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As filed with the Securities and Exchange Commission on April 17, 1998
Registration No. ______________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BRISTOL RETAIL SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 5044 58-2235556
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
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5000 BIRCH STREET, SUITE 205, NEWPORT BEACH, CALIFORNIA 92660
(714) 475-0800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RICHARD H. WALKER
PRESIDENT
BRISTOL RETAIL SOLUTIONS, INC.
5000 BIRCH STREET, SUITE 205, NEWPORT BEACH, CALIFORNIA 92660
(714) 475-0800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
NICK E. YOCCA, ESQ.
MICHAEL E. FLYNN, ESQ.
MARK L. SKAIST, ESQ.
STRADLING, YOCCA, CARLSON & RAUTH,
A PROFESSIONAL CORPORATION
660 NEWPORT CENTER DRIVE, SUITE 1600
NEWPORT BEACH, CALIFORNIA 92660
PHONE: (714) 725-4000
FAX: (714) 725-4100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
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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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED (1) PER SHARE (2) PRICE (2) FEE
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Common Stock ($.001 par 1,817,275 $3.000 $5,451,825 $1,608.29
value)
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(1) The number of shares of the Company's common stock, $.001 par value (the
"Common Stock") registered hereunder includes 569,408 shares of Common
Stock which are issued and outstanding, 300,000 shares of Common Stock
which are issuable upon exercise of warrants to purchase shares of
Common Stock (the "Warrants") and 947,867 shares of Common Stock which
represents the Company's good faith estimate of a presently
indeterminate number of shares which may be issued upon conversion of
the Company's Series A Convertible Preferred Stock (the "Preferred
Stock"). Such estimate was based on the assumption that all shares of
Preferred Stock were converted on April 15, 1998 at a conversion price
per share of Preferred Stock of $2.71, which conversion price represents
seventy eight percent (78%) of the average of the five lowest closing
bid prices of the Common Stock in the twenty-five (25) day trading
period prior to April 15, 1998. Pursuant to Rule 416, this Registration
Statement also covers an indeterminate number of additional shares of
Common Stock which may become issuable upon conversion of the Preferred
Stock by reason of reductions of the conversions price, in accordance
with the terms of the Securities Purchase Agreement between the Company
and Precision Capital Investors Limited Partnership I dated March 18,
1998 (the "Securities Purchase Agreement").
(2) The offering price is estimated solely for the purpose of calculating
the registration fee in accordance with Rule 457(c), using the closing
price reported by the Nasdaq SmallCap Market for the Common Stock on
April 15, 1998 which was $3.000 per share.
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.
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Subject to Completion, dated April 17, 1998
PROSPECTUS
BRISTOL RETAIL SOLUTIONS, INC.
1,817,275 SHARES OF COMMON STOCK, $.001 PAR VALUE
This Prospectus (the "Prospectus") covers the registration for possible
resale of 1,817,275 shares (the "Shares") of Common Stock, par value $.001 (the
"Common Stock") of Bristol Retail Solutions, Inc., a Delaware corporation (the
"Company") that have either been issued to, or that may in the future be issued
to, certain stockholders of the Company (the "Selling Stockholders"), including
shares of Common Stock issuable upon the conversion or exercise of shares of the
Company's 6% convertible preferred stock (the "Preferred Stock") or warrants to
purchase the Company's common stock (the "Warrants") that have been issued to
certain of the Selling Stockholders. (The Shares, Preferred Stock and Warrants
are referred to collectively as the "Securities").
Of the 1,817,275 Shares being registered hereby, 947,867 Shares will be
issuable upon the conversion of 20,000 shares of the Preferred Stock. The
Company issued 10,000 shares of the Preferred Stock on March 18, 1998 to
Precision Capital Investors Limited Partnership I for an aggregate purchase
price of $1,000,000. The shares of Preferred Stock will be converted into shares
of Common Stock at a discount from the average of the lowest market trading
price for any five days, consecutive or otherwise, during the twenty five (25)
day period prior to conversion. See "Selling Stockholders" and "Plan of
Distribution."
Of the 1,817,275 Shares being registered hereby, 300,000 Shares will be
issuable upon the exercise of outstanding warrants to purchase 300,000 shares of
the Company's Common Stock. See "Selling Stockholders" and "Plan of
Distribution."
Of the 1,817,275 Shares being registered hereby, 569,408 were issued by
the Company in May 1997 in connection with the Company's acquisition of Smyth
Systems, Inc. The issuance of such shares was exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
See "Selling Stockholders" and "Plan of Distribution."
The distribution of the shares of Common Stock offered hereby may be
effected from time to time in one or more transactions. All or a portion of the
Common Stock offered by this Prospectus may be offered for sale, from time to
time, by the Selling Stockholders, or by permitted transferees or successors of
the Selling Stockholders, in private or negotiated transactions, in open market
transactions on the National Association of Securities Dealers Automated
Quotation SmallCap Market ("Nasdaq"), or on one or more exchanges or otherwise,
or a combination of these methods, at prices and terms then obtainable, at fixed
prices, at prices then prevailing at the time of sale, at prices related to such
prevailing prices, or at negotiated prices, or otherwise. The shares of Common
stock offered hereby may be sold by one or more of the following: (i) through
underwriters; (ii) through dealers or agents (which may include underwriters)
including: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares of Common Stock 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 and resale by such broker or dealer as a principal for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and (d)
transactions in which the broker solicits purchasers; or (iii) directly to one
or more purchasers. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the Selling Stockholders. Concurrently with
sales under this Prospectus, the Selling Stockholders may effect other sales of
Common Stock under Rule 144 or other exempt resale transactions. The Selling
Stockholders and any underwriters, dealers, brokers, or agents executing selling
orders on behalf of the Selling Stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), in which event commissions received by such persons may be deemed to be
underwriting commission under the Securities Act.
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The Company will not receive any of the proceeds from the sale of the Common
Stock offered hereby. To the extent required, the specific amount of Common
Stock to be sold, the public offering price, the names of any such broker,
dealer underwriter or agent, any applicable commission or discount with respect
to the particular offer will be set forth in a Prospectus Supplement. The
Company has agreed to bear substantially all expenses of registration of the
Common Stock under federal and state securities laws, other than such expenses
as are in the nature of commissions incurred in connection with the sale of
shares of Common Stock by the Selling Stockholders, and to indemnify the Selling
Stockholders against certain liabilities under the Securities Act. See "Plan of
Distribution" and "Selling Stockholders."
The Common Stock is traded on the Nasdaq SmallCap Market ("Nasdaq") under
the symbol "BRTL". On April 15, 1998, the last reported sale price of the Common
Stock was $3.000 per share.
_____________________________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. POTENTIAL
PURCHASERS SHOULD NOT INVEST IN THESE SECURITIES UNLESS THEY CAN
AFFORD A LOSS OF THEIR INVESTMENT HEREIN. SEE "RISK FACTORS"
COMMENCING AT PAGE 6.
_____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE 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 April __, 1998
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION .......................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ................ 4
THE COMPANY .................................................... 5
RISK FACTORS ................................................... 6
USE OF PROCEEDS ................................................ 12
SELLING STOCKHOLDERS ........................................... 12
PLAN OF DISTRIBUTION ........................................... 14
LEGAL MATTERS .................................................. 14
EXPERTS ........................................................ 14
LIMITATION ON LIABILITY AND DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES .. 15
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as a "small
business issuer" as defined under Regulation S-B promulgated under the
Securities Act. In accordance with the Exchange Act, the Company files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected and copied at, and copies of
such materials can be obtained at prescribed rates from, the Public Reference
Branch of the Commission located at 450 Fifth Street, N.W., Washington, D.C. and
at the Commission's Pacific Regional Office located at 5670 Wilshire Boulevard,
11th Floor, Los Angeles, California, the Commission's Northeast Regional Office
located at 7 World Trade Center Suite 1300, New York, New York and at the
Commission's Midwest Regional Office located at Citicorp Center, 500 W. Madison
Street Suite 1400, Chicago, Illinois. In addition, the Company has filed the
registration statement and other filings pursuant to the Exchange Act with the
Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system, and such filings are publicly available through the
Commission's site on the World Wide Web on the Internet, located at
http://www.sec.gov.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-3 of which this Prospectus is a part and which
the Company has filed with the Commission. For further information with respect
to the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from, the Public
Reference Section of the Commission at the address set forth above. Additional
updating information with respect to the Company may be provided in the future
by means of appendices or supplements to this Prospectus.
The Company's Common Stock and Class A Redeemable Common Stock Purchase
Warrants are quoted on the Nasdaq SmallCap Market under the symbols "BRTL" and
"BRTLW", respectively. Reports, proxy statements and other
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information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated by reference herein:
a. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997, filed with the Commission on April 15,
1998.
b. The Company's Quarterly Reports on Form 10-QSB for the quarter
ended March 31, 1997, filed with the Commission on May 14, 1997,
for the quarter ended June 30, 1997, filed with the Commission on
August 13, 1997, and for the quarter ended September 30, 1997,
filed with the Commission on November 14, 1997.
c. The Company's Current Reports on Form 8-K filed January 15, 1997
(and the amendment thereto filed with the Commission), April 17,
1997, May 23, 1997 (and the amendment thereto filed with the
Commission), May 29, 1997, June 12, 1997 (and the amendment
thereto filed with the Commission), June 20, 1997 (and the
amendment thereto filed with the Commission), July 21, 1997 and
October 7, 1997.
d. The description of the Company's Common Stock which is contained
in the Company's registration statement on Form 8-A under the
Exchange Act, filed with the Commission on October 28, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy
of this Prospectus is delivered, upon written or oral request of such person, a
copy of any and all of the information that has been or may be incorporated by
reference herein (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to Bristol Retail Solutions, Inc., Attention: Chief Financial
Officer, 5000 Birch Street, Suite 205, Newport Beach, California 92660,
telephone number (714) 475-0800.
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THE COMPANY
Established in April 1996, the Company is engaged in key segments of the
retail automation industry, including point-of-sale ("POS") systems installation
and service, systems integration which provides retailers with turnkey operating
solutions and development and sale of proprietary software products.
The principal objective of the Company is the establishment of a
national network of full service dealers of retail automation equipment,
including POS systems, electronic cash registers ("ECRs") and related hardware
and software, which market their products to retail end users. As of December
12, 1997, the Company had acquired six POS dealers. In addition, the Company
intends to function as a systems integrator of computer hardware, software and
networking products in specific national retail markets. The Company intends to
offer its customers a variety of customized value-added services such as
consulting, integration and support services, together with a broad range of
turnkey computers and networking products from leading vendors. Currently, the
Company is seeking to expand in the systems integration field through
acquisition and internal development. It is also establishing strategic
relationships with key providers of retail automation software that will be of
value in the expansion of the Company's systems integration strategy, which can
be sold through the Company's dealer network.
The Company is implementing a program of selective POS dealer
acquisitions and consolidations. The Company will then seek to enhance the
profitability of the acquired dealerships through the benefits derived from the
economies of scale flowing from a volume-oriented business, improved value added
operations, better trained personnel, quicker on-site service, greater product
diversity, focused leasing programs, major/national account programs and
enhanced service and support of end user installations.
A POS system is used at the "point-of-sale" in a retail establishment.
It leads or prompts the retail clerk through a sales transaction with a
customer. The POS system collects detailed information, including credit
information, about the transaction. Standard components of a POS system include
a display terminal to view the transaction, a keyboard for data entry, a cash
drawer for collecting funds, a printer to prepare a written record of the
transaction, a server for processing data and coordinating communications, and
software to guide the clerk through the transaction. Typically, a number of
sophisticated "registers" are installed in a retail establishment, thus allowing
multiple departments or locations to enter transactions simultaneously. The ECR
is a less expensive and less sophisticated alternative to the POS system,
comprised of a stand-alone cash register that is electronic rather than
mechanical. The Company also offers its customers continued support, customer
service and supplies from installation through the life span of its products.
The primary target markets for the products supplied by the Company are
supermarkets, convenience stores, quick service restaurants and higher-end table
service restaurants.
The Company's management believes the driving forces in United States
retailing are the need to attract and retain new customers, increase the average
sale per visit and maximize productivity. Retailers need the ability to quickly
identify the buying history and needs of a customer. Access to such information
allows retailers to match their current products and services to each customer's
needs.
The current cash register system used by many retailers is incapable of
handling these needs. The Company believes that the most effective solution to
these needs is the modern POS system. The Company expects demand to come from
two sources: (i) retailers seeking to upgrade their systems and (ii) retailers
seeking to replace their obsolete systems.
In accordance with its strategic acquisition and consolidation program,
the Company acquired 100% of the outstanding capital stock of Cash Registers,
Incorporated ("CRI"), on June 28, 1996. CRI, which was founded in 1974, is an
independent supplier of retail POS systems in Kentucky and Southern Ohio. On
December 31, 1996, the Company completed the acquisition of Automated Retail
Systems, Inc. ("ARS"), a POS dealership headquartered in Seattle, Washington,
with additional offices in Spokane, Washington and San Mateo, California.
On April 1, 1997, MicroData, Inc. ("MicroData"), a POS dealer based in
Mount Vernon, Illinois, was acquired by CRI, then a wholly-owned subsidiary of
the Company. On May 29, 1997, the Company acquired Smyth Systems, Inc.
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("Smyth"), a POS dealer and value-added reseller. Smyth, which was founded in
1949, is based in Canton, Ohio and Irvine, California. On June 6, 1997, CRI
acquired Electronic Business Machines, Inc. ("EBM"), a POS dealer based in
Indianapolis, Indiana. EBM also has an office in Louisville, Kentucky. On August
5, 1997, the Company acquired Pacific Cash Register and Computer, Inc. ("PCR"),
a POS dealer based in San Francisco, California.
The Company was incorporated in Delaware on April 3, 1996 as Bristol
Technology Systems, Inc. The Company's name was changed from Bristol Technology
Systems, Inc. to Bristol Retail Solutions, Inc. on July 18, 1997. Unless the
context requires otherwise, references herein to the "Company" shall include
Bristol Retail Solutions, Inc. and Bristol Technology Systems, Inc. The
Company's executive and administrative offices are located at 5000 Birch Street,
Suite 205, Newport Beach, California 92660. The Company's telephone number is
(714) 475-0800.
RISK FACTORS
The purchase of the shares of Common Stock offered hereby involves a
high degree of risk. In addition to the other information set forth elsewhere in
this Prospectus, the following factors relating to the Company and this offering
should be considered when evaluating an investment in the Common Stock offered
hereby. This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1993 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results may differ materially from
the results projected in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, the following:
Limited Operating History. The Company was founded in April 1996 and,
prior to the acquisition of CRI in June 1996, the Company had no operations upon
which an evaluation of the Company and its prospects could be based. There can
be no assurance that the Company will be able to implement successfully its
strategic plan, to generate sufficient revenue to meet its expenses or to
achieve or sustain profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Risks Related to the Company's Acquisition Strategy. The Company's
strategy is to increase its revenue and the markets it serves through the
acquisition of additional POS dealers and value added resellers serving retail
end users. From its inception through March 31, 1998, the Company has completed
six acquisitions. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional companies or successfully
integrate the operations of additional companies into those of the Company
without encountering substantial costs, delays or other problems. In addition,
there can be no assurance that companies acquired in the future will achieve
sales and profitability that justify the Company's investment in them or that
acquired companies will not have unknown liabilities that could materially
adversely affect the Company's results of operations or financial condition. The
Company may compete for acquisition and expansion opportunities with companies
that have greater resources than the Company. There can be no assurance that
suitable acquisition candidates will continue to be available, that financing
for acquisitions will be obtainable on terms acceptable to the Company, that
acquisitions can be consummated or that acquired businesses can be integrated
successfully and profitably into the Company's operations. Further, the
Company's results of operations in quarters immediately following a material
acquisition may be materially adversely effected while the Company integrates
the acquired business into its existing operations. The Company may acquire
certain businesses that have either been unprofitable or that have had
inconsistent profitability prior to their acquisition. An inability of the
Company to improve the profitability of these acquired businesses could have a
material adverse effect on the Company. Finally, the Company's acquisition
strategy places significant demands on the Company's resources and there can be
no assurance that the Company's management and operational systems and structure
can be expanded to effectively support the Company's continued acquisition
strategy. If the Company is unable to implement successfully its acquisition
strategy, this inability may have a material adverse effect on the Company's
business, results of operations, financial condition and cash flows.
Need for Additional Financing to Implement Acquisition Strategy. The
Company currently intends to effect future acquisitions with cash generated from
operations and future issuances of debt or equity securities. There can be no
assurance that the Company will be able to obtain financing if and when it is
needed on terms
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the Company deems acceptable. The inability of the Company to obtain financing
would have a material adverse effect on the Company's ability to implement its
acquisition strategy, and as a result, could require the Company to diminish or
suspend its acquisition strategy.
