable for such reletting purposes, (iv) restore the
Demised Premises to the condition in which it was required to be
surrendered by Tenant; and (v) receive and apply the rent so
received to pay all fees and expenses incurred by Landlord,
directly or indirectly, as a result of Tenant's default,
including, without limitation, any reasonable legal fees and
expenses arising therefrom, the reasonable cost of re-entry,
repair, remodeling and reletting and the payment of the rent and
other charges due hereunder. No entry, re-entry or reletting by
Landlord, whether by summary proceedings, termination or
otherwise, shall discharge Tenant from any of its liability to
Landlord as set forth in this Lease, and in no event shall Tenant
be entitled to or receive any benefit or credit from any rental
in excess of the rent reserved under this lease which results
from a reletting of the Demised Premises after Tenant's default;
(3) Tenant will pay Landlord, and be liable
to Landlord for the full amount of all fixed annual rent and
additional rent thereafter to become due, less the amount of
rents and additional rents collected by Landlord for the demised
premises for the balance of the term, which rents shall be
credited against the monthly installments due from Tenant.
Landlord shall be deemed to have satisfied its obligation, if
any, to mitigate its damages upon listing the Demised Premises,
with a licensed real estate broker, for lease, at market rents.
(4) If Tenant shall fail to make any
payments required to be made under this Lease, or shall default
in the performance of any covenant, agreement, term, provision or
condition herein contained, Landlord may, without being under any
obligation to do so, and without thereby waiving such default,
make such payment and/or remedy such default for the account and
at the sole expense of Tenant. Tenant shall pay to Landlord, on
demand, the amount of all sums so paid and all expenses so
incurred by Landlord, together with interest, at the rate set
forth in subparagraph 18(b)(5) below, on such sums and expenses
from the date incurred until payment in full;
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(5) Interest on any sums due to Landlord
from Tenant under this Lease shall accrue, as of the date of
default, at a variable rate equal to two (2) percentage points
above the prime interest rate as set daily by Chase Manhattan
Bank, N.Y.C., N.Y.
(6) Tenant, for itself and on behalf of any
and all persons claiming through or under it, including without
limitation, creditors of every kind, hereby waives and surrenders
all rights and privileges which it or any of them may have under
or by reason of any present or future law to redeem the Demised
Premises, or to have a continuance of this Lease for the
remainder of the term, after being dispossessed or ejected
therefrom by process of law or after the termination of this
Lease as herein provided.
(7) Tenant shall be liable to the Landlord
for all reasonable attorneys' fees and other costs which Landlord
may incur as a result of enforcing or protecting its rights
against the Tenant under this Lease.
c. The failure on the part of Landlord to re-
enter or repossess the Demised Premises, or to enforce any of its
rights as provided in this section upon any default, shall not be
deemed a waiver of any of the terms and conditions of this Lease
and shall not preclude said Landlord from exercising any such
rights upon any subsequent occurring default or defaults. All of
Landlord's rights shall be cumulative and shall not preclude the
Landlord from exercising any other rights which it may have under
law.
19. Assignment and Subletting.
a. Tenant shall not be entitled to transfer,
sell, mortgage, pledge, hypothecate, or assign this Lease or
sublet or grant a concession or license or otherwise permit any
other person or entity to occupy the Demised Premises or any part
thereof (hereinafter referred to as "Assignment") without the
prior written consent of Landlord, which shall not be
unreasonably delayed or withheld.
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b. The criteria for Landlord's consent shall
include such factors as, without limitation, proposed assignee's
(hereinafter referred to as the "Assignee") financial condition
and its experience in the business it will conduct at the Demised
Premises; the activity that will by carried out by the Assignee
at the Demised Premises; satisfactory assurance that the
Assignee's presence at the Demised Premises would not constitute
an "industrial establishment" under ECRA; approval by the holders
of any mortgages against the Demised Premises or any assignees
under any assignment of leases made by Landlord; Tenant shall
provide Landlord with all information reasonably requested by
Landlord for its decision on the requested Assignment and Tenant
shall bear all expenses incurred or sustained by Landlord in
order to assess and evaluate the Assignment, including, but not
limited to, its reasonable attorney's fees. Any consent shall
apply only to the specific transaction for which it was given and
shall not be a waiver of the obligation of Tenant to obtain
Assignments. The acceptance or collection of rent by the
Landlord from any Assignee shall not be deemed an acceptance of
such Assignee as Tenant in lieu of written express consent or as
a release of Tenant from its obligation under this Lease.
c. In the event Landlord consents to an
Assignment, such consent to that Assignment shall be expressly
conditioned upon the compliance by tenant and the Assignee of the
following provisions:
(1) From the time of the request for a
consent to the Assignment through the effective date of the
Assignment itself, this Lease must be in full force and effect
without any breach or default thereunder existing on the part of
the Tenant. Provided an Assignment is not in conjunction with a
sale or merger of Tenant's business, Landlord, in lieu of
consenting to an Assignment, may terminate this Lease.
(2) The Assignee shall assume, by written
instrument, in form and content reasonably satisfactory to
Landlord, the due performance of all of Tenant's obligations
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under the Lease, including any accrued obligations at the time of
the assignment.
(3) A copy of the Assignment and the
original assumption agreement (both in form and content
satisfactory to the Landlord) fully executed and acknowledged by
the Assignee, together with a certified copy of a properly
executed corporate resolution authorizing such assumption, if
applicable, shall be delivered to the Landlord prior to the
effective date of such Assignment.
(4) Such Assignment shall be upon and
subject to all the provisions, terms, covenants and conditions of
this Lease and the Tenant, Assignee and any guarantor shall
continue to be and remain liable hereunder. In no event shall
rent charged to any assignee exceed the rent payable by Tenant to
Landlord under this Lease, a breach of this restriction shall be
a material default under this Lease.
(5) Tenant shall have complied with the
requirements of ECRA and shall have received from the NJDEP
either (i) a non-qualified approval of Tenant's negative
declaration, or (ii) a letter of ECRA non-applicability. Tenant
shall furnish Landlord with a copy of either the approval or the
letter of ECRA non-applicability from the NJDEP at the time the
request for consent to the Assignment it made to the Landlord.
20. Signs. The Tenant shall not display any sign,
picture, advertisement, awning, merchandise, or notice on the
Property, the Building, nor anywhere in the Common Area, nor on
the outside of the Demised Premises, except as permitted by
Landlord in writing and as permitted by law. Notwithstanding the
foregoing, Tenant may utilize the existing lawn sign in
accordance with all applicable municipal laws.
21. Landlord's Right to Make Modifications. Landlord
reserves the right to make improvements to the Building and the
Property, including but not limited to, relocating egress and
ingress to the Building and Property, provided that such changes
and construction shall not unreasonably interfere with Tenant's
24
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use of the Demised Premises or access to the Demised Premises.
22. Bankruptcy of Tenant.
a. Upon the filing of a petition by or against
Tenant under the United States Bankruptcy Code, Tenant, as debtor
and as debtor in possession, and any trustee who may be appointed
agree as follows: (i) to perform each and every obligation of
Tenant under this Lease including, but not limited to, the manner
of "use and operation" of the Demised Premises as provided in
Paragraph 9 of this Lease until such time as this Lease is either
rejected or assumed by order of the United Status Bankruptcy
Court; and (ii) to pay monthly in advance on the first day of
each month as reasonable compensation for use and occupancy of
the Demised Premises an amount equal to all rent and other
additional rent otherwise due pursuant to this Lease; and (iii)
to reject or assume this Lease within ninety (90) days of the
filing of such petition under Chapter 7 of the Bankruptcy Code or
within one hundred twenty (120) days (or such shorter term as
Landlord, in its sole discretion, may deem reasonable so long as
notice of such period is given) of the filing of a petition under
any other Chapter; and (iv) to give Landlord at least forty five
(45) days prior written notice of any proceeding relating to any
assumption of this Lease; and (v) to give at least thirty (30)
days prior written notice of any abandonment of the Demised
Premises; and such abandonment to be deemed a rejection of this
Lease; and (vi) to do all other things of benefit to Landlord
otherwise required under the Bankruptcy Code; and (vii) to be
deemed to have rejected this Lease in the event of the failure to
comply with any of the above; and (viii) to have consented to the
entry of an order by an appropriate United States Bankruptcy
Court providing all of the above, waiving notice and hearing of
the entry of same.
b. No default of this Lease by Tenant, either
prior to or subsequent to the filing of such a petition, shall be
deemed to have been waived unless expressly done so in writing by
Landlord.
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23. Quiet Enjoyment. Landlord covenants and agrees
with Tenant that upon Tenant's prompt and full payment of all
rent and other sums required to be paid by Tenant under this
Lease and observing and performing all the terms, covenants and
conditions on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Demised Premises, subject,
nevertheless, to the terms and conditions of this Lease and any
present or future underlying leases, ground leases and/or
mortgages on the Building.
24. Holding Over. The Tenant shall have no right to
remain in possession after the Termination Date. If the Tenant
shall occupy the Demised Premises after the expiration of this
Lease with the consent of the Landlord (which consent shall be
the obligation of Tenant to obtain in writing prior to the
Termination Date and which consent Landlord shall be under no
obligation to give), and rent is accepted and collected from said
Tenant, such occupancy and payment shall be construed as an
extension of this Lease for a term of month-to-month only, from
the date of such expiration. In such event, if either Landlord
or Tenant desires to terminate said occupancy at the end of any
month after the termination of this Lease, the party so desiring
to terminate the same shall give the other party thirty (30) days
written notice to that effect. if such occupancy continues after
such notice of termination, or if Tenant shall continue its
occupancy after the Termination Date without obtaining Landlord's
consent, Tenant shall pay to Landlord, as partial damages, double
the amount of both fixed annual rental (at the rate which was
last in effect for the term) and all additional rent for the time
Tenant retains possession of the Demised Premises or any part
thereof after termination of the term, together with all costs,
expenses and damages incurred by Landlord and its agents to
obtain possession from Tenant and/or as a result of any loss of
rents and/or liability sustained by landlord or its agents in
connection with any subsequent tenancy which may have intended to
occupy said Demised Premises at the expiration of the term
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herein. The acceptance of rent and/or additional rent by
Landlord shall not be deemed to create a new or additional
tenancy other than aforesaid.
25. Surrender.
a. On the last day of the term or on the sooner
termination thereof, Tenant shall, at Tenant's sole cost and
expense: (i) peaceably surrender the Demised Premises broomclean,
in good order and condition, restored to its original condition
as of the commencement of the term of this Lease, except for
reasonable wear and tear; and (ii) remove from the Demised
Premises its signs, furniture, equipment, machinery and trade
fixtures ("Tenant's Property"). Tenant's Property not so removed
may at Landlords' election and without limiting Landlord's right
to compel removal thereof, be deemed abandoned. Any damage to
the Demised Premises caused by Tenant in the removal of Tenant's
Property shall be repaired by Tenant at Tenant's sole cost and
expense. This obligation shall survive the expiration or sooner
termination of this Lease.
b. The title to all alterations, additions,
improvements, repairs, fixtures, other than Tenant's Property,
which shall have been made, furnished or installed by or at the
expense of either the Landlord or Tenant in or upon the Demised
Premises, vest in Landlord upon the installation thereof, and the
same shall remain upon and be surrendered with the Demised
Premises as part thereof without disturbance and without charge,
unless otherwise required by Landlord.
26. Notices.
a. All notices and demands which are required to
or are permitted by the terms of this Lease shall be given in
writing, whether herein specified or not, and shall be deemed
effectively given upon receipt or rejection if personally
delivered, delivered by overnight courier with return receipt,
telecopied or sent by United States registered, express or
certified mail, postage prepaid, addressed to the parties at the
following addresses:
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For Landlord:
Lauffer Building Associates, Ltd.
c/o Bergen & Bornstein, P.A.
237 South Street
Morristown, New Jersey 07960
For Tenant:
Mr. David Bains
Amplidyne, Inc.
144 Belmont Drive
Franklin, New Jersey 07416
Said addresses and the names of the parties to whom notices are
to be sent may be changed from time to time by either party or by
an assignee or successor of either of them by the giving of
written notice to the other sent as above provided.
27. Brokers. Tenant represents and warrants that
neither it nor any of its employees or agents has acted so as to
entitle any brokers other than David T. Houston Co. to a
commission in connection with this transaction, which commission
shall be paid by Landlord.
Each party covenants and agrees to indemnify and hold
harmless the other party against any claim asserted by any broker
or anyone else with whom such party has dealt for any
compensation in bringing about this transaction, other than as
above stated (provided the other party has not dealt with such
broker or other person in connection with this transaction), and
to reimburse the other party for any costs or expenses including,
without limitation, reasonable attorneys' fees and disbursements,
incurred by the other party in defending himself against claims
made against him for any such compensation.
28. Security. Tenant shall, on the date hereof,
deposit with the Landlord the sum of THIRTY-FIVE THOUSAND and
00/100 ($35,000.00) DOLLARS as security for the full and faithful
performance of the obligations of Tenant to be performed by
Tenant pursuant to this Lease. Said sum shall be returned
without interest to the Tenant immediately after the Termination
Date, provided that the Tenant has fully, faithfully and timely
carried out all of the terms, covenants and conditions on its
part to be performed.
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29. Demising Walls.
a. In the event Landlord shall lease space in the
Building to a third party, Landlord may construct demising walls
to separate Tenant's space from the space of third parties.
30. Miscellaneous
a. Definitions.
(1) The term "Landlord" as used in this
Lease shall mean the owner or lessee (if the Landlord claims the
right of possession by reason of a lease or sublease from the
owner) for the time being of the Building, and if such property
or the Lease be sold or transferred, voluntarily or
involuntarily, the seller, or assignor, shall be entirely
relieved of all covenants and obligations under this Lease
arising after transfer without further agreement between the
parties hereto and their successors.
(2) The words "rent" or "rental" - may be
used interchangeably and are defined to include all monies
specifically reserved as fixed annual rent, additional rental,
and all costs, expenses and damages which the Landlord may suffer
or incur by reason of any default of the Tenant or failure on its
part to comply with the covenants, terms or conditions of this
Lease, and all other sums of money which by virtue of this Lease
shall at any time or times become due and owing by Tenant to
Landlord.
b. Abandonment of Fixtures.
If, after the default in payment of rent or
violation of any other provision of this Lease or at any time
during the term hereof or upon expiration of this Lease, Tenant
moves out or is dispossessed and fails to remove any trade
fixtures or any other property within thirty (30) days after said
moving or dispossession then, in that event, the said fixtures
and property shall be deemed abandoned by the Tenant and shall
become the property of the Landlord.
c. Waiver.
No agreement to accept a surrender of the
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Demised Premises shall be valid unless in writing signed by
Landlord. The delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the Lease
or a surrender of the Demised Premises. The failure of Landlord
to seek redress for violation of, or to insist upon the strict
performance of, any covenant or condition of this Lease, or of
any rule or regulation, shall not be construed as a waiver or
relinquishment for the future of such covenant, condition, rule
or regulation. The receipt by Landlord of rent with knowledge of
a breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No payment by Tenant or receipt by
Landlord of a lesser amount than the rent herein stipulated shall
be deemed to be other than on account of the earliest stipulated
rent, nor shall any endorsement or statement on any check nor any
letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept the balance of
such rent or pursue any other remedy in this Lease provided.
d. Entire Agreement.
This Lease and the Exhibits, if any, attached
hereto and forming a part hereof, set forth all the covenants,
promises, agreements, conditions and understandings between
Landlord and Tenant concerning the Demised Premises. There are
no oral agreements or understandings between the parties hereto
affecting this Lease, and this Lease supersedes and cancels any
and all previous negotiations, arrangements, agreements and
understandings, if any, between the parties hereto with respect
to the subject matters hereof, and none thereof shall be used to
interpret or construe this Lease. Except as herein otherwise
expressly provided, no subsequent alteration, amendment, change
or addition to this Lease, shall be binding upon Landlord or
Tenant unless reduced to writing and signed by them.
e. Lease Effective.
The submission of this Lease by Landlord to
Tenant for examination shall not be deemed to constitute an offer
by Landlord or a reservation to Tenant of an option to lease, and
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this Lease shall become effective as a binding instrument only
upon the execution and delivery thereof by both Landlord and
Tenant.
f. Partial Invalidity.
If any term, covenant or condition of this
Lease or the application thereof shall, to any extent, be invalid
or unenforceable, the remainder of this Lease or the application
of such term, covenant or condition to persons or circumstances,
other than those for which it is held invalid or unenforceable,
shall not be affected thereby and each remaining term, covenant
or condition of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
g. Rights of Entry.
Landlord or its duly authorized agents or
representatives shall have the right, upon notice, except in the
case of an emergency, to enter upon the Demised Premises during
all reasonable business hours for the purpose of examining the
same, showing same to banking and insurance representatives,
governmental inspectors, or, in the event of emergency, in order
that repairs and alterations may be made for the safety and
preservation thereof, provided, however, that Landlord's right to
enter upon said Demised Premises shall be subject to the exercise
of ordinary care and caution in doing so. Landlord or Landlord's
duly authorized agents or representatives shall also have the
right to show the Demised Premises to persons wishing to purchase
or lease the same and, during the six (6) months next prior to
the expiration of the term of this Lease, Landlord or its duly
authorized agents or representatives shall have the right to
place notices on the front of the Building offering the Demised
Premises for lease or for sale.
h. Elimination of Liens by Tenant.
Tenant shall not suffer or permit or cause
any liens or any action to be filed against the Demised Premises
by reason of any cause of Tenant or Tenant's agents or employees.