Consideration for Acquired Companies Exceeds Asset Value. Valuations of
the companies acquired by the Company have not been undertaken based on
independent appraisals, but have been determined through arm's-length
negotiations between the Company and representatives of such companies. The
consideration for each such company has been based primarily on the judgment of
management as to the value of such company as a going concern and not on the
book value of the acquired assets. Valuations of these companies determined
solely by appraisals of the acquired assets may have been less than the
consideration paid for the companies. No assurance can be given that the future
performance of such companies will be commensurate with the consideration paid.
Moreover, the Company has incurred and expects to incur significant amortization
charges resulting from consideration paid in excess of the book value of the
assets of the companies acquired and companies which may be acquired in the
future.
Substantial Competition. The POS industry is highly fragmented and
competitive. Competitive factors within the industry include product prices,
quality of products, service levels, and reputation and geographical location of
dealers. The Company primarily competes with independent POS dealers and some of
these dealers may have greater financial resources available to them than does
the Company. In addition, there are original equipment manufacturers of POS
equipment that compete in certain product areas. The Company's ability to make
acquisitions will also be subject to competition. The Company believes that,
during the next few years, POS dealers may seek growth through consolidation
with entities other than the Company. In addition, no assurance can be given
that the major manufacturers will not choose to effect or expand the
distribution of their products through their own wholesale organizations or
effect distribution directly to many of the retail accounts of the Company in
the markets served by the Company. Any of these developments could have a
material adverse effect on the Company's business, results of operations,
financial condition and cash flows.
Substantial Fluctuations in Future Operating Results. The Company may
experience substantial fluctuations in its annual and quarterly operating
results in future periods. The Company's operating results are affected by a
number of factors, many of which are beyond the Company's control. A substantial
portion of the Company's backlog is typically scheduled for delivery within 90
days. Delivery dates for products sold by the Company are subject to change due
to customers changing the required installation date of an automation retail
solution system. The changing of such delivery dates is beyond the Company's
control. Quarterly sales and operating results therefore depend in large part on
customer-driven delivery dates, which are subject to change. In addition, a
significant portion of the Company's operating expenses are relatively fixed in
nature and planned expenditures are based in part on anticipated orders. Any
inability to adjust spending quickly enough to compensate for any revenue
shortfall may magnify the adverse impact of such revenue shortfall on the
Company's results of operations.
Dependence on Manufacturers. A substantial portion of the Company's
total revenue is and will be derived from the sale of POS systems, ECRs and
related equipment, none of which are manufactured by the Company. The Company's
business is dependent upon close relationships with manufacturers of POS
equipment and the Company's ability to purchase equipment in the quantities
necessary and upon competitive terms so that it will be able to meet the needs
of its end user customers. For the year ended December 31, 1997, the Company
purchased its hardware principally from three main vendors, Panasonic, ERC, a
distributor of Panasonic products, and NCR. Sales of Panasonic, ERC and NCR
products accounted for approximately 32% of net revenue for the year ended
December 31, 1997. There can be no assurance that the relationships with these
manufacturers will continue or that the Company's supply requirements can be met
in the future. The Company's inability to obtain equipment, parts or supplies on
competitive terms from its major manufacturers could have a material adverse
effect on the Company's business, results of operations, financial condition and
cash flows.
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Fixed Fee Contracts. Many of the Company's service contracts are fixed
fee contracts pursuant to which the customer pays a specified fee for the
Company's performance of all necessary maintenance and remedial services during
the contract's term. Under these agreements, the Company is responsible for all
costs incurred in maintaining and repairing the equipment, including the cost of
replacement parts, regardless of actual costs incurred. Accordingly, the Company
can incur losses from fixed fee contracts if the actual cost of maintaining or
repairing the equipment exceeds the costs estimated by the Company.
Potential Inability to Market Newly Developed Products. The technology
of POS systems, ECRs, VARs and related equipment is changing rapidly. There can
be no assurance that the Company's existing manufacturers will be able to supply
competitive new products or achieve technological advances necessary to remain
competitive in the industry. Further, there can be no assurance that the Company
will be able to obtain the necessary authorizations from manufacturers to market
any newly developed equipment. The Company's Smyth subsidiary operates in the
VAR solutions segment, wherein it develops customized turnkey retail automation
solutions, consisting of both hardware and software. There can be no assurance
that Smyth will be able to develop commercially viable and technologically
competitive VAR solutions at competitive prices.
Possible Environmental Liabilities. Under various federal, state and
local environmental laws, ordinances and regulations, a current or previous
owner or operator of real property may be held liable for the costs of removal
or remediation of certain hazardous or toxic substances which could be located
on, in or under such property. These laws and regulations often impose liability
whether or not the owner or operator knew of or was responsible for the presence
of the hazardous or toxic substances. The costs for any required remediation or
removal of these substances could be substantial, and the liability as to any
property is generally not limited under these laws and regulations and could
exceed the value of the property and the aggregate assets of the owner or
operator. The presence of these substances or failure to remediate these
substances properly may also adversely affect the owner's ability to sell or
rent the property or to borrow using the property as collateral. In connection
with the ownership or operation of its acquired companies, the Company could be
liable for these and other related costs.
Reliance on Key Personnel. Implementation of the Company's acquisition
strategy is largely dependent on the efforts of a few senior officers. In
particular, the Company's operations are dependent to a great degree on the
continued efforts of Chief Executive Officer Richard H. Walker. Furthermore, the
Company will in most probability continue to be dependent on the senior
management of companies that are acquired. Competition for highly qualified
personnel is intense, and the loss of any executive officer or other key
employee, or the failure to attract and retain other skilled employees, could
have a material adverse effect upon the Company's business, results of
operations or financial condition. The Company is a party to employment
agreements with Mr. Walker, as well as with Executive Vice President Paul
Spindler. The agreements with Messrs. Walker and Spindler terminate in the years
2004 and 2001, respectively, unless terminated earlier pursuant to the
agreements, and each contains confidentiality provisions and covenants not to
compete. State laws, however, may limit the enforceability of the
confidentiality and/or non-competition provisions therein. The Company is
currently the beneficiary of a key man life insurance policy in the amount of
$1,000,000 on the life of Mr. Walker for a term of three years. There can be no
assurance that the Company will maintain the policy in effect or that the
coverage will be sufficient to compensate the Company for the loss of the
services of Mr. Walker.
Anti-Takeover Effects of Certain Charter and Bylaw Provisions. Certain
provisions of the Company's Certificate of Incorporation and Bylaws may have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
These provisions make it more difficult for stockholders to take certain
corporate actions and could have the effect of delaying or preventing a change
in control of the Company. For example, the Company has not elected to be
excluded from the provisions of Section 203 of the Delaware General Corporation
Law, which impose certain limitations on business combinations with interested
stockholders upon acquiring 15% or more of the Common Stock. This statute may
have the effect of inhibiting a non-negotiated merger or other business
combination involving the Company, even if such event would be beneficial to the
then-existing stockholders. In addition, the Company's Certificate of
Incorporation authorizes the issuance of up to 4,000,000 shares of preferred
stock with such rights and preferences as may be determined
8
<PAGE> 11
from time to time by the Board of Directors. Accordingly, the Board of Directors
may, without stockholder approval, issue preferred stock with dividends,
liquidation, conversion, and voting or other rights, which could adversely
affect the voting power or other rights of the holders of the Company's Common
Stock. The issuance of preferred stock could have the effect of entrenching the
Company's Board of Directors and making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company.
As of March 31, 1998, the Company had issued 10,000 shares of Series A
Convertible Preferred Stock, at an issue price of $100 per share. Each share of
Series A Preferred Stock is convertible at the option of the holder thereof at
any time into a number of shares of Common Stock determined by dividing the
issue price by the conversion price, which is defined to be 78% of the lowest
non-consecutive five-day average closing bid price for the Common Stock for the
25-day period prior to conversion. Each holder of shares of the Series A
Preferred Stock is entitled to the number of votes equal to the number of shares
of Common Stock into which it could be converted. The Company cannot, without
the vote or written consent of at least 66-2/3% of the then outstanding shares
of Series A Preferred Stock, (i) redeem, purchase or otherwise acquire for value
any share of the Series A Preferred Stock; (ii) redeem, purchase or otherwise
acquire any of the Company's Common Stock; (iii) authorize or issue any other
equity security senior to or on parity with the Series A Preferred Stock as to
voting rights, dividend rights, conversion rights, redemption rights or
liquidation preferences; (iv) declare or pay any dividend or make any
distribution with regard to any share of Common Stock; (v) sell, convey, lease
or otherwise dispose of all or substantially all of its property or business;
liquidate, dissove or wind up the Company's business; or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary);
(vi) effect any transaction or series of transactions in which more than 50% of
the voting power of the Company is disposed of, unless the Company's
stockholders of record as constituted immediately prior to such transaction
will, immediately thereafter, hold at least a majority of the voting power of
the surviving or acquiring entity; (vii) permit any subsidiary to issue or sell
any of its capital stock (except to the Company); (viii) increase or decrease
(other than by redemption or conversion) the total number of authorized shares
of Series A Preferred Stock; or (ix) alter or change the rights, preferences or
privileges of the shares of Series A Preferred Stock so as to adversely affect
the shares.
Volatility of Stock Price. The stock market from time to time
experiences significant price and volume fluctuations that are unrelated to the
operating performance of the particular companies. These broad market
fluctuations may materially adversely affect the market price of the Company's
common stock. In addition, the market price of the Company's common stock has
been and may continue to be highly volatile. Factors such as possible
fluctuations in the Company's business, results of operations or financial
condition, failure of the Company to meet expectations of security analysts and
investors, announcements of new acquisitions, the timing and size of
acquisitions, the loss of suppliers or customers, the announcement of new or
terminated supply agreements by the Company or its competitors, changes in
regulations governing the Company's operations or its suppliers, the loss of the
services of a member of senior management, litigation and changes in general
market conditions all could have a material adverse affect on the market price
of the Company's common stock.
Maintenance Criteria for Nasdaq; Risks of Low-Priced Securities. The
Company's common stock is presently traded on the Nasdaq SmallCap Market. To
maintain inclusion on the Nasdaq SmallCap Market, the Company's common stock
must continue to be registered under Section 12(g) of the Exchange Act, and the
Company must continue to have at least $2,000,000 in net tangible assets or
$500,000 in income in two of the last three years, a public float of at least
500,000 shares, $1,000,000 in market value of public float, a minimum bid price
of $1.00 per share, at least two market makers and at least 300 stockholders.
While the Company currently meets the maintenance standards, there is no
assurance that the Company will be able to maintain the standards for Nasdaq
SmallCap Market inclusion with respect to its securities. At December 31, 1997,
the Company had $2,032,000 in net tangible assets. If the Company fails to
maintain Nasdaq SmallCap Market listing, the market value of the Company's
common stock likely would decline and stockholders would find it more difficult
to dispose of or to obtain accurate quotations as to the market value of the
common stock.
9
<PAGE> 12
Indemnification and Limitation of Liability. The Company's Certificate
of Incorporation (the "Certificate") and Bylaws include provisions that
eliminate the directors' personal liability for monetary damages to the fullest
extent possible under Delaware Law or other applicable law (the "Director
Liability Provision"). The Director Liability Provision eliminates the
liability of directors to the Company and its stockholders for monetary damages
arising out of any violation by a director of his fiduciary duty of due care.
Under Delaware Law, however, the Director Liability Provision does not eliminate
the personal liability of a director for (i) breach of the director's duty of
loyalty, (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violation of law, (iii) payment of dividends or
repurchases or redemptions of stock other than from lawfully available funds, or
(iv) any transaction from which the director derived an improper benefit. The
Director Liability Provision also does not affect a director's liability under
the federal securities laws or the recovery of damages by third parties.
Absence of Dividends. The Company has not paid dividends on its
Preferred Stock or Common Stock to date. The Company is obligated to pay,
quarterly, cumulative dividends at a rate of six percent (6%) per annum of the
issue price of the Preferred Stock, payable, at the holders' option, in cash or
in Common Stock at the conversion price of the Preferred Stock. So long as any
of shares Preferred Stock remain outstanding, the Company may not, without the
vote or written consent of the holders of at least 66-2/3% of the then
outstanding shares of Preferred Stock, voting together as a single class,
declare or pay any dividend with regard to any share of Common Stock.
Additionally, although the current line of credit does not expressly prohibit
the Company from paying dividends, the line of credit does contain certain
covenants which restrict the reduction or depletion of the Company's capital.
The Company anticipates that future financing, including any lines of credit,
may further restrict or prohibit the Company's ability to pay dividends. Under
the terms of the underwriting agreement entered into by the Company in
connection with its initial public offering, the Company is restricted until
November 20, 1998, from paying dividends in excess of the amount of the
Company's current or retained earnings derived from November 20, 1996, unless
the consent of the underwriters is obtained. See Anti-Takeover Effect of
Certain Charter and Bylaw Provisions.
Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. Although the Company
believes that its products and internal systems will be Year 2000 compliant, the
Company believes that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct their current software systems for Year 2000 compliance.
These expenditures may result in reduced funds available to purchase software
products such as those offered by the Company. The Company estimates it will
expend approximately $150,000 to $200,000 to make its software products Year
2000 compliant. The Company is making inquiries of its vendors of POS systems
and cash registers regarding whether the systems upon which they rely are Year
2000 compliant and whether they anticipate any impairment of their ability to
deliver product and services as a result of Year 2000 issues.
Effect of Quarterly Fluctuations in Operating Results on Price of Common
Stock. The Company's business is subject to seasonal influences. The POS dealers
and system integrators which the Company has acquired to date have typically had
lower net revenues in the quarters ending March 31 and December 31 primarily due
to the lower level of new store openings by customers caused by inclement
weather, budgetary concerns and/or holidays. The Company believes that this
pattern of seasonality will continue in the foreseeable future. Quarterly
results in the future may be materially affected by the timing and magnitude of
acquisitions and costs related to such acquisitions, the timing and extent of
staffing additions at corporate headquarters necessary to integrate acquired
companies and support future growth and general economic conditions. Therefore,
results for any quarter are not necessarily indicative of the results that the
Company may achieve for any subsequent quarter or
10
<PAGE> 13
for a full year. The effect of inflation on the Company's operations has not
been significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's future
operating results.
Shares Eligible for Future Sale. Sales of Common Stock in the public
market, or the perception that sales could occur, could materially adversely
affect the market price of the Common Stock and could impair the Company's
future ability to obtain capital through an offering of securities. The Company
had 5,556,746 shares of Common Stock outstanding at April 15, 1998 of which
approximately 3,274,938 shares are "Restricted Securities" within the meaning of
Rule 144 under the Securities Act and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemption contained in Rule 144. In general, under Rule
144, as currently in effect, a person who has beneficially owned shares for at
least one year is entitled to sell, within any three-month period, a number of
"Restricted" shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale limitations, notice requirements and the
availability of current public information about the Company. Rule 144(k)
provides that a person who is not deemed an "affiliate" and who has beneficially
owned shares for at least two years is entitled to sell such shares at any time
under Rule 144 without regard to the limitations described above.
Of the 3,274,938 restricted shares, 291,602 shares are also subject to
contractual restrictions on transferability. These restrictions expire at
various times from December 31, 1998 to August 6, 1999.
A total of 200,000 shares of Common Stock have been reserved for
issuance under the Company's 1997 Employee Stock Purchase Plan (the "Purchase
Plan"). As of April 15, 1998, 8,236 shares of Common Stock are issued and
outstanding under the Purchase Plan.
Effect of Options, Warrants and Registration Rights. The Company has
reserved an aggregate of 2,450,000 shares of Common Stock for issuance upon
exercise of options granted under the Company's Stock Option Plan. As of April
15, 1998, options to acquire 1,565,000 shares of Common Stock had been granted
pursuant to the Stock Option Plan. The exercise price of the options presently
outstanding ranges from $2.875 per share to $3.188 per share. The Company has
outstanding 718,750 Class A Warrants to purchase an aggregate of 718,750 shares
of Common Stock at a price of $6.00 per share. In addition, the Company has sold
to First Cambridge Securities Corporation, the lead Underwriter of its Initial
Public Offering on November 12, 1996, or its Designees (the "Underwriter"),
Underwriters' Stock Warrants to purchase up to 125,000 shares of Common Stock
and Underwriters' Warrants, entitling the Underwriter to purchase 62,500 Class A
Warrants, which in turn are exercisable into 62,500 shares of Common Stock. The
Underwriters' Stock Warrants are exercisable at a price equal to $8.70 per share
of Common Stock, while the Underwriters' Warrants are exercisable at a price
equal to $.125 per Class A Warrant. On March 18, 1998, the Company issued
warrants to purchase 125,000 shares of Common Stock, and agreed to issue,
subject to the satisfaction of certain conditions, additional warrants to
purchase 62,500 shares of Common Stock (collectively, the "Investor Warrants")
on or prior to each of the dates that is thirty (30) and sixty (60) days after
the Effective Date of the Registration Statement. On March 18, 1998, the Company
also issued warrants to purchase 50,000 shares of Common Stock to certain
Selling Stockholders (the "Placement Agent Warrants"). For the respective terms
of the Underwriters' Stock Warrants, the Underwriters' Warrants, the Class A
Warrants issuable upon exercise of the Underwriters' Warrants the Investor
Warrants, Placement Agent Warrants and any options granted or that may be
granted by the Company under the Company's Stock Option Plan, the holders
thereof are given an opportunity to profit in the event of a rise, in the market
price of the Common Stock or the Warrants, with a resulting dilution in the
interest of the other stockholders or holders of Warrants, without assuming the
risk of ownership. Further, the terms on which the Company may obtain additional
equity financing during those periods may be materially adversely affected by
the existence of the Warrants, Options and Plans. The holders of Options or
Warrants to purchase Common Stock may exercise such Options or Warrants at a
time when the Company might be able to obtain additional capital through new
offerings of securities on terms more favorable than those provided by such
Options or Warrants. In addition, the holders of the Underwriters' Stock
Warrants and Underwriters' Warrants have demand and "piggyback" registration
rights with respect to their securities. Exercise of the Demand Registration
Rights may involve substantial expense to the Company. Additionally, if the
Underwriters should exercise their Registration Rights to effect a distribution
of the Underwriters' Stock Warrants and the Underwriters' Warrants or underlying
Securities, the Underwriter, prior to and during such distribution, may be
unable to make a market in the Company's Securities. If the Underwriter must
cease making a market in the Company's Securities, the Market and Market Price
for the Securities may be adversely affected. See "Description of Securities."
Control by Management. The Officers and Directors of the Company and
members of their families beneficially owned approximately 43.3% of the
outstanding shares of Common Stock at April 15, 1998. Accordingly, these
persons, if acting together, will likely be able to control substantially all
matters requiring approval by the Stockholders of the Company, including the
Election of Directors and the approval of Mergers or other business
11
<PAGE> 14
combination transactions. This concentration of ownership could discourage or
prevent a change in control of the Company.
USE OF PROCEEDS
The proceeds from the sale of the Selling Stockholders' Common Stock
will belong to the Selling Stockholders. The Company will not receive any
proceeds from such sales of the Common Stock. In the event the Warrants are
exercised, the Company may receive proceeds from such exercise. The actual
amount of proceeds to be received by the Company, if any, will depend on, among
other things, the number of Warrants exercised, and whether any such exercise is
effected pursuant to the "cashless exercise" provisions thereof (the Company
will not receive any proceeds from the exercise of any Warrants which are
exercised pursuant to "cashless exercise" provisions). The Company intends to
use the proceeds received from the exercise of the Warrants, if any, for general
working capital purposes.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of April 15, 1998 by the
Selling Stockholders as follows: (i) the name of each Selling Stockholder; (ii)
the number of shares of Common Stock beneficially owned by each Selling
Stockholder (including shares obtainable upon conversion of Preferred Stock or
exercise of Warrants with 60 days of such date); (iii) the number of shares of
Common Stock being offered hereby; and (iv) the number of the Company's
outstanding shares of Common Stock to be beneficially owned by each Selling
Stockholder after completion of the sale of Common Stock. Except as indicated
in the footnotes to this table, the Selling Stockholders have not held any
position or office or had a material relationship with the Company or any of
its affiliates within the past three years.
12
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER OF SHARES OF SHARES OF COMMON
COMMON STOCK NUMBER OF SHARES STOCK OWNED AFTER
BENEFICIALLY OWNED OF COMMON STOCK SELLING STOCKHOLDER
STOCKHOLDER PRIOR TO OFFERING(2) REGISTERED HEREIN OFFERING (1)
----------- ------------------- ----------------- -------------------
Number
<S> <C> <C> <C>
Precision Capital Investors 1,197,867 1,197,867 0
Limited Partnership I (3) 0
Wharton Capital Partners 25,000 25,000 0
Ltd. (4) 0
HD Brous & Co., Inc. (5) 25,000 25,000 0
Larry D. Smyth & Diane L 129,744 129,744 0
Smyth (6) 0
Robert T. Smyth (7) 121,064 121,064 0
William A. Smyth (8) 113,016 113,016 0
Canat & Company 52,096 52,096 0
Harold Ziegler, Jr 23,104 23,104 0
George F. Merrill 16,536 16,536 0
Robert F. Webster 13,272 13,272 0
Richard D. Sutton 12,544 12,544 0
Margaret L. Christian 12,480 12,480 0
Majorie M. Culp & Gary L. Bricker 6,120 6,120 0
Louis B. Boettler 6,000 6,000 0
Marion Noble 5,240 5,240 0
James A. Merrill 4,560 4,560 0
Ruth S. Culp & Carolyn Smyth 4,480 4,480 0
Ruth S. Culp 4,480 4,480 0
Kathleen Midian 4,000 4,000 0
McDonald & Company 3,744 3,744 0
Dayna E. Smyth 3,344 3,344 0
Matthew D. Smyth 3,336 3,336 0
Dean G. Lauritzen 2,496 2,496 0
Mrs. J. R. Duncan 2,480 2,480 0
Carolyn Culp Smyth (9) 2,120 2,120 0
John Olofson, Jr. 1,680 1,680 0
Timothy Jon Smyth (9) 1,600 1,600 0
Roy Wild 1,600 1,600 0
David C. Ewing 1,600 1,600 0
Jane Christian Smyth 1,200 1,200 0
James R. Duncan (10) 1,080 1,080 0
J. Daniel Bernard 960 960 0
Thomas A. Schauer 896 896 0
Kenneth J. Scheetz (11) 840 840 0
William H. Belden 800 800 0
William C. Ziegler 800 800 0
William B. Badger 800 800 0
Richard Robert Smyth (9) 800 800 0
Melinda Sue Smyth Custar 800 800 0
Kjirsti Smyth Nicolaysen 800 800 0
Kathlene Kay Ewing 800 800 0
Inger Lee Nicolaysen 800 800 0
Hartru & Co - Harter Trust 800 800 0
Deydre Jayne Smyth 800 800 0
Daniel Joel Smyth 800 800 0
Ann Smyth Marris 800 800 0
James B. Steffen (12) 480 480 0
Todd M. Henderson 320 320 0
Paul J. Neischwitz 280 280 0
Bonita Neischwitz 280 280 0
Jack Dieringer (9) 240 240 0
Thomas J. Tschantz 176 176 0
Nicholas M. Mussulin & Doris S. 160 160 0
Mussulin
Joseph M. Procario 80 80 0
Gail M. Meyer 80 80 0
</TABLE>
- ---------------
(1) Assumes all of the shares of Common Stock held by the Selling Stockholders
and registered hereunder are sold.
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table.
(3) The number of shares set forth in the table represents an estimate of the
number of shares of Common Stock to be offered by such Selling Stockholder.
The actual number of shares of Common Stock issuable upon conversion of
Series A Preferred Stock and exercise of Warrants issued to such Selling
Stockholder (the "Investor Warrants)" is indeterminate, is subject to
adjustment and could be materially less or more than such estimated number
depending on factors which cannot be predicted by the Company at this time,
including, without limitation, the future market price of the Common Stock.
The actual number of shares of Common Stock offered hereby, and included in
the Registration Statement of which Prospectus is a part, includes such
additional number of shares of Common Stock as may be issued or issuable
upon conversion of the Series A Preferred Stock and exercise of the
Investor Warrants by reason of the floating rate conversion price mechanism
or other adjustment mechanisms described therein, or by reason of any stock
split, stock dividend or similar transaction involving the Common Stock, in
order to prevent dilution, in accordance with Rule 416 under the Securities
Act. Pursuant to the terms of the Series A Preferred Stock, if the Series A
Preferred Stock had been actually converted on April 15, 1998, the
conversion price would have been $2.11 (seventy eight percent (78%) of the
average of the five lowest traded prices of the Common Stock for the twenty
five (25) trading days immediately preceding such date) at which price the
Series A Preferred Stock would have been converted into approximately
947,867 shares of Common Stock. The Investor Warrants are initially
exercisable at a per share price (the "Investor Warrant Exercise Price")
equal to the lesser of (i) $2.693 (such price representing 110% of the
average closing bid price of a share of Common Stock for the five (5) days
preceding the date of issuance and (ii) 110% of the closing bid price of a
share of Common Stock on the Effective Date of this Registration Statement.
Pursuant to the terms of the Preferred Stock and Investor Warrants, shares
of Preferred Stock and Investor Warrants are issuable only to the extent
that the Common Stock issuable upon conversion of such shares of Preferred
Stock and upon exercise of such Investor Warrants, together with the Common
Stock issuable upon conversion of shares of Preferred Stock and exercise of
Investor Warrants previously issued, would not result in the issuance of
more than twenty percent (20%) of the Company's outstanding Common Stock in
accordance with NASDAQ Rule 4310(c)(25)(H)(i)(d)(2). Accordingly, the
number of shares of Common Stock set forth in the table for this Selling
Stockholder may exceed the number of shares of Common Stock that this
Selling Stockholder could own beneficially at any given time through its
ownership of the Preferred Stock and Investor Warrants. In that regard,
beneficial ownership of this Selling Stockholder set forth in this table
may not determined in accordance with Rule 13d-3 under the Exchange Act.
(4) Includes 25,000 shares of Common Stock which are issuable to such Selling
Stockholder upon conversion of warrants.
(5) Includes 25,000 shares of Common Stock which are issuable to such Selling
Stockholder upon conversion of warrants. Such Selling Stockholder has been
retained by the Company to provide investment banking services.
(6) Larry D. Smyth has served as Senior Vice President of Smyth Systems, Inc.,
a wholly-owned subsidiary of the Company, since May 1997.
(7) Robert T. Smyth has served as President of Smyth Systems, Inc., a
wholly-owned subsidiary of the Company, since May 1997.
(8) William A. Smyth has served as Senior Vice President of Smyth Systems,
Inc., a wholly-owned subsidiary of the Company, since May 1997.
(9) Such Selling Stockholder has been a non-executive employee of Smyth
Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997.
(10) James R. Duncan has served as Senior Vice President of Smyth Systems, Inc.,
a wholly-owned subsidiary of the Company, since May 1997.
(11) Kenneth J. Scheetz has served as Vice President -- Service of Smyth
Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997.
(12) James B. Steffen has served as Vice President of Smyth Systems, Inc., a
wholly-owned subsidiary of the Company, since May 1997.
13
<PAGE> 16
PLAN OF DISTRIBUTION
On March 18, 1998 the Company entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") with the Investor, pursuant to
which the Investor purchased 10,000 shares of Preferred Stock at a price of $100
per share. The Preferred Stock can be converted by the Investor at any time
within the five (5) year period commencing with the date of issuance at the
conversion price stated in the Securities Purchase Agreement. In connection with
such sale, the Company also granted to the Investor 125,000 Investor Warrants.
The Securities Purchase Agreement also provides that, subject to the
satisfaction of certain conditions, the Company will sell to the Investor an
additional 5,000 shares of Preferred Stock at a purchase price of $100 per
share, and will grant to the Investor an additional 62,500 Investor Warrants, on
or prior to each of the dates that is thirty (30) and sixty (60) days after the
Effective Date of the Registration Statement. The Company granted each of HD
Brous & Co. and Wharton Capital Partners Ltd. 25,000 Placement Agent Warrants.
This Registration Statement has been filed by the Company pursuant to a
Registration Rights Agreement between the Company and the Investor. In addition
to shares of Common Stock into which shares of Preferred Stock are convertible
and the Investor Warrants and Placement Agent Warrants are exercisable, this
Registration Statement also registers 569,408 shares of Common Stock issued to
certain Selling Stockholders.
The distribution of the shares of Common Stock offered hereby may be
effected from time to time in one or more transactions. All or a portion of the
Common Stock offered by this Prospectus may be offered for sale, from time to
time, by the Selling Stockholders, or by permitted transferees or successors of
the Selling Stockholders, in private or negotiated transactions, in open market
transactions on the National Association of Securities Dealers Automated
Quotation SmallCap Market ("Nasdaq"), or on one or more exchanges or otherwise,
or a combination of these methods, at prices and terms then obtainable, at fixed
prices, at prices then prevailing at the time of sale, at prices related to such
prevailing prices, or at negotiated prices, or otherwise. The shares of Common
stock offered hereby may be sold by one or more of the following: (i) through
underwriters; (ii) through dealers or agents (which may include underwriters)
including: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares of Common Stock 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 and resale by such broker or dealer as a principal for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and (d)
transactions in which the broker solicits purchasers; or (iii) directly to one
or more purchasers. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the Selling Stockholders. Concurrently with
sales under this Prospectus, the Selling Stockholders may effect other sales of
Common Stock under Rule 144 or other exempt resale transactions. The Selling
Stockholders and any underwriters, dealers, brokers, or agents executing selling
orders on behalf of the Selling Stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), in which event commissions received by such persons may be deemed to be
underwriting commission under the Securities Act.
The Company has agreed to indemnify certain of the Selling Stockholders
against certain liabilities, including certain liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Stradling, Yocca, Carlson & Rauth, a Professional
Corporation, Newport Beach, California.
EXPERTS
The consolidated financial statements of Bristol Retail Solutions,
Inc. as of December 31, 1997, and for the fiscal year ended December 31, 1997
appearing in Bristol Retail Solutions, Inc.'s Annual Report (Form 10-KSB) for
the year ended December 31, 1997, have been audited by Deloitte & Touche LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Bristol Retail Solutions,
Inc. as of December 31, 1996, and for the period from inception (April 3, 1996)
to December 31, 1996 appearing in Bristol Retail Solutions, Inc.'s Annual Report
(Form 10-KSB) for the year ended December 31, 1996, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
14
<PAGE> 17
The financial statements of Automated Register Systems, Inc. as of
December 31, 1996 and 1995, and for the years then ended appearing in Bristol
Retail Solutions, Inc.'s Form 8-K/A dated March 14, 1997 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Electronic Business Machines, Inc. as of
December 31, 1996 and May 31, 1997, and for each of the two years ended December
31, 1996 and the five-month period ended March 31, 1997 appearing in Bristol
Retail Solutions, Inc.'s Form 8-K/A dated August 11, 1997 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Smyth Systems, Inc. for the years ended
December 31, 1996 and 1995 incorporated in this prospectus by reference from the
Bristol Retail Solutions, Inc. filing on Form 8-K/A on July 29, 1997 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LIMITATION ON LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Bylaws of the Company provide for indemnification of the Company's
directors and officers to the fullest extent permitted by law. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
directors, officers or controlling persons of the Company pursuant to the
Company's Certificate of Incorporation, as amended, Bylaws and the Delaware
General Corporation Law (the "DGCL"), the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in such Act and is therefore unenforceable.
15
<PAGE> 18
- --------------------------------------------------------------------------------
1,817,275 SHARES OF COMMON STOCK, $.001 PAR VALUE
BRISTOL RETAIL SOLUTIONS, INC.
PROSPECTUS
APRIL __, 1998
- --------------------------------------------------------------------------------
<PAGE> 19
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the costs and expenses, all of which shall be
borne by the Company, in connection with the offering of the securities pursuant
to this Registration Statement on Form S-3:
<TABLE>
<S> <C>
Registration Fee................................................. $ 1,608.29
Accounting Fees and Expenses..................................... $ ______*
Legal Fees and Expenses.......................................... $ ______*
Total..................................................... $ ______*
</TABLE>
- ----------
* Estimated
Item 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation (the "Certificate") and
Bylaws include provisions that eliminate the directors' personal liability for
monetary damages to the fullest extend possible under Delaware Law or other
applicable law (the "Director Liability Provision"). The Director Liability
Provision eliminates the liability of Directors to the Company and its
stockholders for monetary damages arising out of any violation by a director of
his fiduciary duty of due care. Under Delaware Law, however, the Director
Liability Provision does not eliminate the personal liability of a director for
(i) breach of the director's duty of loyalty, (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violation of law, (iii)
payment of dividends or repurchases or redemption of stock other than from
lawfully available funds, or (iv) any transactions from which the director
derived an improper benefit. The Director Liability Provision also does not
affect a director's liability under the federal securities laws or the recovery
of damages by third parties. Furthermore, pursuant to Delaware Law, the
limitation liability afforded by the Director Liability Provision does not
eliminate a director's personal liability for breach of the director's duty of
due care. Although the directors would not be liable for monetary damages to the
corporation or its stockholders for negligent acts or commissions in exercising
their duty of due care, the directors remain subject to equitable remedies, such
as actions for injunction or rescission, although these remedies, whether as a
result of timeliness or otherwise, may not be effective in all situations. With
regard to directors who also are officers of the Company, these persons would be
insulated from liability only with respect to their conduct as directors and
would not be insulated from liability for acts or omissions in their capacity as
officers. These provisions may cover actions undertaken by the Board of
Directors, which may serve as the basis for a claim against the Company under
the federal and state securities laws. The Company has been advised that it is
the position of the Commission that insofar as the foregoing provisions may be
involved to disclaim liability for damages arising under the Securities Act,
such provisions are against public policy as expressed in the Act and are
therefore unenforceable.