In the event that any such lien is filed, Tenant shall have the
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same discharged within thirty (30) days after notice thereof or
post appropriate security satisfactory to Landlord to protect
Landlord's interest as a result of said lien. Nothing in this
Lease contained shall be deemed to be a consent on the part of
Landlord to subject the Demised Premises to a lien or a claim
under a mechanic's lien law of New Jersey by reason of labor or
material furnished to Tenant in connection with the Demised
Premises.
1. Interpretation.
The captions and headings throughout this
Lease are for convenience and reference only and the words
contained therein shall in no way be held or deemed to define,
limit, describe, explain, modify, amplify or add to the
interpretation, construction or the meaning of any provisions of,
or the scope or intent of, this Lease, nor in any way affect this
Lease.
All references to nouns and pronouns used
herein shall be construed in the singular or plural and in such
gender and tense as the sense of this Lease requires.
No provisions of this Lease shall be
construed by any court or other judicial authority against either
Landlord or Tenant by reason of any such party being deemed to
have drafted or structured such provision.
The words "hereby", "herein", "hereof",
"hereto", "hereunder", and similar words shall always be deemed
to refer to this Lease in its entirety, and not merely to the
subparagraph or paragraph wherein such words appears, unless
expressly so modified.
j. Successors and Assiqns.
This Lease shall be binding upon and shall
inure to the benefit of the parties hereto, their respective
heirs, representatives, successors, and to the extent that this
Lease is assignable by the terms hereof, to the assigns of such
parties. No rights, however, will inure to the benefit of any
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assignee of Tenant unless the assignment to such assignee has
been made in accordance with the provisions of this Lease.
k. Recording.
Tenant shall not record this Lease or any
memorandum of this Lease. Any such recording by Tenant shall be
a material breach of this Lease.
1. Trial By Jury Waiver.
The parties hereby waive trial by jury in any
action, proceeding or counterclaim brought by either party
against the other on any matter arising out of or in any way
connected with this Lease, the relationship of Landlord and
Tenant, or Tenant's use and occupancy of the Demised Premises.
IN WITNESS WHEREOF, the parties hereto have hereunto
their hands and seals the day and year first above written:
LANDLORD:
LAUFFER BUILDING ASSOCIATES, LTD.
BY: UNITED STATES LAND RESOURCES, L.P.,
General Partner
BY: UNITED STATES REALTY RESOURCES,
INC., General Partner
BY: /s/ LAWRENCE S. BERGER
................................
LAWRENCE S. BERGER, President
TENANT:
AMPLIDYNE, INC.
BY: /s/ DAVID BAINS
...................................
DAVID BAINS, President
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EXHIBIT B
Landlord's Work
1. Interior demising walls painted, one coat white.
2. Existing carpets cleaned.
3. Damaged or missing ceiling tiles replaced.
LEASE AGREEMENT
HILLSBOROUGH BUSINESS CENTER
FOR AND IN CONSIDERATION of the mutual covenants herein
contained, the parties hereto do hereby agree as follows:
1. The following terms are incorporated by reference
into this agreement:
(a) NAME AND ADDRESS OF LANDLORD:
LARKEN ASSOCIATES
P.O. BOX 957
5-12 HOMESTEAD ROAD
BELLE MEAD, NEW JERSEY 08502
(908) 874-8686
(b) NAME AND ADDRESS OF TENANT:
David S. Baines
Amplidyne, Inc.
Ilene Court
Building 7 Unit 7,8,9,&10
Belle Mead, N.J. 08502
(c) DESCRIPTION OF PREMISES:
Building 7 Unit 7,8,9,&10
6000 sq. ft.
(d) TERM OF LEASE:
3 years Commencing: September 1, 1994
Terminating: October 31, 1997
(e) MONTHLY RENTAL (NNN):
Rate Monthly
09/01/94 thru 08/31/95 $3.75 $l,875.00
09/01/95 thru 08/31/96 $4.25 $2,125.00
09/01/96 thru 10/31/97 $4.50 $2,250.00
(f) PROPORTIONATE SHARE OF EXPENSE:
APROX. $1.05 PER SQ. FT. TAXES AS PER BILLS
APROX. $1.20 PER SQ. FT. COMMON AREA AS PER BILLS
(g) SECURITY DEPOSIT
2 MONTHS SECURITY DEPOSIT $3,750.00
(h) USE OF PREMISES:
Office / Assembly
PAGE 1
<PAGE>
2. RENTAL OF PREMISES. The Landlord set forth in paragraph
1 (a) above hereby leases to the Tenant set forth in paragraph 1(b)
above, and the Tenant hereby hires from the Landlord, the space set
forth in Paragraph 1 (c) above (the "Premises") in the building (the
"Building") located on the property of Landlord set forth in
Paragraph 1 (c) above (the "Property").
3. TERM. The term of this Lease shall commence and
terminate as set forth in Paragraph 1 (d) above, unless sooner
terminated as this Lease hereinafter provides.
In the event that the Premises are not ready for Tenant's
occupancy at the time fixed by this Lease for commencement of the
term, this Lease shall not be affected thereby and Landlord shall
not be liable to Tenant by reason thereof, but in such event no
rent shall be due hereunder until the date the premises are ready
for occupancy. In the event that the Premises are not ready for
Tenant's occupancy ninety (90) days after the date fixed for
commencement of the term, either party shall have the right to
terminate this Lease on written notice to the other and neither
party shall have any further liability to the other hereunder.
4. FIXED RENT. As fixed rent, the Tenant shall pay to the
Landlord at the address set forth in Paragraph 1 (a) above, or to
such other person or at such other place as the Landlord may from
time to time designate, without previous demand therefore, and
without counter-claim, deduction or set-off, the monthly sum set
forth in Paragraph 1 (e) above in advance on the first day of
each month during the term of this Lease.
5. NET NET NET RENT. It is the intention of the parties
hereto that, except as otherwise provided herein, this shall be a
"Net Net Net Lease" and that this Lease shall yield to the
Landlord the fixed rent referred to in Paragraph 4 hereof on a
triple net basis during the entire period of the term of this
Lease, and Tenant shall pay, as additional rent, its
proportionate share of all costs, expenses and obligations of
every kind and nature whatsoever in relation to the Property.
6. IMPOSITIONS. Tenant shall pay, as additional rent, its
proportionate share represented by a percentage obtained by
dividing the square footage of the demised premises into the
square footage of the building described in Paragraph 1 (f) of
this Lease (hereinafter called the "Tenant's Share") of all real
estate taxes, assessments for public improvements or benefits,
and other charges of every kind and nature whatsoever, ordinary
or extraordinary, foreseen or unforeseen, general or special (all
of which are hereinafter sometimes collectively referred to as
"Impositions") (said additional rent is hereinafter referred to
as the "Tax Rent"), which shall, pursuant to present or future
law or
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otherwise, prior to or during the term hereof, have been or be
levied, charged, assessed or imposed upon, or grow or become due
and payable out of or for, or become or have become a lien on the
Property or any part thereof, or the appurtenances thereof.
Landlord shall bill Tenant monthly for Tenant's proportionate
share of the foregoing Impositions. Tenant acknowledges that
certain Impositions may, at the Landlord's discretion, be
assessed over time to the Tenant(s) of the building, and Tenant
agrees to pay said Impositions regardless of whether said
Impositions were incurred prior to or after the commencement of
the term of the Lease. Tenant shall also pay to Landlord one
hundred (100%) percent of all Impositions imposed upon the
Property as a result of any improvements made in or to the
Premises by Tenant.
If at any time during the term of this Lease, the then prevailing
method of taxation or assessment shall be changed so that the
whole or any part of the Imposition therefore payable by Tenant
as above provided, shall instead be levied, charged, assessed or
imposed wholly or partially on the rents received by Landlord
from the Premises, or shall otherwise be imposed against Landlord
in the form of franchise tax or otherwise, then Tenant shall pay
all such levies, charges, assessments, impositions, taxes and
other substituted charges in the manner herein provided for the
payment of Impositions. If at any time during the term of this
Lease, a tax or excise on rent, or other such tax however
described, is levied or assessed against Landlord on account of
the rentals payable to Landlord hereunder, Tenant shall pay one
hundred percent (100%) of any such tax or excise on rent to
Landlord as additional rent.
7. EXPENSE. Tenant shall pay as additional rent Tenant's
Share of all expenses of the Property during the term of this
Lease (said additional rent is hereinafter referred to as the
"Expense Rent"). The term "expense" shall mean all costs
incurred by Landlord in connection with the operation,
maintenance, repair and replacement of the Property and providing
services to the tenants thereof, including, but not limited to,
insurance, payroll, snow removal, common area maintenance,
management fees, repairs, replacements, supplies, sewer rents,
leasing commissions, utilities, legal fees incurred by Landlord
enforcing the provisions of the lease, and grass cutting.
During the first and last years of the Term, the amount
payable by Tenant hereunder shall be prorated for the fraction of
the calendar year included in the Term.
Landlord shall bill Tenant monthly for Tenant's proportionate
share of the foregoing Expense Rent. Tenant acknowledges that
certain of the expenses as set forth above may, at the Landlord's
discretion, be assessed over time to the Tenant(s) of the
building, and Tenant agrees to pay said expenses regardless of
whether said expenses were incurred prior to or after the
commencement of the term of this Lease.