Delaware Law provides a detailed statutory framework covering
indemnification of directors, officers, employees or agents of the Company
against liabilities and expenses arising out of legal proceedings brought
against them by reason of their status or service as directors, officers,
employees or agents. Section 145 of the Delaware General Corporation Law
("Section 145") provides that a director, officer, employee or agent of a
corporation (i) shall be indemnified by the corporation for expenses actually
and reasonably incurred in defense of any action or proceeding if such person is
sued by reason of his service to the corporation, to the extent that such person
has been successful in defense of such action or proceeding, or in defense of
any claim, issue or matter raised in such litigation, (ii) may, in actions other
than actions by or in the right of the corporation (such as derivative actions),
be indemnified for expenses actually and reasonably incurred, judgments, fines
and amounts paid in settlement of such litigation, even if he is not successful
on the merits, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation (and in a
criminal proceeding, if he did not have reasonable cause to believe his conduct
was unlawful), and (iii) may be indemnified by the corporation for expenses
actually and reasonably incurred (but not judgments or settlements) of any
action by
II-1
<PAGE> 20
the Corporation or of a derivative action (such as a suit by a stockholder
alleging a breach by the director or officer of a duty owed to the corporation),
even if he is not successful, provided that he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no indemnification is permitted without court
approval if the director has been adjudged liable to the corporation.
Delaware Law also permits a corporation to elect to indemnify its
officers, directors, employees and agents under a broader range of circumstances
than that provided under Section 145. The Certificate contains a provision that
takes full advantage of the permissive Delaware indemnification laws (the
"Indemnification Provision") and provides that the Company is required to
indemnify its officers, directors, employees and agents to the fullest extent
permitted by law, including those circumstances in which indemnification would
otherwise be discretionary, provided, however, that prior to making such
discretionary indemnification, the Company must determine that the person acted
in good faith and in a manner he or she believed to be in the best interests of
the Company and, in the case of any criminal action or proceeding, the person
had no reason to believe his or her conduct was unlawful.
In furtherance of the objectives of the Indemnification Provision, the
Company has also entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Certificate and Bylaws (the "Indemnification Agreements"). The Company
believes that the Indemnification Agreements are necessary to attract and retain
qualified directors and executive officers. Pursuant to the Indemnification
Agreements, an indemnitee will be entitled to indemnification to the extent
permitted by Section 145 or other applicable law. In addition, to the maximum
extent permitted by applicable law, an indemnitee will be entitled to
indemnification for any amount or expense which the indemnitee actually and
reasonably incurs as a result of or in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, preparing to be a witness, or
otherwise participating in any threatened, pending or completed claim, suit,
arbitration, inquiry or other proceeding (a "Proceeding") in which the
indemnitee is threatened to be made or is made a party or participant as a
result of his or her position with the Company, provided that the indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company and had no reasonable cause to
believe his or her conduct was unlawful. If the Proceeding is brought by or in
the right of the Company and applicable law so provides, the Indemnification
Agreement provides that no indemnification against expenses shall be made in
respect of any claim, issue or matter in the Proceeding as to which the
indemnitee shall have been adjudged liable to the Company.
On or about August 7, 1997 a class action complaint was filed against
the Company and certain of its officers and directors. Underwriters for the
Company's initial public offering are also named as defendants. The class action
plaintiffs are Lincoln Adair, Antique Prints, Ltd., and Martha Seamons, on
behalf of themselves and all other similarly situated. The case is pending in
the United States District Court for the Southern District of New York. In
addition to seeking themselves declared proper plaintiffs and having the case
certified as a class action, plaintiffs seek unspecified monetary damages.
Plaintiffs complaint alleges claims under the federal securities laws for
alleged misrepresentations and omissions in connection with purchases of
securities. The Company disputes the allegations made in the complaint and
intends to vigorously defend itself.
Item 16. Exhibits.
<TABLE>
<S> <C>
3.1* Certificate of Incorporation, as amended, of the Company.
3.2* Bylaws of the Company.
4.1 Securities Purchase Agreement entered into between the Company
and Precision Capital Investors Limited Partnership I dated as of
March 18, 1998.
4.2 Registration Rights Agreement entered into between the Company
and Precision Capital Investors Limited Partnership dated as of
March 18, 1998.
4.3 Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock
4.4 Common Stock Purchase Warrant issued to Precision Capital
Investors Limited Partnership I.
4.5 Warrant to purchase Common Stock issued to H D Brous & Co., Inc.
4.6 Warrant to Purchase Common Stock issued to Wharton Capital
Partners Ltd.
5.1** Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.
16.1* Letter on change in certifying accountant. Filed as Exhibit 16.1
to the Company's Form 8-K filed on October 7, 1997, and
incorporated herein by reference.
</TABLE>
II-2
<PAGE> 21
<TABLE>
<S> <C>
23.1** Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (included on the signature page to the
Registration Statement - see page II-3).
</TABLE>
* Previously filed.
** To be filed by amendment.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(iii) Include any additional or changed information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be deemed 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.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport Beach, State of California, on the 17th day
of April, 1998.
BRISTOL RETAIL SOLUTIONS, INC.
By: /s/ Richard H. Walker
-------------------------------------
Richard H. Walker
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Bristol Retail Solutions,
Inc., do hereby constitute and appoint Richard H. Walker and Michael Shimada or
either of them, our true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite are
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorney-in-fact and agents, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard H. Walker Chief Executive Officer, April 17, 1998
- ----------------------------- President and Director
Richard H. Walker (principal executive officer)
/s/ Michael Shimada Vice President and Chief April 17, 1998
- ----------------------------- Financial Officer (principal
Michael Shimada financial and accounting
officer)
/s/ Paul Spindler Chairman of the Board of April 17, 1998
- ----------------------------- Directors, Executive Vice
Paul Spindler President and Secretary
/s/ Lawrence Cohen Vice Chairman of the Board of April 17, 1998
- ----------------------------- Directors
Lawrence Cohen
/s/ Jack Borsting, Ph.D. Director April 17, 1998
- -----------------------------
Jack Borsting, Ph.D.
/s/ Dr. Thomas Lutri, M.D. Director April 17, 1998
- -----------------------------
Dr. Thomas Lutri, M.D.
</TABLE>
II-4
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1* Certificate of Incorporation, as amended, of the Company.
3.2* Bylaws of the Company.
4.1 Securities Purchase Agreement entered into between the Company
and Precision Capital Investors Limited Partnership I dated as of
March 18, 1998.
4.2 Registration Rights Agreement entered into between the Company
and Precision Capital Investors Limited Partnership dated as of
March 18, 1998.
4.3 Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock
4.4 Common Stock Purchase Warrant issued to Precision Capital
Investors Limited Partnership I.
4.5 Warrant to Purchase Common Stock issued to H D Brous & Co., Inc.
4.6 Warrant to Purchase Common Stock issued to Wharton Capital
Partners Ltd.
5.1** Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.
16.1* Letter on change in certifying accountant. Filed as Exhibit 16.1
to the Company's Form 8-K filed on October 7, 1997, and
incorporated herein by reference.
23.1** Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (included on the signature page to the
Registration Statement - see page II-4).
</TABLE>
- ----------
* Previously filed.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 18, 1998,
is entered into by and between BRISTOL RETAIL SOLUTIONS, INC., a Delaware
corporation, with headquarters located at 5000 Birch Street, Suite 205 Newport
Beach, California 92660 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded, inter alia, by Rule 506 under Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, 6% Convertible Preferred Stock, $.001 par
value per share (the "Convertible Preferred Stock"), of the Company which will
be convertible into shares of Common Stock, $.001 par value per share of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
such Convertible Preferred Stock, and subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE; CERTAIN DEFINITIONS. (i) The undersigned hereby
agrees to purchase from the Company shares of the Convertible Preferred Stock in
the amount set forth on the signature page of this Agreement (the "Initial
Preferred Stock"), out of a total offering of $2,000,000 of such Convertible
Preferred Stock, and having the terms and conditions set forth in the
Certificate of Designations, Voting Powers, Preferences and Rights to the
Certificate of Incorporation of the Company attached hereto as ANNEX I (the
"Certificate of Designations"). The purchase price for the Initial Preferred
Stock shall be as set forth on the signature page hereto (the "Purchase Price")
and shall be payable in United States Dollars.
(ii) As used herein, the term "Preferred Stock" means the
Initial Preferred Stock and the Additional Preferred Stock (as defined below),
together with all shares, if any, of the Convertible Preferred Stock issued as
dividends thereon, unless the context otherwise requires.
(iii) As used herein, the term "Securities" means the
Preferred Stock and the Common Stock issuable upon conversion of the Preferred
Stock.
<PAGE> 2
b. FORM OF PAYMENT. The Buyer shall pay the purchase price for
the Initial Preferred Stock by delivering immediately available good funds in
United States Dollars to the escrow agent (the "Escrow Agent") identified in the
Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions"). No later than the Closing Date (as defined below), the Company
shall deliver one or more certificates representing the Initial Preferred Stock
duly executed on behalf of the Company (collectively, the "Certificate") to the
Escrow Agent. By signing this Agreement, the Buyer and the Company, and subject
to acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
c. METHOD OF PAYMENT. Payment into escrow of the Purchase Price
for the Initial Preferred Stock shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Account No.: <_____________________>
Not later than 1:00 p.m., New York time, on the date which is one (1) New York
Stock Exchange trading day after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Initial Preferred Stock, in immediately available funds. Time is
of the essence with respect to such payment, and failure by the Buyer to make
such payment shall allow the Company to cancel this Agreement.
d. ESCROW PROPERTY. The Purchase Price and the Certificate
delivered to the Escrow Agent as contemplated by Sections 1(b) and (c) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and will be acquiring the shares of
<PAGE> 3
Common Stock issuable upon conversion of the Preferred Stock (the "Converted
Shares") for its own account for investment or as Agent for other "accredited
investors", and not with a view towards the public sale or distribution thereof
and not with a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Preferred Stock and the
shares of Common Stock representing the Converted Shares (such Common Stock
sometimes referred to as the "Shares") by the Buyer shall be made pursuant to
registration of the Shares under the 1933 Act or pursuant to an exemption from
registration.
d. The Buyer understands that the Initial Preferred Stock are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Initial Preferred Stock and
the offer of the Shares which have been requested by the Buyer, including ANNEX
V hereto. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Buyer has also had the opportunity to obtain and to review the Company's (i)
the Company's annual report on Form 10-K for the year ending December 31, 1996,
(ii) the Company's quarterly report on Form 10-Q for the quarterly period ending
September 30, 1997 (the "SEC Reports"); and the Buyer understands that its
investments in the Shares involves a high degree of risk;
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or
<PAGE> 4
endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof or of the Preferred
Stock, in no event (except (i) with respect to an automatic conversion of the
Preferred Stock as provided in the Certificate of Designations or (ii) if the
Company is in default of any of its obligations under the Preferred Stock or any
of the Transaction Agreements, as defined below) shall the holder be entitled to
convert any Preferred Stock to the extent that, after such conversion, the sum
of (1) the number of shares of Common Stock beneficially owned by the Buyer and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Preferred Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the Preferred Stock with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Buyer
and its affiliates of more than 9.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), except as otherwise provided
in clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The Convertible
Preferred Stock has been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock or the Shares.
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on the NASDAQ/SmallCap market. The
<PAGE> 5
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing, and the Company has
maintained all requirements for the continuation of such listing.
c. AUTHORIZED SHARES. The Company has at December 9, 1997,
5,548,510 shares of Common Stock outstanding, and has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock [2/3 of Market Price on 1st Closing Date] and exercise of the
Warrants at the lower of the closing bid price of a share of Common Stock on the
Initial Closing Date or the Effective Date of the Registration Statement, and of
all the Preferred Stock outstanding. The Converted Shares have been duly
authorized and, when issued upon conversion of, or as interest on, the Preferred
Stock in accordance with its terms, will be duly and validly issued, fully paid
and non-assessable and will not subject the holder thereof to personal liability
by reason of being such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT
AND STOCK. This Agreement and the Registration Rights Agreement, the form of
which is attached hereto as ANNEX IV (the "Registration Rights Agreement"), and
the transactions contemplated hereby and thereby, have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Preferred Stock, and the
Registration Rights Agreement, when executed and delivered by or on behalf of
the Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject, as to enforceability, to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) except as disclosed in ANNEX V, any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock (except as herein set forth), (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) any
listing agreement for its Common Stock, except such conflict, breach or default
which would not have a material adverse effect on the transactions contemplated
herein.
f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or
<PAGE> 6
market or the stockholders of the Company is required to be obtained by the
Company for the issuance and sale of the Securities to the Buyer as contemplated
by this Agreement, except such authorizations, approvals and consents that have
been obtained.
g. SEC FILINGS. None of the Company's SEC Reports contained, at
the time they were filed, 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 made therein in light of the circumstances under which they were
made, not misleading. Except as set forth on ANNEX V hereto, the Company has
since June 1997 timely filed all requisite forms, reports and exhibits thereto
with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in ANNEX V or in the Company's SEC Reports. Since September 30, 1997,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Reports), that has not been disclosed in writing to the
Buyer that (i) would reasonably be expected to have a material adverse effect on
the business or financial condition of the Company or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the agreements
contemplated hereby (collectively, including this Agreement, the "Transaction
Agreements").
j. ABSENCE OF LITIGATION. Except as set forth in ANNEX V hereto,
and in the Company's SEC Reports, which the Buyer has reviewed, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an
<PAGE> 7
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business or financial condition. results of operation or
prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by any of the Transaction Agreements or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in ANNEX V
hereto and Section 3(e) hereof, no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of operations.
l. PRIOR ISSUES. Except as set forth in ANNEX V, during the
twelve (12) months preceding the date hereof, the Company has not issued any
Common Stock or convertible securities in capital transactions which have not
been fully disclosed in the Company's filings with the SEC. All such issuances
have been fully converted into shares of common stock and there are no
outstanding unconverted debt or convertible securities from those transactions.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Reports or those incurred in the ordinary course of the Company's business since
September 30, 1997, and which, individually or in the aggregate, do not or would
not have a material adverse effect on the properties, business, condition
(financial or otherwise), results of operations or prospects of the Company and
its subsidiaries, taken as a whole. No event or circumstances has occurred or
exists with respect to the Company or its properties, business, condition
(financial or otherwise), results of operations or prospects, which, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed.
n. NO DEFAULT. The Company is not in default in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound.
o. NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since June 1997, made any offer or sales of any security
or solicited any offers to buy any security under circumstances that would
eliminate the availability of the exemption from registration under Regulation D
in connection with the offer and sale of the Securities as contemplated hereby.
p. DILUTION. The number of Shares issuable upon conversion of the
<PAGE> 8
Preferred Stock may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to the conversion of the Preferred Stock. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Preferred Stock is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
pursuant to an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE
<PAGE> 9
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE> 10
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Preferred Stock to the
Buyer under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. REPORTING STATUS. So long as the Buyer beneficially owns any
of the Preferred Stock, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination.
f. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow agent fees in connection with the sale of the
Preferred Stock) for general capital purposes and acquisitions, but shall not,
directly or indirectly, use such proceeds for investment in any other affiliate
or to repay debt to affiliates.
g. FUTURE PURCHASES. (i) The Company unconditionally and
irrevocably agrees to issue, and the Buyer agrees to purchase, up to an
additional $1,000,000 liquidation amount of Preferred Stock (the "Additional
Preferred Stock") in two tranches of $500,000 each (the "Additional Tranches"),
on the terms and subject to the conditions hereinafter provided.
(ii) The closing for each Additional Tranche shall occur on a
date (the "Additional Closing Date"), which date shall not be later than the
thirty (30) days and sixty (60) days respectively after the Effective Date (as
defined below) or as otherwise mutually agreed upon by the Company and the
Buyer. The closing of the Additional Tranche shall be conducted upon the same
terms and conditions as those applicable to the Initial Preferred Stock.
(iii) On each Additional Closing Date, (A) the Registration
Statement required to be filed under the Registration Rights Agreement shall
continue to be effective, (B) the representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
(and the Company's issuance of the Additional Preferred Stock shall constitute
the Company's making each such representation and warranty as of such date), and
(C) the Market Price of the Common Stock (as defined below) for each of the five
(5) trading days immediately preceding the Additional Closing Date shall exceed
$2.50 per share, (D) the average daily share volume for the Common Stock for the
ten (10) trading day period preceding the Additional Closing Date shall have
equaled or exceeded 25,000 shares of Common Stock, (E) there shall have been no
material adverse changes (financial or otherwise) in the business or conditions
of the Company from the Closing Date through and including the Additional
Closing Date (and the Company's issuance of the Additional Preferred Stock shall
<PAGE> 11
constitute the Company's making such representation and warranty as of such
date), and (F) the Common Stock issuable upon conversion of the Additional
Preferred Stock and upon exercise of the Additional Warrants, together with the
Common stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants previously issued will not at a conversion or exercise price equal to
66% of the Market Price on such Additional Closing Date, result in the issuance
of more than 20% of the Company's outstanding Common Stock in accordance with
NASDAQ Rule 4310(c)(25)(H)(i)(d)(2) ("Cap Regulations").
(iv) The term "Market Price of the Common Stock" means, the
closing bid price of the Common Stock as reported, at the option of the Buyer,
by Bloomberg, LP or the National Association of Securities Dealers.
h. Certain Agreements. (i) The Company covenants and agrees that
it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the earlier of the date which is
one hundred eighty (180) days after the Effective Date (as defined below).
(ii) The provisions of subparagraph (g)(i) will not apply to (w)
Common Stock issued pursuant to Rule 144, provided the holder thereof holds such
Common Stock for at least one year from the date of issuance; (x) a secondary
public offering of shares of Common Stock at market; (y) an offering of
convertible debentures at market or above; or (z) the issuance of securities
(other than for cash) in connection with a merger, consolidation, sale of
assets, disposition or the exchange of the capital stock for assets, stock or
other joint venture interests; provided, such securities would not be included
in the Registration Statement relating to the Shares and a registration
statement in respect of such stock shall not be filed prior to sixty (60) days
after the Effective Date.
(iii) The term "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as defined in the
Registration Rights Agreement).
(iv) In the event the Company breaches the provisions of this
[PARAGRAPH] 4(h), the Conversion Price shall be amended to be the lesser of 68%
of the lowest five (5) day average closing bid for the twenty-five (25) days
prior to the Conversion Notice, but at no time in excess of 100% of the five (5)
day average bid price prior to Closing, and Purchaser may require the Company to
immediately redeem all outstanding Preferred Stock in accordance with Section
4(k)(y).
i. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield two hundred percent (200%) of the number of
shares of Common Stock issuable at conversion rights of the Buyer pursuant to
the terms and conditions of the Preferred Stock for all
<PAGE> 12
outstanding shares of Preferred Stock and upon exercise of the Warrants.
j. WARRANTS. The Company agrees to issue to Buyer at the Closing,
transferable divisible warrants with cashless exercise provisions (the
"Warrants") for 125,000 shares of Common Stock per $1,000,000 pro rata. Such
Warrants shall bear an exercise price per share of Common Stock as follows: 110%
of the lesser of the Market Price on the Initial Closing Date or Effective Date,
and shall be exercisable immediately upon issuance, and for a period of five (5)
years thereafter, in the form annexed hereto as Exhibit VI, together with
piggy-back registration rights, and demand registration rights under the
Registration Rights Agreement.
k. LIMITATION ON ISSUANCE OF SHARES. The Company may be limited
in the number of shares of Common Stock it may issue by the "Cap Regulations".
Without limiting the other provisions thereof, the Preferred Stock shall provide
that (i) the Company will take all steps reasonably necessary to be in a
position to issue shares of Common Stock on conversion of the Preferred Stock
and/or exercise of the Warrants without violating the Cap Regulations and (ii)
if, despite taking such steps, the Company still can not issue such shares of
Common Stock without violating the Cap Regulations, the holder of Preferred
Stock and Warrants which can not be converted as result of the Cap Regulations
(each such share, an "Unconverted Preferred Stock") shall have the option,
exercisable in such holders' sole and absolute discretion, to elect either of
the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such holder's notice of conversion at a conversion
purchase price equal to the average of the closing bid price per share
of Common Stock for the five (5) consecutive trading days (subject to
certain equitable adjustments for certain events occurring during such
period) preceding the date of notice of conversion; or
(y) require the Company to redeem each Unconverted Preferred
Stock for an amount in cash (the "Redemption Amount") equal to:
V x M
--------
CP
where:
"V" means the principal of an Unconverted Preferred Stock plus
any accrued but unpaid interest thereon;
"CP" means the conversion price in effect on the date of
redemption (the "Redemption Date") specified in the notice from the
holder of the Unconverted
<PAGE> 13
Preferred Stock electing this remedy; and
"M" means the highest closing bid price per share of the Common
Stock during the period beginning on the Redemption Date and ending on
the date of payment of the Redemption Amount.
The Preferred Stock shall contain provisions substantially consistent with the
above terms, with such additional provisions as may be consented to by the
Buyer. The provisions of this paragraph are not intended to limit the scope of
the provisions otherwise included in the Preferred Stock.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Initial Preferred Stock in accordance with Section 1(c)
hereof, the Company will irrevocably instruct its transfer agent to issue Common
Stock from time to time upon conversion of the Preferred Stock in such amounts
as specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5
and stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Converted Shares, promptly instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to
convert the Preferred Stock by telecopying an executed and completed Notice of
Conversion to the Company and delivering within five (5) business days
thereafter, the original Notice of Conversion by express courier, with a copy to
the Company's transfer agent.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Preferred Stock after the Effective
Date, the date specified in the
<PAGE> 14
Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that is received by the Company on or before such specified
date. The Conversion Date for any mandatory conversion at maturity shall be the
Maturity Date of the Preferred Stock.
(iii) The Company shall, at its expense, take all actions
and use all means necessary and diligent to cause its transfer agent to transmit
the certificates representing the Converted Shares issuable upon conversion of
any Preferred Stock (together with Preferred Stock not being so converted) to
the Buyer via express courier, by electronic transfer or otherwise, within three
(3) business days after receipt by the Company of the later of (i) receipt by
the transfer agent of the copy of the original Notice of Conversion, and (ii)
the Conversion Date (the "Delivery Date").
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer in the event that due entirely to the Corporations
direct or indirect actions or its failure to act (the "Company's Actions") the
transfer agent issues and delivers the Shares upon Conversion in accordance with
the following schedule (where "No. Business Days Late" is defined as the number
of business days beyond five (5) business days from Delivery Date:
<TABLE>
<CAPTION>
Late Payment For Each $10,000
of Preferred Stock Liquidation
No. Business Days Late Amount Being Converted
---------------------- ------------------------------
<S> <C>
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
</TABLE>
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's Actions resulting in the transfer
agent's failure to issue and deliver the Common Stock to the Buyer. Furthermore,
in addition to any other remedies which may be available to the Buyer, in the
event that due to the Company's Actions, the transfer agent fails to deliver
such shares of Common Stock within five (5) business days after the Delivery
Date, the Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such
<PAGE> 15
effect to the Company whereupon the Company and the Buyer shall each be restored
to their respective positions immediately prior to delivery of such Notice of
Conversion, and Buyer may require the Company to immediately redeem all
outstanding Preferred Stock in accordance with Section 4(k)(y).
d. If, by the relevant Delivery Date, due to the Company's
Actions, and the transfer agent fails for any reason to deliver the Shares to be
issued upon conversion of a Preferred Stock and after such Delivery Date, the
holder of the Preferred Stock being converted (a "Converting Holder") purchases,
in an open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Converting Holder (the "Sold Shares"), which delivery such
Converting Holder anticipated to make using the Shares to be issued upon such
conversion (a "Buy-In"), the Company shall pay to the Converting Holder, in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Converting Holder's total purchase price (including
brokerage commissions, if any) for the Covering Shares over (y) the net proceeds
(after brokerage commissions, if any) received by the Converting Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
the Buyer in immediately available funds immediately upon demand by the
Converting Holder. By way of illustration and not in limitation of the
foregoing, if the Converting Holder purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover a
Buy-In with respect to shares of Common Stock it sold for net proceeds of
$10,000, the Buy-In Adjustment Amount which Company will be required to pay to
the Converting Holder will be $1,000.
e. Subject to the completeness and accuracy of the Buyer's
representations and warranties herein, upon the conversion of any Preferred
Stock by a person who is a non-U.S. Person, and following the expiration of any
applicable Restricted Period (as those terms are defined in Regulation S), the
Company, shall, at its expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue stock certificates without restrictive legend or stop orders in the
name of Buyer (or its nominee (being a non-U.S. Person) or such non-U.S. Persons
as may be designated by Buyer) and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion, as applicable. Nothing in this Section 5, however, shall affect in
any way Buyer's or such nominee's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. The remedies set forth
in paragraphs 5(c), (d) and (e) shall be cumulative.
f. In lieu of delivering physical certificates representing the
unlegended securities issuable upon conversion, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the
<PAGE> 16
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
g. The original certificate representing the Preferred Stock
shall be delivered by the Buyer to the Company simultaneous with the final
Notice of Conversion.
<PAGE> 17
6. DELIVERY INSTRUCTIONS.
The Initial Preferred Stock shall be delivered by the Company to
the Escrow Agent pursuant to Section 1(b) hereof, on a delivery against payment
basis, no later than on the Closing Date.
7. CLOSING DATE.
(i) The closing of the issuance and sale of the Initial Preferred
Stock shall occur on the date (the "Closing Date") which is the first NYSE
trading day after the fulfillment or waiver of all closing conditions pursuant
to Sections 8 and 9 hereof or such other date and time as is mutually agreed
upon by the Company and the Buyer. The date of the Additional Closing Date shall
be the date specified by either party upon at least five (5) business days'
advance notice to the other party; provided, however, that it shall be a
condition of the Additional Closing Date that (i) the conditions of Section 4(g)
be satisfied, and (ii) each of the conditions contemplated by Sections 8 and 9
hereof shall have been satisfied or waived on or before such date.
(ii) Each closing of the purchase and issuance of Preferred Stock
shall occur on the Closing Date or the Additional Closing Date, as the case may
be, at the offices of the Escrow Agent and shall take place no later than 12:00
Noon, New York time, on such day or such other time as is mutually agreed upon
by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Property only upon
satisfaction of the conditions set forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Preferred Stock on the Closing Date and Additional Closing Dates to the Buyer
pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Buyer of this Agreement as
evidenced by execution of this Agreement by the buyer for at least One Million
Dollars ($1,000,000) Dollars in principal amount of Preferred Stock (or such
lesser amount as the Company, in its sole discretion, shall determine on the
Closing Date);
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred Stock
in accordance with Section 1(c) hereof;
<PAGE> 18
c. The accuracy on the Closing Date and each Additional Closing
Date of the representations and warranties of the Buyer contained in this
Agreement as if made on the Closing Date and each Additional Closing Date, and
the performance by the Buyer on or before the Closing Date and each Additional
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date and each Additional Closing Date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the Preferred Stock on the Closing Date and each Additional Closing Date is
conditioned upon:
a. Acceptance by the Company of this Agreement for the sale of
Preferred Stock, as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the appropriate
Preferred Stock in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date and
each Additional Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date and such
Additional Closing Date and the performance by the Company on or before the
Closing Date and each Additional Closing Date of all covenants and agreements of
the Company required to be performed on or before the Closing Date and such
Additional Closing Date, and as to Additional Preferred Stock, the conditions
set forth in Section 4j; and
d. On the Closing Date and each Additional Closing Date, the
Buyer having received an opinion of counsel for the Company, dated the Closing
Date and each Additional Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX III attached hereto,
and on the first Closing Date only, the Registration Rights Agreement annexed
hereto as ANNEX IV and the Warrants.
e. No statute, rule, regulation, executive order, decree, ruling
or injunction shall be enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits or adversely
effects any of the transactions contemplated by this Agreement or the
Transaction Documents, and no proceeding or investigation shall have been
commenced or threatened which may have the effect of prohibiting or adversely
effecting any of the transactions contemplated by this Agreement or the
Transaction Documents.
<PAGE> 19
f. From and after the date hereof to and including the initial
Closing Date and each Additional Closing Date, the trading of the Common Stock
shall not have been suspended by the SEC, or the NASD and trading in securities
generally on the New York Stock Exchange or NASDAQ/SmallCap shall not have been
suspended or limited, nor shall minimum prices been established for securities
traded on NASDAQ/Small Cap, nor shall there be any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer
makes it impracticable or inadvisable to purchase the initial Preferred Stock or
the Additional Preferred Stock, as the case may be.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES. Any notice required or permitted hereunder shall be
given
<PAGE> 20
in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail,
or
(iii) the third business day after mailing by international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: BRISTOL RETAIL SOLUTIONS, INC.
5000 Birch Street, Suite 205
Newport Beach, California 92660
ATTN: Richard H. Walker
Telecopier No.: (714) 475-0808
Telephone No.: (714) 475-0800
with a copy to:
Stradling Yocca Carlson & Rauth, P.C.
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660-6441
ATTN: Mark Skaist, Esq.
Telecopier No.: (714) 725-4100
Telephone No.: (714) 725-4000
BUYER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telecopier No. (212) 213-2077
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Preferred Stock and the
Purchase Price, and shall inure to the benefit of the Buyer and its successors
and assigns.
<PAGE> 21
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 22
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer or one of its officers thereunto duly authorized as of the date set forth
below.
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED:
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $
SIGNATURES FOR ENTITIES
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 18, 1998
(this "Agreement"), is made by and between BRISTOL RETAIL SOLUTIONS, INC., a
Delaware corporation (the "Company"), and the entity named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of March 18, 1998, between the Initial
Investor and the Company (the "Securities Purchase Agreement"; capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor $2,000,000 liquidation preference of 6% Convertible Preferred
Stock, par value $.001 per share of the Company (the "Preferred Stock," which
term, as used herein shall have the meaning ascribed to it in the Securities
Purchase Agreement); and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Investor in connection with the issuance of the Preferred Stock; and
WHEREAS, the Preferred Stock is convertible into shares of Common
Stock (the "Conversion Shares") upon the terms and subject to the conditions
contained in the Certificate of Designations and the Warrants to be issued to
the Initial Investor may be exercised for the purchase of shares of Common Stock
(the "Warrant Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Investor" means the Initial Investor and any permitted
transferee or
<PAGE> 2
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(b) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company; or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time, which determination shall be accompanied by a good faith
determination by the Board of Directors of the Company that the registration
statement would be materially misleading absent the inclusion of such
information.
(c) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares and the
Warrant Shares.
(e) "Registration Statement" means a registration statement of
the Company under the Securities Act.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file
with the SEC, as soon as possible after the Closing Date, but no later than
thirty (30) days following the Closing Date, either a Registration Statement on
Form S-3 or an amendment to any such pending Registration Statement registering
for resale by the Investor all of the Registrable Securities, but in no event
less than the aggregate number of shares into (i) which the Preferred Stock
would be convertible at the time of filing of the Form S-3 (assuming for such
purposes that all shares of Preferred Stock had been eligible to be converted,
and had been converted, into Conversion Shares in accordance with their terms,
whether or not such eligibility or conversion had in fact occurred as of such
date), and (ii) which would be issued upon exercise of all of the Warrants at
the time of filing of the Form S-3 [assuming for such purposes that all Warrants
had been eligible to be exercised and had been exercised in accordance with
their terms, whether or not such eligibility or exercise had in fact occurred as
of such date]. Such Registration Statement or amended Registration Statement
shall also state that, in accordance with Rule 416 and 457 under the Securities
Act, it also covers such indeterminate number of additional shares of Common
<PAGE> 3
Stock as may become issuable upon conversion of the Preferred Stock and the
exercise of the Warrants resulting from adjustment in the Conversion Price or
the Warrant exercise price, as the case may be, or to prevent dilution resulting
from stock splits, or stock dividends. The Company will use its reasonable best
efforts to cause such Registration Statement to be declared effective no later
than ninety (90) days after the Closing Date. If at any time the number of
shares of Common Stock into which the Preferred Stock may be converted and which
would be issued upon exercise of the Warrants exceeds the aggregate number of
shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of a written notice from any Investor, either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by the
SEC at that time, to register all shares of Common Stock into which the
Preferred Stock may currently or in the future be converted and which would be
issued currently or in the future upon exercise of the Warrants, or (ii) if such
Registration Statement has been declared effective by the SEC at that time, file
with the SEC an additional Registration Statement on Form S-3, as may be
appropriate, to register the shares of Common Stock into which the Preferred
Stock may currently or in the future be converted and which would be issued
currently or in the future upon exercise of the Warrants that exceed the
aggregate number of shares of Common Stock already registered. Such Registration
Statement shall not include any shares other than the Registrable Securities
without the consent of the Investor.
(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by thirty (30) days after
the Closing Date (the "Required Filing Date"), then the Company will make
payments to the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the
Registrable Securities is not effective (a) within the earlier of (1) five (5)
days after notice by the SEC that it may be declared effective, or (2) ninety
(90) days following the Closing Date (the "Required Effective Date"), or (b)
after a Suspension Period (as defined below), then the Company will make
payments to the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to (A) two percent (2%) of the
Purchase Price paid by the Initial Investor (the "Purchase Price") for all
Preferred Stock then purchased and outstanding pursuant to the Securities
Purchase Agreement on the Required Filing Date or the Required Effective date,
as the case may be, to the first relevant Computation Date, and (B) three
percent (3%) of the Purchase Price on each Computation Date thereafter. By way
of illustration and not in limitation of the foregoing, if the Registration
Statement is timely filed but is not declared effective until one hundred
sixty-five (165) days after the Closing Date, the Periodic Amount will aggregate
eight
<PAGE> 4
(8%) percent of the Purchase Price of the Preferred Stock (2% on day 91, plus 3%
on days 120 and 150).
(iv) Additionally, if (a) the Registration Statement is
not filed within sixty (60) days from the Closing Date or (b) the Required
Effective Date is greater than one hundred fifty (150) days after the Closing
Date, or (c) the effectiveness of the Registration Statement is not maintained
during the Registration Period as hereinafter defined, Purchaser may, at its
option, require the Company to redeem the Preferred Stock in full, within three
(3) days, in cash, in accordance with Section 4(k)(y) of the Securities Purchase
Agreement.