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It is expressly agreed and understood that Tenant will pay
Tenant's share of the electric utility room and water room
charges on a common area basis as to their percentage share of
the space in the Lease. The Tenant will also pay pro-rated rent
equivalent to the leased space for the common area of the entire
building described in Paragraph 1 (f) of this Lease, including
all utility rooms.
8. USE. The premises or any part thereof shall not be used
or permitted to be used for other than the purpose set forth in
Paragraph 1 (h) above, and said unit shall be subject to and in
accordance with all rules, regulations, laws, ordinances,
statutes, and requirements of all government authorities,
including fire insurance rating organizations and Board of Fire
Underwriters and any similar bodies having jurisdiction over the
Leased Premises.
If Tenant has any permitted use involving storage or
handling of flammable materials, combustible dust, ignitable
fibers or flying fibers or any other use which may result in an
increase in fire hazard, Tenant shall at its own expense provide
such hazard-reducing alterations of Premises, equipment, or
protection devices as Landlord shall specify.
9. UTILITIES. Tenant shall pay as additional rent all
charges for heat, fuels of all types, water, sewer, sprinkler,
standby (fire protection) electricity, telephone, gas, and all
other utilities used by Tenant in the Premises.
SPRINKLERS. If required, Landlord will provide automatic
sprinklers designed to cover an open, unobstructed premise of an
"Ordinary Hazard (Group 1) Occupancy" as defined by Standard for
the Installation of Sprinkler Systems. Tenant shall at its own
expense provide additional sprinkler protection in any office,
hallway room or other enclosed space not provided by Landlord.
Any additions or alterations to the sprinkler system that may be
required shall comply with Paragraph 12 "Conform to Law" and
Paragraph 13 "Alterations" and other provisions of this lease.
Landlord will provide a main water line for the premises at
his expense for use as a water supply for automatic sprinklers,
but water company charges therefore shall be part of common area
charges.
Fire extinguishers will be installed by Larken Associates,
according to Hillsborough Township Fire Sub-Code officials, and
billed to tenant with first month's rent.
Tenant will be responsible for maintenance of fire
extinguisher or extinguishers. The fire extinguishers will be
owned by Larken Associates when tenant leaves the premises.
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10. REPAIRS. Tenant shall take good care of the
Premises and fixtures and appurtenances therein, and at its own
cost and expense make all non-structural repairs, (structural
defined as load bearing walls, steel foundation and roof
structure not including roof membrane) thereto, as and when
needed, to preserve them in good working order and condition,
reasonable wear and tear and damage from the elements and
casualty excepted. Notwithstanding the foregoing, all damage or
injury to the Premises or to any other part of the Property, or
to its fixtures or appurtenances, where requiring structural or
non-structural repairs, caused by the negligence or improper
conduct of Tenant, or its employees, invitees, licensees or
agents, shall be repaired promptly by Tenant at it sole cost and
expense.
The Tenant covenants and agrees that it shall not cause
or permit any waste (other than reasonable wear and tear),
damages, disfigurement or injury to the Leased Premises, or any
overloading of the floors of the building constituting part of
the Leased Premises.
The Tenant expressly covenants and agrees at its sole
expense to replace any broken glass in the windows or other
apertures of the Leased Premises which may become damaged or
injured.
The Landlord, at Tenant's cost and expense, shall
maintain, repair and keep free and clear of ice and snow, the
driveways and parking areas.
The Tenant shall at its own cost and expense, maintain,
repair and keep free and clear of ice and snow the sidewalks,
steps and approach sidewalks to the Leased Premises; and the
Tenant shall further, at its own cost and expense, keep the
exterior of the Premises free and clear of paper and other debris
so as to keep same in a good and orderly manner as reasonably
prescribed by Landlord.
In the event the Landlord expends any amounts pursuant to
the Tenant's obligation herein, then the Tenant shall pay as
additional rent its proportionate share of such amounts expended
as provided under the formula in Article 3 hereof.
Landlord shall use its best efforts to maintain the
roofing membrane by a combination of inspections and repairs as
Landlord deems necessary. Tenant shall immediately notify the
Landlord in writing of any leaks or damage to the roof membrane.
The Landlord assumes no responsibility for any damage to Tenant's
property or any third party's property held by Tenant in the
Leased Premises for any reason or causes whatsoever.
The Landlord shall contract and bill the Tenant its
proportionate share for all landscape maintenance as to Premises
as described above.
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11. ASSIGNING AND SUBLETTING. Tenant shall not assign,
mortgage or otherwise encumber this Lease, nor sublet the
Premises in whole or part, nor permit nor suffer the Premises or
part thereof to be used or occupied by others, without the prior
written consent of Landlord. Landlord shall not unreasonably
withhold its consent to an assignment of this Lease or subletting
of all or part of the Premises (hereinafter called the "Sublease
Area"). The consent of Landlord in any one or more instances
shall not be deemed a waiver of the necessity of Landlord's
written consent in subsequent instances.
If Tenant shall desire to assign this Lease or sublet the
Sublease Area, Tenant shall first submit in writing to Landlord
(i) the name and address of the proposed assignee or sublessee,
(ii) financial statements, references, methods of operation and
number of employees of proposed assignee or sublessee, (iii) a
counterpart of the proposed agreement of assignment or sublease,
and (iv) an offer to Landlord, with respect to an assignment, to
assign this Lease to Landlord without payment of monies or other
consideration therefore, or with respect to a subletting, to
sublet to Landlord the Sublease Area at the rental contained in
this Lease applicable to the Sublease Area, or the same rental
contained in the proposed agreement of sublease, at Landlord's
option. Landlord shall accept such offer, if at all, within
sixty (60) days after receipt of such offer. In the event that
Landlord accepts such offer, Landlord may make further
assignments of the Lease or make further subleases of all or any
part of the Sublease Area, and make changes, alterations and
improvements to the Premises or Sublease Area without Tenant's
consent thereto. If Landlord shall not accept Tenant's offer,
and shall consent to the proposed assignment or subletting,
Tenant may thereafter assign this Lease to the proposed assignee
or sublet the Sublease Area to the proposed sublessee, but only
on the terms and conditions contained in the proposed agreement
of assignment or sublease submitted to Landlord. No such
assignment shall be effective unless the assignee shall assume
the performance of all of the terms, covenants and conditions of
the Lease to be performed by the Tenant. In the event that such
assignment or subletting shall not be made within thirty (30)
days after the offer to assign or sublease to Landlord shall have
expired, then the provisions of this paragraph requiring that
Tenant first offer to assign or sublet to Landlord shall again be
applicable. Tenant shall not assign this Lease or sublet all or
any part of the Premises to any person or entity which shall at
that time be a tenant, subtenant or other occupant of the
Property.
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If this Lease is assigned, or if the Premises or any part
thereof are sublet or occupied by anybody other than Tenant,
Landlord may collect rent from the assignee, sublessee or
occupant, and apply the amount collected to the rent payable
hereunder; but no such collection shall be deemed a waiver of
this covenant against assignment and subletting, or the
acceptance of the assignee, subletting by Tenant and/or the
acceptance of rent by Landlord from any assignee, sublessee or
occupant, the Tenant named herein shall remain fully liable for
the payment of rent and for the performance of all of the terms
of this Lease to be performed by the Tenant.
12. CONFORM TO LAW. Tenant shall, at its own expense, in
the use and occupancy of the Premises, conform to all laws,
orders and regulations of the federal, state and municipal
governments, or any of their departments, and the regulations of
the Board of Fire Underwriters, and Landlord's insurers, now or
hereafter applicable the Premises. Tenant shall not do or permit
anything to be done in the Premises or bring or keep anything
therein which shall in any way increase the rate of fire
insurance on the Property.
If necessary, it is tenant's obligation to acquire any
State, Federal, or Municipal approvals for any of it's items
manufactured that are, in nature, a violation in using sewer
facilities or drainage facilities. In the event of any such
violation the Tenant will hold Larken Associates harmless from
any such violation. Larken Associates will have a right to
immediately dispossess tenant if, after moving into the Premises,
a violation occurs and Tenant does not cure such violation in a
timely manner.
Tenant's Standard Industrial Classification Number is
_____________. Tenant will immediately notify Landlord of any
changes in this number during the term of this Lease. Tenant
agrees to comply with all the requirements of the Environmental
Clean-up Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 et seq. and
the Spill Compensation and Control Act ("Spill Act") N.J.S.A.
58:10-23 et seq., and all regulations promulgated in connection
therewith regarding any substances or materials placed or used
upon the Leased Premises by Tenant, it's agents employees or
contractors.