(v) Each Periodic Amount will be payable to the Investor
by the Company in cash or other immediately available funds, upon demand of the
Investor.
(vi) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or if the Registration Statement has not been declared
effective by the Required Registration Date may be difficult to ascertain. The
parties agree that the Periodic Amount represents a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages and the sole and exclusive remedy of the Investor with respect to such
default by the Company.
(vii) Notwithstanding the foregoing, the amounts payable
by the Company pursuant to this provision shall not be payable to the extent any
delay in the effectiveness of the Registration Statement occurs because of an
act of, or a failure to act or to act timely by the Initial Investor or its
counsel if the Company timely forwards to counsel any required documents or in
the event all of the Registrable Securities may be sold pursuant to Rule 144 or
another available exemption under the Act.
(viii) "Computation Date" means (i) the date which is the
earlier of (A) thirty (30) days after the Required Filing Date and the Required
Effective Date, as the case may be, or (B) the date after the Required Filing
Date or the Required Registration Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or declared effective (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (ii) each date which is the earlier of
(A) thirty (30) days after the previous Computation Date or (B) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or declared
effective (with respect to payments due as contemplated by Section 2(b)(ii)
hereof), as the case may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC by the Required
Filing Date, a
<PAGE> 5
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause each Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two (2) years after the Closing
Date, (ii) the date when the Investors may sell all Registrable Securities under
Rule 144 or (iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(d) Notify the Holders of Registrable Securities to be sold,
their Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than five (5) days prior to such filing) and (if request
by any such Person) confirm such notice in writing no later than one (1)
Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) whenever the Commission notifies the Company whether there will
be a "review" of such Registration Statement; (C) whenever the Company receives
(or representatives of the Company receive on its behalf) any oral or written
comments from the Commission respect of a Registration Statement (copies or, in
the case of oral comments, summaries of such comments shall be promptly
furnished by the Company to the Holders); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement)
<PAGE> 6
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Holders with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) Business Day in advance of the
filing of such responses with the Commission so that the Holders shall have the
opportunity to comment thereon.
(e) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness
or any stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to
time after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing
<PAGE> 7
of the existence of a Potential Material Event, the Investors shall not offer or
sell any Registrable Securities, or engage in any other transaction involving or
relating to the Registrable Securities, from the time of the giving of notice
with respect to a Potential Material Event until such Investor receives written
notice from the Company that such Potential Material Event either has been
disclosed to the public or no longer constitutes a Potential Material Event;
provided, however, that the Company may not so suspend the right to such holders
of Registrable Securities for more than two twenty (20) day periods in the
aggregate during any 12-month period ("Suspension Period") with at least a ten
(10) business day interval between such periods, during the periods the
Registration Statement is required to be in effect;
(i) Use its reasonable efforts to secure NASDAQ/OTC Bulletin
Board authorization and quotation for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(k) Cooperate with the Investors who hold Registrable Securities
(or, subject to receipt by the Company of appropriate notice and documentation,
as may be required by the Securities Purchase Agreement, the Certificate of
Designations, the Warrants or this Agreement, securities convertible into
Registrable Securities) being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities or
securities convertible into Registrable Securities are included in such
Registration Statement) an appropriate instruction and opinion of such counsel;
provided, however, that nothing in this subparagraph (j) shall be deemed to
waive any of the provisions regarding the conditions or method of conversion of
Preferred Stock or exercise of Warrants into Registrable Securities; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding
<PAGE> 8
itself, the Registrable Securities held by it, and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least five (5) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(e)
or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other
than underwriting discounts and commissions of the Investor and legal fees of
counsel to the Investor) incurred in connection with registrations, filings or
qualifications pursuant to Section 3, including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company, and a fee for a single
counsel for the Investor not exceeding $3,500, shall be borne by the Company.
(b) Except as and to the extent specifically set forth in
Schedule 5(b) attached hereto, neither the Company nor any of its subsidiaries
has, as of the date hereof, nor shall the Company nor any of its subsidiaries,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except as and
to the extent specifically set forth in Schedule 5(b) attached hereto, neither
the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person. Without limiting the generality of the foregoing,
<PAGE> 9
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each
<PAGE> 10
Investor will indemnify the Company and its officers, directors and agents
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or 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, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action of its
final conclusion. The Indemnified Person or 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 reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made
<PAGE> 11
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6; (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation; and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any Preferred Stock of the Company which is
convertible into such securities) permitted or allowable by the terms of the
Securities Purchase Agreement only if: (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with or in favor of the Company to be bound by all of the provisions
contained herein, a copy of which shall be provided to the Company. The copies
referred to in clauses (a) and (d) of the immediately preceding sentence may be
redacted to delete certain financial and other details of the transaction
between the Investor and the transferee if the same is
<PAGE> 12
included in the document to be provided to the Company. In the event of any
delay in filing or effectiveness of the Registration Statement as a result of
such assignment, the Company shall not be liable for any damages arising from
such delay, or the payments set forth in Section 2(c) hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an eighty (80%) percent interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
<PAGE> 13
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission,
receipt confirmed, or other means) or sent by certified mail, return receipt
requested, properly addressed and with proper postage pre-paid (i) if to the
Company, BRISTOL RETAIL SOLUTIONS, INC., 5000 BIRCH STREET, SUITE 205 NEWPORT
BEACH, CALIFORNIA 92660 , ATT: President, Telecopier No.: (714) 475-0808; with a
copy to Stradling, Yocca, Carlson & Rauth, P.C., 660 Newport Center Drive, Suite
1600, Newport Beach, California 92660-6441, ATTN: Mark Skaist, Esq., Telecopier
No.: (714) 725-4100; (ii) if to the Initial Investor, at the address set forth
under its name in the Securities Purchase Agreement, with a copy to Samuel
Krieger, Esq., Krieger & Prager, 319 Fifth Avenue, Third Floor, New York, NY
10016, Telecopier No.: (212) 213-2077; and (iii) if to any other Investor, at
such address as such Investor shall have provided in writing to the Company, or
at such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective, when personally delivered, upon
receipt and, when so sent by registered or certified mail, four (4) calendar
days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions.
(e) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
<PAGE> 14
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
(j) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
BRISTOL RETAIL SOLUTIONS, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
PRECISION CAPITAL INVESTORS LIMITED
PARTNERSHIP I
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
BRISTOL RETAIL SOLUTIONS, INC.
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
BRISTOL RETAIL SOLUTIONS, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that, pursuant to the authority contained in Article Four of
its Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution creating a
series of its Preferred Stock designated as Series A Convertible Preferred
Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be, and hereby is, created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, are as follows:
(1) Designation and Amount. The shares of such series shall be
designated as "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting such series shall be Twenty
Thousand (20,000). The number of shares of Series A Preferred Stock may be
decreased (but not below the number of shares then outstanding) or increased by
a certificate executed, acknowledged, filed, and recorded in accordance with the
General Corporation Law of the State of Delaware setting forth a statement that
a specified decrease or increase, as the case may be, thereof had been
authorized and directed by a resolution or resolutions adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Certificate of Incorporation of the Corporation.
(2) Dividends. The holders of shares of Series A Preferred Stock
shall be entitled to receive quarterly, out of any assets legally available
therefor, cumulative dividends, at the rate of six percent (6%) per annum of the
Original Issue Price of the Series A Preferred Stock (as defined below),
payable, at the holder's option, in cash or in Common Stock at the Series A
Conversion Price (as defined below).
(3) Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (A) $100.00 for each
outstanding share of Series A Preferred
<PAGE> 2
Stock (the "Original Issue Price" for the Series A Preferred Stock) and (B) an
amount equal to declared but unpaid dividends on such share. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock
in proportion to the preferential amount each such holder is otherwise entitled
to receive.
(b) After payment to the holders of the Series A Preferred
Stock of the amounts set forth in Section 3(a) above, the entire remaining
assets and funds of the Corporation legally available for distribution, if any,
shall be distributed among the holders of the Common Stock in proportion to the
shares of Common Stock then held by them.
(c) For purposes of this Section (3), (i) any acquisition
of the Corporation by means of merger or other form of corporate reorganization
in which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) and following
which the stockholders of the Corporation immediately prior to such transaction
own less than a majority of the voting shares of the surviving corporation or
(ii) a sale of all or substantially all of the assets of the Corporation, shall
be treated as a liquidation, dissolution or winding up of the Corporation and
shall entitle the holders of Series A Preferred Stock to receive at the closing
in cash, securities or other property (valued as provided in Section (3)(d)
below) amounts as specified in Section (3)(a) above.
(d) Whenever the distribution provided for in this Section
(3) shall be payable in securities or property other than cash, the value of
such distribution shall be the fair market value of such securities or other
property as determined in good faith by the Board of Directors.
(4) Redemption.
(a) At any time after the date of issuance of the Series A
Preferred Stock and prior to the conversion thereof (as provided in Section (6)
below), this Corporation may redeem, from any source of funds legally available
therefor, some or all of the outstanding Series A Preferred Stock (the date of
each such redemption being referred to herein as the "Series A Redemption
Date"). The Corporation shall effect such redemptions on the Series A Redemption
Date by paying in exchange for each share of Series A Preferred Stock to be
redeemed an amount in cash (the "Series A Redemption Price") equal to:
V x M
---------------
CP
where:
"V" means the Original Issue Price for the Series A Preferred Stock plus
any declared but unpaid dividends on such share;
-2-
<PAGE> 3
"CP" means the Series A Conversion Price (as defined in Section 6(a)
below); and
"M" means the highest closing bid price per share of the Common Stock
during the period beginning on the Redemption Date and ending on the date of
payment of the Series A Redemption Price.
Any redemption effected pursuant to this Section (4)(a) shall be made on a
pro-rata basis among the holders of the Series A Preferred Stock in proportion
to the shares of Series A Preferred Stock then held by them.
(b) At least 20 days prior to the Redemption Date written
notice shall be mailed, first class postage prepaid, to each holder of record
(at the close of business on the business day next preceding the day on which
notice is given) of the Series A Preferred Stock to be redeemed, at the address
last shown on the records of the Corporation for such holder, notifying such
holder of the redemption to be effected, specifying the number of shares to be
redeemed from such holder, the Redemption Date, the Series A Redemption Price,
the place at which payment may be obtained and calling upon such holder to
surrender to the Corporation, in the manner and at the place designated, his
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in Section (4)(c), on or after the
Redemption Date, each holder of Series A Preferred Stock to be redeemed shall
surrender to this Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the Series A Redemption Price of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be cancelled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall
have been a default in payment of the Series A Redemption Price, all rights of
the holders of shares of Series A Preferred Stock designated for redemption in
the Redemption Notice as holders of Series A Preferred Stock (except the right
to receive the Series A Redemption Price without interest upon surrender of
their certificate or certificates) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books of the Corporation
or be deemed to be outstanding for any purpose whatsoever. The shares of Series
A Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein.
(d) If on the Redemption Date, the Corporation does not
pay the Series A Redemption Price, the holder of Series A Preferred Stock may
thereafter convert any or all or part of his Series A Preferred Stock at the
lesser of (i) the Series A Conversion Price (as defined in Section 6(a) hereof),
or (ii) 78% of the five-day average closing bid price for the Corporation's
Common Stock for the five (5) trading days prior to the delivery of the Notice
of Redemption.
(5) Voting Rights.
Each holder of shares of the Series A Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series A Preferred Stock could be converted and
shall have voting rights and powers equal to the
-3-
<PAGE> 4
voting rights and powers of the Common Stock (except as otherwise expressly
provided herein or as required by law, voting together with the Common Stock as
a single class) and shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of the Corporation. Fractional votes shall not,
however, be permitted and any fractional voting rights resulting from the above
formula (after aggregating all shares into which shares of Series A Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
(6) Conversion. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share and on or prior to the fifth day prior
to any Redemption Date, if any, as may have been fixed in any Redemption Notice
with respect to the Series A Preferred Stock, at the office of the Corporation
or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Issue Price for the Series A Preferred Stock by the Conversion Price applicable
to such share, determined as hereinafter provided, in effect on the date
conversion shall be deemed to have been made (the "Conversion Date"), as
specified by the holder of Series A Preferred Stock in his Notice of Conversion
(as defined below). The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series A Preferred Stock (the
"Series A Conversion Price") shall be 78% of the lowest non-consecutive five-day
average closing bid price for the Corporation's Common Stock listed and traded
on the NASDAQ/Small Cap market, or such other national securities exchange on
which the Corporation's Common Stock is then listed, for the 25-day period prior
to the Conversion Date. In no event shall the Series A Conversion Price exceed
$3.26.
(b) Automatic Conversion. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the
then-effective Series A Conversion Price three (3) years after the issuance of
such share.
(c) Mechanics of Conversion.
(i) Before any holder of Series A Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall telecopy an executed and completed notice (each a "Notice of Conversion")
to the Corporation, specifying the number of shares of Series A Preferred Stock
to be converted, the Conversion Date, the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued, and such
other information as the Corporation may reasonably request. The holder of
Series A Preferred Stock shall deliver within three (3) business days after
transmitting the Notice of Conversion by telecopy, the original Notice of
Conversion by express courier, with a copy to the Corporation's transfer agent.
(ii) The Corporation shall, at its expense, take
all actions and use all means necessary and diligent to cause its transfer agent
to issue and deliver a certificate or certificates representing the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock (together
with a certificate or certificates representing the Series A Preferred Stock
-4-
<PAGE> 5
not being so converted) to such holder of Series A Preferred Stock via express
courier, by electronic transfer or otherwise, within three (3) business days of
the later of (i) receipt by the transfer agent of the copy of the original
Notice of Conversion, and (ii) the Conversion Date (the "Delivery Date").
(iii) Conversion shall be deemed to have been made
immediately prior to the close of business on the Conversion Date, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holders or
holders of such shares of Common Stock on such date.
(iv) The Corporation agrees to pay late payments in
the amounts and as set forth herein to the holder of Series A Preferred Stock
satisfying the prerequisites for conversion of the Series A Preferred Stock set
forth in Section 6(c)(i) hereof in the event that due entirely to the
Corporation's direct or indirect actions or its failure to act (the
"Corporation's Actions") the transfer agent does not issue and deliver to such
holder of Series A Preferred Stock certificates representing the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock, in the
manner and as set forth in Section 6(c)(ii) hereof, by the Delivery Date. The
late payments shall be paid in accordance with the following schedule (where
"No. Business Days Late" is defined as the number of business days beyond five
(5) business days from Delivery Date:
<TABLE>
<CAPTION>
Late Payment for Each $10,000
of Preferred Stock Liquidation
No. Business Days Late Amount Being Converted
---------------------- -----------------------------------
<S> <C>
1 $100
2 $200
3 $300
4 $400
5 $500
> 5 $500 + $200 for each
Business Day Late beyond
five (5) days from Delivery
Date
</TABLE>
The Corporation shall pay any payments incurred under this subsection in
immediately available funds upon demand. Nothing herein shall limit the holder
of Series A Preferred Stock from pursuing actual damages for the Corporation's
Actions resulting in the transfer agent's failing to issue and deliver the
Common Stock to such holder of Series A Preferred Stock. Furthermore, in
addition to any other remedies that may be available to the holder of Series A
Preferred Stock, in the event that delivery of such shares of Common Stock is
not made within five (5) business days after the Delivery Date, due to the
Corporation's Actions, the holder of Series A Preferred Stock will be entitled
to revoke the relevant Notice of Conversion by delivering a notice to such
effect to the Corporation whereupon the Corporation and such holder of Series A
Preferred Stock shall each be restored to their respective positions immediately
prior to delivery of such Notice of Conversion, and the holder of Series A
Preferred Stock may then require the Corporation to immediately redeem all
outstanding Series A Preferred Stock in accordance with Section 4 hereof.
-5-
<PAGE> 6
(v) If, by the relevant Delivery Date, due to
the Corporation's Actions, delivery of the shares of Common Stock to be issued
upon conversion of the Series A Preferred Stock is not made, and after such
Delivery Date the holder of the Series A Preferred Stock purchases, in an open
market transaction or otherwise, shares of Common Stock (the "Covering Shares")
in order to make delivery in satisfaction of a sale of Common Stock by such
holder of Series A Preferred Stock (the "Sold Shares"), which delivery such
holder of Series A Preferred Stock anticipated to make using the shares of
Common Stock to be issued upon such conversion of Series A Preferred Stock (a
"Buy-In"), the Corporation shall pay to such holder of Series A Preferred Stock
the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment Amount"
is the amount equal to the excess, if any, of (x) the holder of Series A
Preferred Stock's total purchase price (including brokerage commissions, if any)
for the Covering Shares over (y) the net proceeds (after brokerage commissions,
if any) received by such holder of Series A Preferred Stock from the sale of the
Sold Shares. The Corporation shall pay the Buy-In Adjustment Amount to the
holder of Series A Preferred Stock in immediately available funds immediately
upon demand by such holder of Series A Preferred Stock. By way of illustration
and not in limitation of the foregoing, if the holder of Series A Preferred
Stock purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which the Corporation will be required to pay to such holder of Series A
Preferred Stock will be $1,000.
(vi) Subject to the completeness and accuracy of
the holder of Series A Preferred Stock's representations and warranties herein,
upon the conversion of any Series A Preferred Stock by a person who is a
non-U.S. Person, and following the expiration of any applicable Restricted
Period (as those terms are defined in Regulation S), the Corporation shall, at
its expense, take all necessary action (including the issuance of an opinion of
counsel) to assure that the Corporation's transfer agent shall issue stock
certificates without restrictive legends or stop orders in the name of such
holder of Series A Preferred Stock (or its nominee (being a non-U.S. Person) or
such non-U.S. Persons as may be designated by such holder of Series A Preferred
Stock) and in such denominations to be specified at conversion representing the
number of shares of Common Stock issuable upon such conversion, as applicable.
Nothing in this Section 6, however, shall affect in any way any holder of Series
A Preferred Stock's or such nominee's obligations and agreement to comply with
all applicable securities laws upon resale of the shares of Common Stock. The
remedies set forth in subsections 4(c)(iv), (v) and (vi) shall be cumulative.
(vii) In lieu of delivering physical certificates
representing the unlegended securities issuance upon conversion, provided the
Corporation's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, upon request of the holder
of Series A Preferred Stock and its compliance with the provisions contained in
this subsection, so long as the certificates therefor do not bear a legend and
such holder of Series A Preferred Stock thereof is not obligated to return such
certificate for the placement of a legend thereon, the Corporation shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the holder of Series A Preferred Stock by
crediting the account of the Prime Broker of such holder of Series A Preferred
Stock with DTC through its Deposit Withdrawal Agent Commission System.
-6-
<PAGE> 7
(viii) The original certificate or certificates
representing the Series A Preferred Stock shall be delivered by the holder
thereof to the Corporation concurrently with delivery of the final Notice of
Conversion.
(d) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section (6) and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
(e) Notices of Record Date. In the event that the
Corporation shall propose at any time: (i) to declare any dividend or
distribution upon its Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and whether or not out of
earnings or earned surplus; (ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights; (iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or (iv) to merge or consolidate with or into any corporation other
than the Corporation's subsidiaries, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up;
Then, in connection with each such event, the Corporation shall
send to the holders of Series A Preferred Stock: (1) at least twenty (20) days
prior written notice of the date on which a record shall be taken for such
dividend, distribution or subscription rights (and specifying the date on which
the holders of Common Stock shall be entitled thereto) or for determining rights
to vote, if any, in respect of the matters referred to in (iii) and (iv) above;
and (2) in the case of the matters referred to in (iii) and (iv) above, at least
twenty (20) days prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event).
(f) Issue Taxes. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(g) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such
-7-
<PAGE> 8
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to this Certificate.
(h) Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Series A Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Series A Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
(i) Notices. Any notice required by the provisions of this
Section (6) to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.
(7) Restrictions and Limitations.
(a) So long as any shares of Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of at least 66-2/3% of the then outstanding shares of the Series A
Preferred Stock, voting together as a single class:
(i) Redeem, purchase, or otherwise acquire for
value (or pay into or set aside for a sinking fund for such purposes) any share
or shares of Preferred Stock otherwise than by redemption in accordance with
Section (6) hereof or by conversion in accordance with Section (4) hereof;
(ii) Redeem, purchase or otherwise acquire (or pay
into or set aside for a sinking fund for such purpose), any of the Common Stock,
provided, however, that this restriction shall not apply to the repurchase of
shares of Common Stock from employees, officers, directors, consultants or other
persons performing services for the Corporation or any subsidiary pursuant to
agreements under which the Corporation has the option to repurchase such shares
upon the occurrence of certain events, such as the termination of employment;
(iii) Authorize or issue, or obligate itself to
issue, any other equity security (including any security convertible into or
exercisable for any equity security) senior to or on a parity with the Series A
Preferred Stock as to voting rights, dividend rights, conversion rights,
redemption rights or liquidation preferences;
(iv) Declare or pay any dividend or make any
distribution with regard to any share of Common Stock;
(v) Sell, convey, lease or otherwise dispose of
all or substantially all of its property or business; liquidate, dissolve or
wind up the Corporation's business; or merge into or consolidate with any other
corporation (other than a wholly-owned
-8-
<PAGE> 9
subsidiary corporation); or effect any transaction or series of related
transactions in which more than 50% of the voting power of the corporation is
disposed of (a "Corporate Transaction"), unless the corporation's stockholders
of record as constituted immediately prior to such Corporate Transaction will,
immediately after such Corporate Transaction, hold at least a majority of the
voting power of the surviving or acquiring entity;
(vi) Permit any subsidiary to issue or sell, or
obligate itself to issue or sell, except to the Corporation or any wholly owned
subsidiary, any stock of such subsidiary;
(vii) Increase or decrease (other than by
redemption or conversion) the total number of authorized shares of Preferred
Stock; or
(viii) alter or change the rights, preferences or
privileges of the shares of Preferred Stock so as to affect adversely the
shares.
(8) No Reissuance of Series A Preferred Stock. No share or shares
of Series A Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
-9-
<PAGE> 10
IN WITNESS WHEREOF, BRISTOL RETAIL SOLUTIONS, INC. has caused
this Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock to be duly executed by its President and attested to by its
Assistant Secretary and has caused its corporate seal to be affixed hereto this
18th day of March, 1998.
BRISTOL RETAIL SOLUTIONS, INC.
By:______________________________________
/s/Richard H. Walker
President and Chief
Executive Officer
(Corporate Seal)
By:______________________________________
ATTEST: /s/Michael S. Shimada
Chief Financial Officer
____________________________________
/s/ Paul Spindler, Secretary
-10-
<PAGE> 1
EXHIBIT 4.4
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
BRISTOL RETAIL SOLUTIONS, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration,
the receipt of which is hereby acknowledged by BRISTOL RETAIL SOLUTIONS, INC., a
Delaware corporation (the "Company"), Precision Capital Investors Limited
Partnership I, or registered assigns (the "Holder") is hereby granted the right
to purchase at any time until 5:00 P.M., New York City time, on March 31, 2003
(the "Expiration Date"), One Hundred Twenty-Five Thousand (125,000) fully paid
and nonassessable shares of the Company's Common Stock, par value $.001 per
share (the "Common Stock") at an initial exercise price not exceeding $____ per
share (the "Exercise Price"(1), subject to further adjustment as set forth in
Note 1 below or in Section 6 hereof.
2. Exercise of Warrants. This Warrant is exercisable in whole or
in part at the Exercise Price per share of Common Stock payable hereunder,
payable in cash or by certified or official bank check, or by "cashless
exercise", by means of tendering this Warrant Certificate to the Company to
receive a number of shares of Common Stock equal in Market Value to the
difference between the Market Value of the shares of Common Stock issuable upon
exercise of this Warrant and the total cash exercise price thereof. Upon
surrender of this Warrant Certificate with the annexed Notice of Exercise Form
duly executed, together with payment of the Exercise Price for the shares of
Common Stock purchased, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. For the purposes of
this Section 2, "Market Value" shall be an amount equal to the average closing
bid price of a share of Common Stock for the five (5) days preceding the
Company's receipt of the Notice of Exercise Form duly executed multiplied by the
number of shares of Common Stock to be issued upon surrender of this Warrant
Certificate.
3. Reservation of Shares. The Company hereby agrees that at all
times
- --------
1 Lesser of 110% of the average closing bid price of a share of Common
Stock for the five (5) days preceding the Initial Closing Date or the Effective
Date under the Registration Rights Agreement.
<PAGE> 2
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise
Price is required pursuant to this Section 6, the Holder shall be entitled to
purchase such number of additional shares of Common Stock as will cause (i) the
total number of shares of Common Stock Holder is entitled to purchase pursuant
to this Warrant, multiplied by (ii) the adjusted purchase price per share, to
equal (iii) the dollar amount of the total number of shares of Common Stock
Holder is entitled to purchase before adjustment multiplied by the total
purchase price before adjustment.
6.2 Capital Adjustments. In case of any stock split or
reverse stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, spin-off, or like capital adjustment
affecting the Common Stock of the Company, the provisions of this Section 6
shall be applied as if such capital adjustment event had occurred immediately
prior to the date of this Warrant and the original purchase price had been
fairly allocated to the stock resulting from such capital adjustment; and in
other respects the provisions of this Section shall be applied in a fair,
equitable and reasonable manner so as to give effect, as nearly as may be, to
the purposes hereof. A rights offering to stockholders shall be deemed a stock
dividend to the extent of the bargain purchase element of the rights.
7. Transfer to Comply with the Securities Act; Registration
Rights.
(a) This Warrant has not been registered under the Securities Act
of 1933, as amended, (the "Act") and has been issued to the Holder for
investment and not with a view to the distribution of either the Warrant or the
Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other
security issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement
<PAGE> 3
under the Act relating to such security or an opinion of counsel satisfactory to
the Company that registration is not required under the Act. Each certificate
for the Warrant, the Warrant Shares and any other security issued or issuable
upon exercise of this Warrant shall contain a legend on the face thereof, in
form and substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
(b) The Company agrees to file a registration statement, which
shall include the Warrant Shares, on Form S-3 or another available form (the
"Registration Statement"), pursuant to the Act, pursuant to a Registration
Rights Agreement between the Company and Holder dated _________, 1998 (the
"Registration Rights Agreement").
8. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage pre-paid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission, or, if mailed, two days after the date of deposit in the United
States mails, as follows:
(i) if the to Company, to:
BRISTOL RETAIL SOLUTIONS, INC.
500 Birch Street, Suite 205
Newport Beach, California 92660
Attn: Chief Financial Officer
(ii) if to the Holder, to:
PRECISION CAPITAL INVESTORS LIMITED
PARTNERSHIP I
3845 Bathurst Street, Suite 202
Toronto, Ontario
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may
be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant of even date herewith contain the full
understanding of the parties hereto with respect to the subject matter hereof
and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed
<PAGE> 4
entirely within such State. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the ___ day of _____________ 1998.
BRISTOL RETAIL SOLUTIONS, INC.
By:_________________________________
Name:
Title:
Attest:
________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.5
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
Warrant to Purchase
25,000 Shares of
Common Stock
As Herein Described
WARRANT TO PURCHASE COMMON STOCK OF
BRISTOL RETAIL SOLUTIONS, INC.
This is to certify that, for value received, H D Brous & Co., Inc., or
registered assigns (in each case, the "Holder"), is entitled to purchase,
subject to the provisions of this Warrant (the "Warrant"), from Bristol Retail
Solutions, Inc. (the "Company"), having its principal place of business at 5000
Birch Street, Suite 205, Newport Beach, California 92660, at any time during the
period from the date hereof (the "Commencement Date") to 5:00 p.m., California
time, until March 18, 2003 (the "Expiration Date"), at which time this Warrant
shall expire and become void, Twenty-Five Thousand (25,000) shares ("Warrant
Shares") of the Company's Common Stock (the "Common Stock"). This Warrant shall
be exercisable at $3.556 per share (the "Exercise Price"). The number of shares
of Common Stock to be received upon exercise of this Warrant and the Exercise
Price shall be adjusted from time to time as set forth below. This Warrant also
is subject to the following terms and conditions:
1. Exercise of Warrant.
1.1 This Warrant may be exercised in full at any time from and
after the date hereof and before the Expiration Date, but if such date is a day
on which federal or state chartered banking institutions located in the State of
California are authorized to close, then on the next succeeding day which shall
not be such a day. Exercise shall be by presentation and surrender to the
Company at its principal office, or at the office of any transfer agent
designated by the Company, of (i) this Warrant, (ii) the attached exercise form
properly executed, and (iii) a bank check for the Exercise Price for the number
of Warrant Shares specified in the exercise form (except as provided in Section
1.2). If this Warrant is exercised in part only, the Company or its transfer
agent shall, upon surrender of the Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder to purchase the remaining number of Warrant
Shares purchasable hereunder. Upon receipt by the Company of this Warrant in
proper form
<PAGE> 2
for exercise, accompanied by payment as aforesaid, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be
actually delivered by the Holder.
1.2 Exercise by Exchange. In addition to and without limiting the
rights of the Holder under the terms hereof, at the Holder's option this Warrant
may be exercised during the term specified above by being exchanged in whole or
in part prior to its expiration for a number of shares of Common Stock having an
aggregate fair market value on the date of such exercise equal to the difference
between (x) the fair market value of the number of shares of Common Stock
subject to this Warrant designated as being exercised by the Holder hereof on
the date of the exercise and (y) the aggregate Exercise Price for such shares in
effect at such times. The following diagram illustrates how many shares would
then be issued upon exercise pursuant to this Section 1.2:
Let: FMV = Fair market value per share at date of exercise.
PSP = Per share Exercise Price at date of exercise.
N = Number of shares desired to be exercised.
X = Number of shares issued after exercise.
Therefore: X = (FMV)(N)-(PSP)(N)
-----------------
FMV
No payment of any cash or other consideration to the Company shall
be required from the Holder of this Warrant in connection with any exercise of
this Warrant by exchange pursuant to this Section 1.2 or otherwise. Such
exchange shall be effective upon the date of receipt by the Company of the
original Warrant surrendered for cancellation and a written request from the
Holder that the exchange pursuant to this section be made, or at such later date
as may be specified in such request.
For the purposes of this Warrant, the "fair market value" of any
number of shares of Common Stock shall mean such number of shares multiplied by
the Market Price Per Share, as determined pursuant to Section 3 below.
Notwithstanding the foregoing, the Holder of this Warrant shall
only be entitled to exercise this Warrant in the manner provided in this Section
1.2, an aggregate of four (4) times during the term specified herein.
2. Reservation of Shares. The Company shall, at all times until the
expiration of this Warrant, reserve for issuance and delivery upon exercise of
this Warrant the number of Warrant Shares which shall be required for issuance
and delivery upon exercise of this Warrant. The Company covenants that the
shares of Common Stock issuable on exercise of the Warrant shall be duly and
validly issued and fully paid and non-assessable and free of liens, charges and
all taxes with respect to the issue thereof, and that at such time as the
Warrant Shares may be sold, without registration,
2
<PAGE> 3
pursuant to the provisions of Rule 144 of the Securities Act of 1933, as amended
(the "Securities Act"), such shares shall be listed on each national securities
exchange and/or NASDAQ, if any, on which the other shares of outstanding Common
Stock of the Company are then listed.
3. Fractional Interests. The Company shall not issue any fractional
shares or scrip representing fractional shares upon the exercise or exchange of
this Warrant. With respect to any fraction of a share resulting from the
exercise or exchange hereof, the Company shall pay to the Holder an amount in
cash equal to such fraction multiplied by the current fair market value per
share of Common Stock (herein, the "Market Price Per Share"), determined as
follows:
3.1 If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or is
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the current fair market value shall be the last reported sale
price of the Common Stock on such exchange or NASDAQ on three (3) trading days
prior to the date of exercise of this Warrant, or if no such sale is made on any
of those days, the mean of the closing bid and asked prices for such days on
such exchange or NASDAQ;
3.2 If the Common Stock is not so listed or admitted to unlisted
trading privileges or quoted on NASDAQ, the current fair market value shall be
the mean of the last bid and asked prices reported on the three trading days
prior to the date of the exercise of this Warrant (i) by NASDAQ, or (ii) if
reports are unavailable under clause (i) above, by the National Quotation Bureau
Incorporated; or
3.3 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
fair market value shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the Company's Board of Directors
in good faith.
4. No Rights as Stockholders. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed in this Warrant
and are not enforceable against the Company except to the extent set forth
herein.
5. Adjustments.
5.1 Subdivision or Combination of Shares. If the Company is
recapitalized through the subdivision or combination of its outstanding shares
of Common Stock into a larger or smaller number of shares, the number of Warrant
Shares shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all of the Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
5.2 Dividends in Common Stock or Securities Convertible into
Common Stock. If the Company declares a dividend or distribution on Common Stock
payable in Common Stock or securities convertible into Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of
3
<PAGE> 4
Common Stock shall be entitled to receive such dividend, in proportion to the
increase in the number of outstanding shares (and shares of Common Stock
issuable upon conversion of all such securities convertible into Common Stock)
of Common Stock as a result of such dividend or distribution, and the Exercise
Price shall be adjusted so that the aggregate amount payable for the purchase of
all the Warrant Shares issuable hereunder immediately after the record date for
such dividend or distribution shall equal the aggregate amount so payable
immediately before such record date.
5.3 Distributions of Other Securities or Property.
(a) Other Securities. If the Company distributes to holders
of its Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any of its securities (other than Common Stock or
securities convertible into Common Stock) or any evidence of indebtedness, then
in each case, the number of Warrant Shares thereafter purchasable upon exercise
of this Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable by a fraction, of which the numerator shall be the then
Market Price Per Share of Common Stock (as determined pursuant to Section 3) on
the record date mentioned below in this Section 5.3(a), and of which the
denominator shall be the then Market Price Per Share of Common Stock on such
record date, less the then fair value (as determined by the Board of Directors
of the Company in good faith) of the portion of the shares of the Company's
capital stock or evidences of indebtedness distributable with respect to each
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective retroactively as of the record
date for the determination of stockholders entitled to receive such
distribution.