If the Tenant shall fail or neglect to comply with
the aforesaid statutes, ordinances, rules, orders, regulations
and requirements or any of them, or in case the Tenant shall
neglect to maintain the Leased Premises or fail to make any
necessary repairs called for in the Lease, then the Landlord or
the Landlord's agents may after ten (10) days written notice,
(except in the case of emergency,
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<PAGE>
action may be taken immediately enter Leased Premises and make
such repairs, effect such maintenance and comply with any and all
of the said statutes, ordinances, rules, orders, regulations or
requirements, at the cost and expense (including experts and
reasonable attorney's fees) of the Tenant and in case of the
Tenant's failure to pay therefore, the said cost and expense
shall be added to the next month's rent and be due and payable as
such, or the Landlord may deduct the same from the balance of any
monies remaining with Landlord. The failure by the Landlord to
take any action hereunder, or delay by Landlord in taking any
action, shall not place any liability or obligation on the
Landlord. This provision is in addition to the right of the
Landlord to terminate this Lease by reason of any default on the
part of the Tenant.
13. ALTERATION. Tenant shall make no alteration, changes,
additions or improvements, in, to or about the Premises, without
the written consent of the Landlord. Such alterations, additions,
or improvements shall be in conformity with applicable
governmental and insurance company requirements. All
alterations, additions or improvements which may be made by
either party shall remain upon and be surrendered with the
Premises as a part thereof at the expiration or earlier
termination of the Lease, unless, with respect to any alteration,
addition or improvement made by Tenant, Landlord shall give
written notice to Tenant to remove same, in which event the same
shall be removed from the Premises by Tenant, at its expense,
prior to the expiration of the Lease, and Tenant shall restore
the Premises to their original condition.
Tenant shall not make, or cause to have made, any sprinkler
system alterations without prior submission of plans,
specifications, drawings, and related documents to the Landlord
for his review and approval.
14. EXPIRATION OF TERM. At the expiration or earlier
termination of this Lease, Tenant shall remove all of Tenant's
personal property from the Premises, and repair all injury done
by or in connection with the installation or removal of said
property, and surrender the keys and the Premises to Landlord
broom clean and in an as good condition as they were at the
beginning of the term, ordinary wear excepted. All property of
Tenant remaining on the Premises after the expiration or earlier
termination of this Lease shall be conclusively deemed abandoned
and, at Landlord's option, may be retained by Landlord, or may be
removed by Landlord, and Tenant shall reimburse Landlord for the
cost of such removal. Landlord may have any such property stored
at Tenant's risk and expense. The Tenant's obligations under
this section shall survive the expiration or termination of this
Lease.
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<PAGE>
15. RULES AND REGULATIONS. Tenant shall observe such
reasonable rules and regulations with respect to the Property or
Premises as Landlord may from time to time adopt, on written
notice to Tenant. Landlord shall not be obligated to enforce the
rules and regulations as against any other tenant and Landlord
shall not be liable for violation of same by any other tenant,
its employees, agents, invitees or licensees.
16. ACCESS TO PREMISES. Landlord shall have the right to
enter the Premises at any reasonable time to examine same, to
maintain the same, or to make such repairs, replacements or
improvements to the Premises or to the Property as Landlord may
deem desirable, and Tenant shall have no claim against Landlord
by reason thereof. Landlord may install, maintain, replace and
use pipes and conduits in and through the Premises.
Landlord shall have the right to enter the premises at any
reasonable time (i) to inspect sprinkler valves, gauges and other
system components, (ii) perform maintenance and testing, and
(iii) make periodic inspections as part of a loss-prevention
program.
17. DAMAGE BY FIRE OR OTHER CASUALTY. If the Premises are
damaged by fire or other casualty and the Premises are thereby
rendered wholly or partially unusable, an equitable reduction of
rent shall be allowed the Tenant according to the portion of the
Premises which are unusable until the date that the repairs to
the Premises by Landlord have been substantially completed.
Landlord shall repair the Premises at its own expense, with
reasonable promptness, subject to delays beyond Landlord's
control and delays in making insurance adjustments, and subject
to Landlord's right to elect to terminate this Lease as
hereinafter provided. In the event that the Premises or any
other portion of the Property shall be so damaged that the
Landlord shall decide not to repair the same, or if Landlord
shall decide to demolish or to rebuild the same, Landlord may
terminate this Lease by written notice to Tenant, and thereupon
the term of this Lease shall expire as if such date were the date
set forth for the termination of this Lease and Tenant shall
forthwith quit and surrender the Premises. Nothing contained
herein shall relieve Tenant from any liability that Tenant may
have as a result of damage from fire or other casualty. At
Landlord's option, Landlord may temporarily relocate Tenant in
other premises in the Building until the Premises have been
restored, in which event Tenant shall pay rent and additional
rent therefore in accordance with this Lease and this Lease shall
apply to such premises during such period.
18. EMINENT DOMAIN. If any part of the Premises or any
other part of the Property shall be condemned or taken in any
manner for any public or quasi-public purpose and Tenant's use of
the Premises shall be materially affected, this Lease shall
terminate
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on the date when title to same vests in the condemning authority,
and the rent and additional rent shall be apportioned as of such
date. Landlord shall be entitled to receive the entire award in
any condemnation proceeding relating to the Property; except that
Tenant shall be entitled to any separate award for moving
expenses and for fixtures installed by Tenant at its own cost and
expense which do not become part of the Property or the property
of Landlord.
19. WAIVER OF LANDLORD'S LIABILITY. Tenant agrees to take
such steps as it may deem necessary and adequate for the
protection of itself, and its agents, employees, invitees and
licensees, and the property of the foregoing, by insurance, as a
self-insurer or otherwise. Landlord shall not be liable for any
injury to persons or damage to goods on the Property, resulting
from any cause whatsoever, including, without limitation, theft,
steam, water leakage, fire or other casualty, and acts of other
tenants or other persons on the Property.
20. WAIVER OF SUBROGATION. Tenant shall obtain for each
policy of insurance secured by it regarding the Premises or any
property located therein, an appropriate clause therein, or
endorsement thereon, pursuant to which such insurance company
waives subrogation or consents to waiver of the right of Tenant
to recover against the Landlord. If the Tenant cannot, with
reasonable diligence, obtain such provision in its insurance,
Landlord shall have the opportunity, at its option, to procure
such insurance from a responsible insurance company licensed to
do business in the state of New Jersey and the Tenant shall pay
the cost thereof.
21. INDEMNIFICATION BY TENANT. Tenant shall indemnify and
save harmless Landlord from and against all liabilities,
obligations, damages, penalties, claims, costs and expenses,
including reasonable attorneys fees, paid, suffered or incurred
as a result of any breach by Tenant, its agents, employees,
invitees or licensees, of any provisions of this Lease, or the
carelessness, negligence or improper conduct of Tenant, its
agents, employees, invitees or licensees.
22. INSURANCE. At all times during the term of this Lease,
Tenant shall, at Tenant's own cost and expense, provide and keep
in force comprehensive general public liability insurance
covering the legal liability of Tenant, Landlord, and any
mortgagee or ground lessor of Landlord, against claims for bodily
injury, death or property damage, occurring on, in or about the
Premises, or occurring as a result of ownership or use of
facilities located on the Premises, or as a result of the use of
products or materials manufactured, processed, constructed or
sold, or services rendered, on the Premises, in the minimum
amount of Two Million Dollars ($2,000,000.00) with respect to any
one death or bodily injury, Two Million Dollars ($2,000,000.00) with
respect to any
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<PAGE>
one occurrence, and Two Hundred Fifty Thousand Dollars ($250,000.00)
for all claims for property damage with respect to any one
occurrence.
Such insurance shall be written by companies of recognized
financial standing which are well rated by national rating
organizations and are legally qualified to issue such insurance
in the State of New Jersey. All policies obtained by Tenant
shall be delivered to Landlord and endorsed "premium paid" by the
company or agency issuing the same within ten (10) days after
issuance thereof, and shall provide that same shall not be
cancelled without providing Landlord with twenty (20) days prior
notice in writing of any such cancellation.
From and after the occurrence of any default under this Lease
by Tenant or the occurrence of any other event which would give
Landlord the right to terminate this Lease, all right, title and
interest of Tenant in any insurance policy or policies provided
under the terms of this Lease, including any premium for and
dividends upon such policy or policies, are hereby assigned to
Landlord.
23. COMMON AREAS. Tenant shall have the right to use, in
common with Landlord and other tenants and others (subject to
reasonable rules from time to time made by Landlord), the common
parking areas, walkways, sidewalks, driveways, halls and lobbies
(the "Common Areas") located on the Property. Landlord reserves
the following rights in and to the Common Areas and Premises: (i)
the right to install, use, maintain, remove, repair and replace
pipes, ducts, conduits, wires and appurtenant meters and
equipment, serving any part of the Building or Property, to be
located above ceiling surfaces, below floor surfaces, within
walls, or in central core areas; (ii) the right to alter or
relocate any of the Common Areas and to make such changes in,
alterations of or deletions from the Common Areas as Landlord may
determine to do; and (iii) the right to use and grant easements
on, over or under the Property and to dedicate for public use
portions thereof.
With respect to the parking areas on the Property, it is
agreed that Landlord may issue parking permits, install a gate
system and impose any other system as Landlord deems necessary
for the use of the parking areas. Tenant agrees that it and its
employees and invitees shall not park their motor vehicles in
parking spaces allocated to others by Landlord, and shall comply
with such rules and regulations for use of the parking areas as
Landlord may from time to time prescribe, and governmental
regulations relating to the parking areas now or hereinafter in
effect. Landlord shall not be responsible for any damage or
theft of any vehicle in the parking areas, and shall not be
required to keep parking spaces clear of unauthorized vehicles or
to otherwise supervise the use of the parking areas.
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24. CONDITION OF PREMISES. The premises are being leased
by Landlord to Tenant, and Tenant accepts the Premises, in their
present condition, "as is", and Landlord shall not be obligated
to perform any work of any type or nature whatsoever in
connection with the Premises in order to prepare same for
Tenant's use and occupancy, except as otherwise provided herein.
Tenant shall, at its own cost and expense, obtain all
governmental permits and licenses required in connection with its
occupancy of the Premises and the operation of its business in
the Premises.
25. DEFAULT: INSOLVENCY. If Tenant defaults in the payment
of rent or additional rent or defaults in the performance of any
of the covenants or conditions hereof, and if Tenant does not
cure any rent or additional rent default within five (5) days, or
other default within ten (10) days, (or, if such other default is
of such nature that it cannot be completely cured within ten (10)
days if Tenant does not commence such curing with such ten (10)
days and thereafter proceed with reasonable diligence and in good
faith to cure such default), or if the Tenant shall fail to
comply with any of the statutes, ordinances, rules, orders,
regulations and requirements of the Federal, State, County and
Municipal Governments, or if the Premises become deserted or
vacant, or if the Tenant shall compound its debts, or make an
assignment for the benefit of creditors, or if a receiver or
trustee is applied for or appointed for the Tenant, or if there be
filed a petition in bankruptcy or insolvency, or for an
arrangement or reorganization by or against the Tenant, or if the
Tenant is adjudicated a bankrupt or is adjudged to be insolvent,
or if there is advertised any sale of Tenant's property under
process of law, or if the assets or property of the Tenant in the
Premises shall be attached or levied upon, then Landlord may with
or without any demand whatsoever or further notice, pursue any
one or more of the following remedies: (i) Landlord shall have
the right, at its election, to cancel and terminate this Lease
and dispossess Tenant; or (ii) Landlord shall have the right
without terminating or cancelling this lease to declare all
amounts and rents due under this Lease for the remainder of the
existing term (or any applicable extension or renewal thereof) to
be immediately due and payable to the end of the initial term or
any renewal term, if applicable, shall be accelerated; (iii)
Landlord may elect to enter and repossess the premises for
Tenant's account, holding Tenant liable in damages for all
expenses incurred in any such reletting (including without
limitation advertising expenses, brokerage commissions,
reasonable attorney's fees, and repairs, replacements,
alterations and improvements) and for any difference in the
amount of rent received from such reletting and that are due and
payable under the terms of this Lease; or (iv) Landlord may enter
upon the Premises and do whatever Tenant is obligated to do under
the terms of this Lease (and Tenant agrees to reimburse Landlord
on demand for any expenses which Landlord may incur in
effecting compliance with Tenant's obligations under this Lease
and Tenant further agrees that Landlord shall not be liable for
any damages resulting to the Tenant from such action).
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All such remedies of Landlord shall be cumulative, and in
addition, Landlord may pursue any other remedies that may be
permitted by law or in equity. Forbearance by Landlord to
enforce one or more of the remedies herein provided upon an event
of default shall not be deemed or construed to constitute a
waiver of such default. If this Lease shall have been so
terminated by Landlord, Landlord may at any time thereafter
resume possession of Premises by any lawful means and remove
Tenant or other occupants and their effects. In the event that
Tenant shall be in default under this Lease, Tenant expressly
agrees that Landlord shall have the right to change the locks to
the Premises, add other locks to the Premises, or take such other
action as shall be necessary to recover possession of the
premises.
In any case where Landlord has recovered possession of the
Premises by reason of Tenant's default, Landlord may at
Landlord's option occupy the Premises or cause the Premises to be
redecorated, altered, divided, consolidated with other adjoining
premises, or otherwise changed or prepared for reletting, and may
relet the Premises or any part thereof as agent of Tenant or
otherwise, for a term or terms to expire prior to, at the same
time as or subsequent to, the original expiration date of this
Lease, at Landlord's option, and receive the rent therefor,
applying the same first to the payment of such expenses as
Landlord may have incurred in connection with the recovery of
possession, redecorating, altering, dividing, consolidating with
other adjoining premises, or otherwise changing or preparing for
reletting, and the reletting, including brokerage and reasonable
attorneys' fees, and then to the payment of damages in amounts
equal to the rent hereunder and to the cost and expense of
performance of the other covenants of Tenant as herein provided.
Tenant agrees, whether or not Landlord has relet, to pay to
Landlord damages equal to the rent and other sums herein agreed
to be paid by Tenant, less the net proceeds of the reletting if
any, as ascertained from time to time, and the same shall be
payable by Tenant on the several rent days above specified. In
reletting the Premises as aforesaid, Landlord may grant rent
concessions, and Tenant shall not be credited therewith. No such
reletting shall constitute a surrender and acceptance or be
deemed evidence thereof. The Tenant shall not be entitled to any
surplus accruing as a result of any reletting. If Landlord
elects pursuant hereto to occupy and use the Premises or any part
thereof during any part of the balance of the term as originally
fixed or since extended, there shall be allowed against Tenant's
obligation for rent or damages as herein defined, during the
period of Landlord's occupancy, the reasonable value of such
occupancy, not to exceed in any event the rent herein reserved
and such occupancy shall not be construed as a release of
Tenant's liability hereunder.
Tenant agrees to pay the legal fees and expenses of Landlord
in connection with any action in collect rent or additional rent
hereunder or to otherwise enforce any term of this Lease.
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Tenant hereby waives all right of redemption to which Tenant
or any person claiming under Tenant might be entitled by any law
now or hereafter in force.
Landlord's remedies hereunder are in addition to any remedy
allowed by law.
26. SERVICE FEE. In event Tenant fails to pay any rent or
additional rent on or before the fifth (5th) day after it is due,
Landlord shall be entitled to charge as additional rent a service
fee equal to five percent (5%) of the rent due for each five (5)
days which elapse between the fifth (5th) day after said rent is
due and the date the rent is received by Landlord. The foregoing
shall be in addition to any other right Landlord shall have by
this Lease or by law in the event Tenant fails to pay its rent in
accordance with this Lease.
Common Area charges and Rent must be paid by the first (1st)
of the month. If payment is not made, the Landlord has the
right to lock the premises within five (5) days after the first
(1st) of the month unless payment arrangements are made.
It is understood and agreed that Tenant understands that the
billing of rent and additional rent is not mandatory but an
accommodation by Landlord. Tenant must pay rent as per Lease
agreement whether they receive a bill or not and that all
obligations under the Lease agreement prevail whether the bill
has been received or not received.
It is expressly agreed and understood that a five percent
(5%) penalty per five (5) days will begin on the sixth (6th) of
each month and must be paid in full before premises will be
re-opened by Landlord.
All certified letters and phone calls which are made to
Tenant after the fifth (5th) of the month will be charged to the
Tenant. There will be a five percent (5%) interest charge plus a
$20.00 per hour administrative fee.
Each month Tenant will receive a specified Common Area charge
as per other buildings at the Hillsborough Business Center.
This paragraph (26) will supersede anything to the contrary
in the lease.
27. MECHANIC'S LIEN. Tenant shall discharge any mechanic's
lien filed against the Property for work done or claimed to have
been done for Tenant, or materials furnished or claimed to have
been furnished to Tenant, within ten (10) days after notice from
Landlord thereof.
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28. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If Tenant
defaults in the observance or performance of any term to be
observed or performed by Tenant under this Lease, Landlord may
immediately or at any time thereafter and without notice to
Tenant, perform the same for the account of Tenant, and the
expenses incurred with respect to such performance, together with
attorneys' fees and interest thereon, shall be deemed additional
rent hereunder and shall be paid by Tenant to Landlord on demand
therefor.
29. SUBORDINATION. This Lease is subject and subordinate
to all ground or underlying leases and to all mortgages which may
now or hereafter affect such leases or the Property and to all
renewals, modifications, consolidations, replacements and
extensions of any such lease or mortgage. This provision shall
be self-operative and no further instrument or act on the part
of Tenant shall be necessary to effect such subordination.
Tenant will nevertheless execute within five (5) days any
instrument confirming such subordination requested by Landlord.
If Tenant shall fail or otherwise refuse to execute a
subordination in accordance with this paragraph, then, and upon
such event, Tenant shall be deemed to have appointed Landlord and
Landlord shall thereupon be regarded as the attorney-in-fact of
Tenant, duly authorized to execute and deliver the required
subordination for and on behalf of Tenant, but the exercise of
such power by Landlord shall not be deemed a waiver of Tenant's
default.
30. LANDLORD'S RIGHT TO SHOW PREMISES. Throughout the
term of this Lease, Landlord shall have the right to enter the
Premises at reasonable hours for the purpose of showing the same
to prospective purchasers or mortgagees of the Property, and
during the last six (6) months of the Term for the purpose of
showing the same to prospective tenants.
31. QUIET ENJOYMENT. Landlord covenants that if and so
long as Tenant pays the rent and additional rents and performs
the covenants hereof, Tenant shall peaceably and quietly have,
hold and enjoy the Premises for the term herein mentioned,
subject to the provisions of this Lease, and to any mortgage,
underlying lease, or other agreements to which this Lease is
subordinate.
32. TENANT'S ESTOPPEL. Tenant shall, from time to time,
upon not less than ten (10) days' prior written request by
Landlord, execute, acknowledge and deliver to Landlord a written
statement in form satisfactory to Landlord, certifying that this
Lease is unmodified and in full force and effect (or that same is
in full force and effect as modified, listing the instruments of
modification), the dates to which the rent and additional rent
have been paid, and whether or not to the best of Tenant's
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knowledge Landlord is in default hereunder (and if so, specifying
the nature of the default), it being intended that any such
statement delivered pursuant to this Paragraph may be relied upon
by a prospective purchaser of Landlord's interest or mortgage of
Landlord's interest or assignee or any mortgage upon Landlord's
interests in any underlying lease or in the Property.
33. NOTICES. Any notice hereunder shall be sufficient if
sent by certified mail, return receipt requested, addressed, if
given by the Landlord, to the Tenant at the Premises, or if given
by the Tenant, to the Landlord at the address set forth in
Paragraph 1 (a) above, or at such other place as the Landlord may
notify Tenant in writing from time to time.
34. MANAGEMENT FEES. Management fees are 5% of the triple
net rent, payable monthly and are included in the "Expense Rent".
35. NO PERSONAL LIABILITY OF LANDLORD. There shall be no
personal liability of the Landlord or any principal of the
Landlord in connection with this Lease. Tenant agrees to look
solely to the equity of Landlord in the Property for the
collection of any judgment or other judicial process requiring
the payment of money by Landlord in the event of any default or
breach by Landlord with respect to this Lease or in any way
relating to the Premises or Property, and no other assets of
Landlord or any principal of Landlord shall be subject to levy,
execution or other procedures for the satisfaction of Tenant's
remedies.
36. HOLDOVER. In the event Tenant remains in possession of
the Premises after the expiration of the tenancy created
hereunder, and without the execution of a new lease, unless the
lease term has been extended pursuant to Paragraph 37 hereof,
Tenant, at the option of Landlord, shall be deemed to be
occupying said Premises as a tenant from month to month, at a
monthly rental equal to twice the sum of (i) the monthly
installment of fixed rent payable during the last month of the
lease term, and (ii) 1/12th of the Tax Rent and Expense Rent
payable for the last year of the lease term, subject to all the
other conditions, provisions and obligations of this Lease
insofar as the same are applicable to a month-to-month tenancy.
37. ONE YEAR RENEWAL. Tenant agrees to give written notice
to Landlord at least one hundred twenty (120) days prior to the
expiration of the lease term that it intends to vacate the
Premises at the expiration of the Lease. If such notice is not
given as above provided, this Lease shall automatically be
extended for an additional one (1) year term on all of the same
terms and conditions except that the monthly fixed rent for the
extension term shall be one hundred forty per cent (140%) of the
amount of fixed rent payable for the last month of the then
expiring term of the Lease.
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38. SUBMISSION OF LEASE. This Lease is submitted to Tenant
for signature on the understanding that it shall not be deemed an
offer and shall not bind Landlord in any way unless and until
duly executed by both Landlord and Tenant.
39. NO REPRESENTATIONS. Landlord has made no
representations or promises with respect to the Premises or the
Property, except as expressly contained herein. Tenant has
inspected the Premises and agrees to take the same in "as is"
condition, except as otherwise expressly set forth. Landlord
shall have no obligation, except as herein set forth, to do any
work in and to the premises to render them ready for occupancy
and use by Tenant. Tenant has inspected the building and the
Premises and is thorough}y acquainted with their condition, and
agrees to take the same "as is" and acknowledges that the taking
of possession of the Premises by Tenant shall be conclusive
evidence that the Premises and the building of which the same
form a part, were in good and satisfactory condition at the time
such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties
hereto are merged in this contract, which alone fully and
completely expresses the agreement between Landlord and Tenant
and any executory agreement hereafter made shall be ineffective
to change, modify, discharge or effect an abandonment of it in
whole or in part, unless such executory agreement is in writing
and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
40. CAPTIONS. The captions in the Lease are included for
convenience only and shall not be taken in consideration in any
construction or interpretation of this Lease or any of its
provisions.
41. NO WAIVER OR CHANGES. The failure of either party to
insist on strict performance of any covenant or condition hereof,
or to exercise any option herein contained, shall not be
construed as a waiver of such covenant, condition or option in
any other instance. This Lease cannot be changed or terminated
orally.
42. RECORDING. The Tenant shall not record this Lease or a
memorandum hereof.
43. BROKER. Tenant represents that it did not deal with or
negotiate with any broker in connection with this Lease and
indemnifies and holds Landlord harmless from and against any
claim for commission or other fee made by any broker with whom it
has dealt or negotiated.
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44. SECURITY DEPOSIT. Tenant has deposited with Landlord on
the signing of this Lease the sum set forth in Paragraph 1 (g)
above as security for the performance of Tenant's obligations
under this lease. Landlord shall have the right to apply any
part or all of said security deposit to remedy any default of
Tenant hereunder, including, but not limited to, payment of any
fixed rent, additional rent, holdover rent, services, fees, or
other debts of Tenant due to Landlord, repair of all damage to
Premises or repair or replacement of damage to other property of
Landlord caused by Tenant, or any of its agents, employees,
invitees or licensees, or expenses of rerenting and redecorating
the Premises in the event Tenant vacates same prior to the
expiration of the term. If Landlord applies any part of said
security deposit to remedy any default of Tenant, Tenant shall,
upon demand, deposit with Landlord the amount so applied so that
Landlord shall have the full deposit on hand at all times during
the term of this Lease. Provided that the Tenant has fully and
faithfully complied with all the terms and conditions of this
Lease, Landlord shall return the said security deposit to Tenant,
without interest, on the later of the date set forth for the
expiration of the term of this Lease or sixty (60) days after the
surrender of the Premises by Tenant. Landlord may deliver the
security deposit to the purchaser or other transferees of the
Landlord's interest in the Premises in the event that such
interest is sold or otherwise transferred, and thereupon Landlord
shall be discharged from any further liability with respect to
said security deposit. It is expressly understood and agreed
that the Tenant shall not and the Tenant represents that it will
not mortgage, pledge, hypothecate, assign, convey or otherwise
encumber the security deposited with the Landlord hereunder.
45. CHANGE REQUIRED BY LENDER. If a lending institution
shall request modifications in this Lease as a condition to
financing secured by the Property, Tenant shall not withhold or
delay its consent thereto, provided that such modifications do
not increase the obligations of Tenant hereunder.
If in connection with obtaining financing for the
improvements on the Premises, an institutional lender shall
request reasonable modifications in this Lease as a condition to
such financing, Tenant will not unreasonably withhold, delay or
defer its consent thereto, provided that such modifications do
not in Tenant's reasonable judgement, increase the obligations of
Tenant hereunder or materially adversely affect the leasehold
interest hereby created for Tenant's use and enjoyment of the
Premises.
Tenant will cooperate with Larken Associates as to any
documentation that is required for E.D.A. financing.
45. BINDING EFFECT. The provisions of this Lease shall apply
to, bind and inure to the benefit of Landlord and Tenant, and
their respective successors, legal representative and assigns, it
being understood that the term "Landlord" as used in this Lease
means
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only the owner, or the mortgagee in possession, or the lessee for
the time being of the property, so that in the event of any sale
or sales of the property or of any lease thereof or if the
mortgagee shall take possession of the property, the Landlord
named herein shall be and hereby is entirely freed and relieved
of all covenants and obligations of Landlord hereunder accruing
thereafter.
47. ADDITIONAL TERMS. Additional provisions forming a part
of this Lease, if any, are attached hereto as Addenda and are
incorporated herein by reference as if set forth herein at
length.
48. LEGAL FEES. It is expressly understood and agreed that
if there is a default by the Tenant of this lease, the Tenant
will be liable for any legal fees incurred by the Landlord in
enforcing the provisions of this Lease. All legal fees incurred
by the Landlord to enforce the provisions of this lease will be
considered additional rent.
49. LANDLORD'S LIEN. The Landlord is hereby granted a lien,
in addition to any statutory lien or right to distraint that may
exist, on all personal property and equipment of the Tenant in or
upon the Premises, to secure payment of the rent and performance
of the covenants and conditions of this Lease. Upon the written
request of the Landlord, Tenant shall enter into a security
agreement with the Landlord covering all of Tenant's personal
property and equipment used in connection with premises. Tenant
shall also execute a financing statement in recordable form
covering all of tenant's own personal property and equipment
described in the preceding sentence as well as any after acquired
property and proceeds from sales or exchange of said property. The
Landlord shall have the right, as agent of the Tenant, to take
possession of any furniture, fixtures or other personal property
of the Tenant found in or about the Premises, and sell the same
at public or private sale and to apply the proceeds thereof to
the payment of any monies becoming due under this Lease, the
Tenant hereby waiving the benefit of all laws exempting property
from execution, levy and sale on distress or judgment.
50. ACCELERATION CLAUSE. It is expressly agreed and understood
that if the Tenant, for any reason, moves out of the Premises
(space leased) at the Hillsborough Business Center, all rent,
common area charges and all other charges that are due and that
will be due during the term of the lease will become due
immediately.
51. FIXTURES.
(a) The Tenant is given the right and privilege of
installing and removing (without damage to real property) his
personal property, furniture, equipment and fixtures in the
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Leased Premises during the term of the Lease, it being understood
and agreed, however, that in the event of:
(i) Default by Tenant under the terms and conditions
of this Lease; or
(ii) Upon the expiration of this Lease; or
(iii) If the Tenant moves out or is dispossessed and
fails to remove any such property, equipment and fixtures or
other property within thirty (30) days after such default or
removal pursuant to the applicable terms and conditions of this
Lease;
then and in any such event, the said property, equipment and
fixtures or other property shall be deemed, at the option of the
Landlord, to be abandoned, (and become Landlord's property) or in
lieu thereof, at the Landlord's option, it may remove such
property and charge the reasonable cost and expense of removal
and storage to the tenant.
(b) Anything to the contrary contained herein notwith-
standing it is expressly understood and agreed that the Tenant may
without injury to real property install, connect and operate
equipment as may be deemed necessary by the Tenant to conduct its
business subject to applicable rules and regulations of
governmental boards and bureaus having jurisdiction thereof;
provided, in any event, that subject to the terms and conditions
of this Article 9, the machinery and fixtures belonging to the
Tenant shall, at all times, be considered and intended to be
personal property of the Tenant, and not part of the realty, and
subject to removal, by the Tenant, provided at the time of such
removal that the Tenant is not in default pursuant to the terms
and conditions of this Lease, and that the Tenant, at its own cost
and expense, pays for any damage to the Leased Premises caused by
such installation and removal.
52. NON-WAIVER BY LANDLORD. Failure of Landlord to insist upon
the strict performance of any provisions or to exercise any option
or enforce any rules and regulations shall not be construed as a
waiver for the future of any such provision, rule or option. The
receipt by Landlord of rent with knowledge of the breach of any
provision of this Lease shall not be deemed a waiver of such
breach. No provision of this Lease shall be deemed to have been
waived unless such waiver be in writing signed by Landlord. No
payment by Tenant or receipt by Landlord of a lesser amount than
the monthly rent shall be deemed to be other than on account of the
earliest rent then unpaid nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy provided in this Lease.
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53. ADDENDUM "A" attached.
54. ADDENDUM "B" N/A
55. ADDENDUM "C" N/A
56. ENVIRONMENTAL RESPONSIBILITY. Tenant expressly
covenants and agrees to indemnify the Landlord against any claim,
damage, liability, cost, penalties or fines which the Landlord
may suffer as a result of the Tenant's violation of any portion
of ECRA, ISRA, the Spill Act or any other environmental pollution
caused by the Tenant in its use of the Leased Premises. The
Tenant covenants and agrees to notify the Landlord immediately of
any claim or notice served upon it with respect to any such claim
the Tenant is in violation of ECRA, ISRA or the Spill Act or is
causing other environmental pollution.
Upon the Tenant's removal from the premises he agrees, at
all times after said removal to comply with and to indemnify,
defend and save Landlord harmless in respect to any and all
claims or causes or actions which may be asserted against
Landlord by reason of Tenant's use and occupancy under ECRA,
ISRA, the Spill Act and any other environmental laws.
Tenant warrants and represents to Landlord that neither it
or predecessor in interest, nor any other person, firm,
corporation or other entity has been the owner or operator of any
"Industrial Establishment" within the meaning of ECRA or ISRA.
This provision shall survive the termination of this Lease.
Landlord makes no representations as to the present
condition of the property, environmental or otherwise. It is
expressly understood by and between the parties that the rental
of the premise is "as is". Tenant has agreed to waive inspection
of the premises and further agrees to indemnify and hold Landlord
harmless against any claim of liability or loss from personal
injury, property damage, or environmental claims resulting or
arising out of the use and occupancy of the property by any past
tenants, including their servants or agents.
57. EXTRAS. It is understood and agreed that the attached
schedule of electrical items (Addendum "B" and Addendum "C", if
applicable,) are the only items provided in the Premises and no
additional electrical items will be installed unless agreed upon,
in advance, in writing, by both parties.
It is understood and agreed that all extras must be paid for
in advance before any extras are supplied or installed.
It is understood and agreed that Larken Associates is under
no obligation to supply or install any extras that are not paid
for in advance by the tenant.
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It is understood and agreed that if any extras are not paid
for on time, Larken Associates will abide by the original lease
or contract and if the tenant desires the extras at a later date
it will be Larken Associates sole discretion to approve or
disapprove of the extras.
It is agreed and understood that any extras will not be
items that will hold up the completion of the unit if the extras
are not paid.
It is agreed and understood that it will be up to the tenant
to have a receipt of payment for any extras, otherwise the lease
or contract will prevail.
58. TENANT'S OBLIGATIONS. It is agreed and understood
that on the day of lease commencement or closing, Larken
Associates will no longer be responsible for any utility charges
on the demised premises. On that day, Larken Associates will be
closing it's account and the purchaser/tenant is responsible for
having the utilities turned over into their name. Larken
Associates will not be responsible for any damage that may occur
due to the purchaser/tenant delay in getting the utilities turned
over into their own account. Any utility charges that may accrue
on the Landlord's account due to the purchaser/tenant delay
in turning the utilities over into it's name will become due
immediately as additional rent.
IN WITNESS WHEREOF, the parties hereto have duly executed
the Lease Agreement this 12th day of August, 1994.
/s/ DAVID S. BAINES
------------------------------
Authorized Signature (TENANT)
LARKEN ASSOCIATES
NJ LIMITED PARTNERSHIP
/s/ LAWRENCE GARDNER
------------------------------
LAWRENCE GARDNER (LANDLORD)
GENERAL PARTNER
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ADDENDUM "A"
COVENANT OF FURTHER ASSURANCES
In consideration of the execution of the foregoing
Lease by Landlord, at the request of the undersigned, and in
reliance on this guaranty, the undersigned hereby guarantees unto
the Landlord the prompt payment of all rent and the performance
of all of the terms, covenants and conditions provided in the
foregoing Lease, hereby waiving all notices of default, and
consenting to all extensions of time or changes in the manner of
payment or performance of any of the terms and conditions of the
foregoing Lease the Landlord may grant, and further consenting to
the assignment of the foregoing Lease, and any modifications
thereof, all without notice to the undersigned. The undersigned
further agrees to pay the Landlord for all of its expenses
incurred in enforcing the obligations of Tenant under the
foregoing Lease and in enforcing this Guaranty.
/s/ DAVID S. BAINES
------------------------------
DAVID S. BAINES (TENANT)
<PAGE>
LARKEN ASSOCIATES
P.O. BOX 957 5-12 HOMESTEAD ROAD, BELLE MEAD, N.J. 08502
ADDENDUM TO LEASE BETWEEN
AMPLIDYNE, INC. (TENANT) AND
LARKEN ASSOCIATES (LANDLORD)
1. FOR AND IN CONSIDERATION OF TENANT SIGNING A NEW 3 YEAR LEASE
FOR BUILDING #7 UNITS #7,8,9 & 10, BOTH PARTIES AGREE THAT NEW
AIR CONDITIONING UNITS WILL BE INSTALLED IN UNITS #7 & 8, AND THE
COST OF MATERIAL AND INSTALLATION WILL BE PAID FOR EQUALLY
BETWEEN THE TENANT (AMPLIDYNE, INC.) AND THE LANDLORD (LARKEN
ASSOCIATES).
AMPLIDYNE, INC.
/s/ DAVID S. BAINES 8-15-94
- ----------------------------- ---------------
DAVID S. BAINES DATE
LARKEN ASSOCIATES
NJ LIMITED PARTNERSHIP
/s/ LAWRENCE GARDNER 8-12-94
- ----------------------------- ---------------
LAWRENCE GARDNER DATE
GENERAL PARTNER
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated May 17, 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."
/s/ GRANT THORNTON LLP
- -----------------------
GRANT THORNTON LLP
Parsippany, New Jersey
August 27, 1996