(b) Property. If the Company distributes to the holders of
its Common Stock, other than as a part of its dissolution or liquidation or the
winding up of its affairs, any of its assets (including cash), the Exercise
Price per Warrant Share shall be reduced, without any further action by the
parties hereto, by the Per Share Value (as hereinafter defined) of the dividend
or distribution. For the purposes of this Section 5.3(b), the "Per Share Value"
of any dividend or distribution other than cash shall be equal to the fair
market value of such non-cash distribution on each share of Common Stock as
determined in good faith by the Board of Directors of the Company; for dividends
or distributions of cash, the Per Share Value thereof shall be the cash
distributed per share of Common Stock.
5.4 Rights Offering. If the Company offers rights or warrants to
persons which entitle them to subscribe to or purchase Common Stock or
securities convertible into Common Stock, the Company shall give written notice
of any such proposed offering to the Holder at least fifteen days prior to the
proposed record date in order to permit the Holder to exercise this Warrant on
or before such record date. There shall be no adjustment in the number of shares
of Common Stock for which this Warrant may be exercised, or in the Exercise
Price, by virtue of any such distribution pursuant to this Section 5.4.
5.5 Merger, Sale of Assets. If at any time while this Warrant, or
any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the
4
<PAGE> 5
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash, or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 5. The
foregoing provisions of this Section 5.5 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. In all events, appropriate adjustment (as determined
in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder after the transaction, to the end that the provisions of
this Warrant shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
exercise of this Warrant.
5.6 Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, shall change
any of the securities as to which purchase rights under this Warrant exist, by
reclassification of securities or otherwise, into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 5.
5.7 Liquidation, etc. If the Company shall, at any time before the
expiration of this Warrant, dissolve, liquidate or wind up its affairs, or
otherwise declare a dividend, or make a distribution to the holders of its
Common Stock generally, whether in cash, property or assets of any kind,
including any dividend payable in stock or securities of any other issuer owned
by the Company (excluding regularly payable cash dividends declared from time to
time by the Company's Board of Directors or any dividend or distribution
referred to in Section 5.2 or Section 5.3), the Exercise Price shall be reduced,
without any further action by the parties hereto, by the Per Share Value (as
hereinafter defined) of the dividend. For purposes of this Section 5.7, the "Per
Share Value" of a cash dividend or other distribution shall be the dollar amount
of the distribution on each share of Common Stock and the "Per Share Value" of
any dividend or distribution other than cash shall be equal to the fair market
value of such non-cash distribution on each share of Common Stock as determined
in good faith by the Board of Directors of the Company.
5.8 Adjustment of Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of the Warrant is adjusted, the Exercise
Price with respect to the Warrant
5
<PAGE> 6
Shares shall be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of the Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Warrant
Shares so purchasable immediately thereafter.
5.9 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Exercise Price of the
Warrant Shares is adjusted as provided herein, the Company shall mail to the
Holder a notice of such adjustment or adjustments, prepared and signed by the
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment, and the computation by which such adjustment
was made.
6. Notices to Holder. So long as this Warrant shall be outstanding (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any similar
rights or (c) if there shall be any capital reorganization of the Company in
which the Company is not the surviving entity, recapitalization of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or other transfer of all or substantially all
of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed to the Holder, at least twenty days prior to
the relevant date described below (or such shorter period as is reasonably
possible if twenty days is not reasonably possible), a notice containing a
description of the proposed action and stating the date or expected date on
which a record of the Company's stockholders is to be taken for the purpose of
any such dividend, distribution of rights, or such reclassification,
reorganization, consolidation, merger, conveyance, lease or transfer,
dissolution, liquidation or winding up is to take place, the effect of the
action, to the extent such effect may be known on the date of such notice, on
the Exercise Price and the kind and amount of shares of stock or other
securities or property deliverable on the exercise of the Warrant, and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event. All such notices shall
be deemed to have been received (i) in the case of personal delivery, on the
date of such delivery, and (ii) in the case of mailing, on the third business
day following the date of such mailing.
7. Transfer or Loss of Warrant.
7.1 Transfer. This Warrant may be transferred, exercised,
exchanged or assigned ("transferred"), in whole or in part, subject to the
provisions of this Section 7.1. The Holder shall have the right to transfer all
or a part of this Warrant and all or part of the Warrant Shares. The Company
shall register on its books any transfer of the Warrant, upon surrender of same
to the Company with a written instrument of transfer duly executed by the
registered Holder or by a duly authorized attorney. Upon any such registration
of a transfer, new Warrant(s) shall be issued to the transferee(s) and the
surrendered Warrant shall be cancelled by the Company. A Warrant may also be
exchanged, at the option of the Holder, for one or more new Warrants
representing the aggregate number of Warrant
6
<PAGE> 7
Shares evidenced by the Warrant surrendered. This Warrant and the Warrant Shares
or any other securities ("Other Securities") received upon exercise of this
Warrant or the conversion of the Warrant Shares shall be subject to restrictions
on transferability unless registered under the Securities Act, or unless an
exemption from registration is available. Until this Warrant and the Warrant
Shares are so registered, this Warrant and any certificate for Warrant Shares
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
stating that this Warrant or the Warrant Shares may not be sold, transferred or
otherwise disposed of unless, in the opinion of counsel satisfactory to the
Company, which may be counsel to the Company, that the Warrant or the Warrant
Shares may be transferred without such registration. This Warrant and the
Warrant Shares may also be subject to restrictions on transferability under
applicable state securities or blue sky laws. Until the Warrant and the Warrant
Shares are registered under the Securities Act, the Holder shall reimburse the
Company for its expenses, including attorneys' fees, incurred in connection with
any transfer or assignment, in whole or in part, of this Warrant or any Warrant
Shares.
7.2 Compliance with Laws. Until this Warrant or the Warrant Shares
are registered under the Securities Act, the Company may require, as a condition
of transfer of this Warrant or the Warrant Shares that the transferee (who may
be the Holder in the case of an exchange) represent that the securities being
transferred are being acquired for investment purposes and for the transferee's
own account and not with a view to or for sale in connection with any
distribution of the security. The Company may also require that the transferee
provide written information adequate to establish that the transferee is an
"accredited investor" within the meaning of Regulation D issued under the
Securities Act, or otherwise meets all qualifications necessary to comply with
exemptions to the Securities Act, all as determined by counsel to the Company.
7.3 Loss of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct its transfer
agent to execute and deliver, a new Warrant of like tenor and date, any such
lost, stolen or destroyed Warrant thereupon shall become void.
8. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or otherwise, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times, in good
faith, take all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
7
<PAGE> 8
9. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or three (3) business
days after mailing if mailed by registered or certified mail, postage prepaid,
addressed in the name and at the address of such Holder appearing on the records
of the Company. Notices or other communications to the Company shall be deemed
to have been sufficiently given if delivered by hand or three (3) business days
after mailing if mailed by registered or certified mail, postage prepaid, to the
Company at:
Bristol Retail Solutions, Inc.
5000 Birch Street, Suite 205
Newport Beach, California 92660
Either party may change the address to which notices shall be given by notice
pursuant to this Section 9.
10. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement
dated March 18, 1998, between the Company and the Buyer (as identified therein).
11. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has executed this Warrant as of March
18, 1998.
BRISTOL RETAIL SOLUTIONS, INC.,
a Delaware corporation
-------------------------------------
Richard H. Walker,
President and Chief Executive Officer
9
<PAGE> 10
Annex A
[FORM OF EXERCISE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase______ shares of Common
Stock and herewith tenders payment for such shares of Common Stock in the amount
of $__________ by bank check made payable to "Bristol Retail Solutions, Inc."
The undersigned requests that a certificate for such shares of Common Stock be
registered in the name of _____________________, whose address is
____________________________. If such number of shares of Common Stock is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
the shares of Common Stock be registered in the name of _________________, whose
address is _______________________, and that such Warrant Certificate be
delivered to _____________________, whose address is
_______________________________.
Dated:
Signature:__________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant Certificate.)
___________________________________
(Insert Social Security or
Taxpayer Identification
Number of Holder.)
<PAGE> 1
EXHIBIT 4.6
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
Warrant to Purchase
25,000 Shares of
Common Stock
As Herein Described
WARRANT TO PURCHASE COMMON STOCK OF
BRISTOL RETAIL SOLUTIONS, INC.
This is to certify that, for value received, Wharton Capital Partners
Ltd., or registered assigns (in each case, the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant (the "Warrant"), from
Bristol Retail Solutions, Inc. (the "Company"), having its principal place of
business at 5000 Birch Street, Suite 205, Newport Beach, California 92660, at
any time during the period from the date hereof (the "Commencement Date") to
5:00 p.m., California time, until March 18, 2003 (the "Expiration Date"), at
which time this Warrant shall expire and become void, Twenty-Five Thousand
(25,000) shares ("Warrant Shares") of the Company's Common Stock (the "Common
Stock"). This Warrant shall be exercisable at $3.556 per share (the "Exercise
Price"). The number of shares of Common Stock to be received upon exercise of
this Warrant and the Exercise Price shall be adjusted from time to time as set
forth below. This Warrant also is subject to the following terms and conditions:
1. Exercise of Warrant.
1.1 This Warrant may be exercised in full at any time from and
after the date hereof and before the Expiration Date, but if such date is a day
on which federal or state chartered banking institutions located in the State of
California are authorized to close, then on the next succeeding day which shall
not be such a day. Exercise shall be by presentation and surrender to the
Company at its principal office, or at the office of any transfer agent
designated by the Company, of (i) this Warrant, (ii) the attached exercise form
properly executed, and (iii) a bank check for the Exercise Price for the number
of Warrant Shares specified in the exercise form (except as provided in Section
1.2). If this Warrant is exercised in part only, the Company or its transfer
agent shall, upon surrender of the Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder to purchase the remaining number of Warrant
Shares purchasable hereunder. Upon receipt by the Company of this Warrant in
proper form
<PAGE> 2
for exercise, accompanied by payment as aforesaid, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be
actually delivered by the Holder.
1.2 Exercise by Exchange. In addition to and without limiting the
rights of the Holder under the terms hereof, at the Holder's option this Warrant
may be exercised during the term specified above by being exchanged in whole or
in part prior to its expiration for a number of shares of Common Stock having an
aggregate fair market value on the date of such exercise equal to the difference
between (x) the fair market value of the number of shares of Common Stock
subject to this Warrant designated as being exercised by the Holder hereof on
the date of the exercise and (y) the aggregate Exercise Price for such shares in
effect at such times. The following diagram illustrates how many shares would
then be issued upon exercise pursuant to this Section 1.2:
Let: FMV = Fair market value per share at date of exercise.
PSP = Per share Exercise Price at date of exercise.
N = Number of shares desired to be exercised.
X = Number of shares issued after exercise.
Therefore: X = (FMV)(N)-(PSP)(N)
-----------------
FMV
No payment of any cash or other consideration to the Company shall
be required from the Holder of this Warrant in connection with any exercise of
this Warrant by exchange pursuant to this Section 1.2. Such exchange shall be
effective upon the date of receipt by the Company of the original Warrant
surrendered for cancellation and a written request from the Holder that the
exchange pursuant to this section be made, or at such later date as may be
specified in such request.
For the purposes of this Warrant, the "fair market value" of any
number of shares of Common Stock shall mean such number of shares multiplied by
the Market Price Per Share, as determined pursuant to Section 3 below.
Notwithstanding the foregoing, the Holder of this Warrant shall
only be entitled to exercise this Warrant in the manner provided in this Section
1.2, an aggregate of four (4) times during the term specified herein.
2. Reservation of Shares. The Company shall, at all times until the
expiration of this Warrant, reserve for issuance and delivery upon exercise of
this Warrant the number of Warrant Shares which shall be required for issuance
and delivery upon exercise of this Warrant. The Company covenants that the
shares of Common Stock issuable on exercise of the Warrant shall be duly and
validly issued and fully paid and non-assessable and free of liens, charges and
all taxes with respect to the issue thereof, and that at such time as the
Warrant Shares may be sold, without registration,
2
<PAGE> 3
pursuant to the provisions of Rule 144 of the Securities Act of 1933, as amended
(the "Securities Act"), such shares shall be listed on each national securities
exchange and/or NASDAQ, if any, on which the other shares of outstanding Common
Stock of the Company are then listed.
3. Fractional Interests. The Company shall not issue any fractional
shares or scrip representing fractional shares upon the exercise or exchange of
this Warrant. With respect to any fraction of a share resulting from the
exercise or exchange hereof, the Company shall pay to the Holder an amount in
cash equal to such fraction multiplied by the current fair market value per
share of Common Stock (herein, the "Market Price Per Share"), determined as
follows:
3.1 If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange or is
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the current fair market value shall be the last reported sale
price of the Common Stock on such exchange or NASDAQ on three (3) trading days
prior to the date of exercise of this Warrant, or if no such sale is made on any
of those days, the mean of the closing bid and asked prices for such days on
such exchange or NASDAQ;
3.2 If the Common Stock is not so listed or admitted to unlisted
trading privileges or quoted on NASDAQ, the current fair market value shall be
the mean of the last bid and asked prices reported on the three trading days
prior to the date of the exercise of this Warrant (i) by NASDAQ, or (ii) if
reports are unavailable under clause (i) above, by the National Quotation Bureau
Incorporated; or
3.3 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
fair market value shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the Company's Board of Directors
in good faith.
4. No Rights as Stockholders. This Warrant shall not entitle the Holder
to any rights as a stockholder of the Company, either at law or in equity. The
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
5. Adjustments.
5.1 Subdivision or Combination of Shares. If the Company is
recapitalized through the subdivision or combination of its outstanding shares
of Common Stock into a larger or smaller number of shares, the number of Warrant
Shares shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all of the Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
5.2 Dividends in Common Stock or Securities Convertible into
Common Stock. If the Company declares a dividend or distribution on Common Stock
payable in Common Stock or securities convertible into Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of
3
<PAGE> 4
Common Stock shall be entitled to receive such dividend, in proportion to the
increase in the number of outstanding shares (and shares of Common Stock
issuable upon conversion of all such securities convertible into Common Stock)
of Common Stock as a result of such dividend or distribution, and the Exercise
Price shall be adjusted so that the aggregate amount payable for the purchase of
all the Warrant Shares issuable hereunder immediately after the record date for
such dividend or distribution shall equal the aggregate amount so payable
immediately before such record date.
5.3 Distributions of Other Securities or Property.
(a) Other Securities. If the Company distributes to holders
of its Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any of its securities (other than Common Stock or
securities convertible into Common Stock) or any evidence of indebtedness, then
in each case, the number of Warrant Shares thereafter purchasable upon exercise
of this Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable by a fraction, of which the numerator shall be the then
Market Price Per Share of Common Stock (as determined pursuant to Section 3) on
the record date mentioned below in this Section 5.3(a), and of which the
denominator shall be the then Market Price Per Share of Common Stock on such
record date, less the then fair value (as determined by the Board of Directors
of the Company in good faith) of the portion of the shares of the Company's
capital stock or evidences of indebtedness distributable with respect to each
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective retroactively as of the record
date for the determination of stockholders entitled to receive such
distribution.
(b) Property. If the Company distributes to the holders of
its Common Stock, other than as a part of its dissolution or liquidation or the
winding up of its affairs, any of its assets (including cash), the Exercise
Price per Warrant Share shall be reduced, without any further action by the
parties hereto, by the Per Share Value (as hereinafter defined) of the dividend
or distribution. For the purposes of this Section 5.3(b), the "Per Share Value"
of any dividend or distribution other than cash shall be equal to the fair
market value of such non-cash distribution on each share of Common Stock as
determined in good faith by the Board of Directors of the Company; for dividends
or distributions of cash, the Per Share Value thereof shall be the cash
distributed per share of Common Stock.
5.4 Rights Offering. If the Company offers rights or warrants to
persons which entitle them to subscribe to or purchase Common Stock or
securities convertible into Common Stock, the Company shall give written notice
of any such proposed offering to the Holder at least fifteen days prior to the
proposed record date in order to permit the Holder to exercise this Warrant on
or before such record date. There shall be no adjustment in the number of shares
of Common Stock for which this Warrant may be exercised, or in the Exercise
Price, by virtue of any such distribution pursuant to this Section 5.4.
5.5 Merger, Sale of Assets. If at any time while this Warrant, or
any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the
4
<PAGE> 5
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash, or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer that a holder of the shares deliverable
upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 5. The
foregoing provisions of this Section 5.5 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. In all events, appropriate adjustment (as determined
in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder after the transaction, to the end that the provisions of
this Warrant shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
exercise of this Warrant.
5.6 Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, shall change
any of the securities as to which purchase rights under this Warrant exist, by
reclassification of securities or otherwise, into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 5.
5.7 Liquidation, etc. If the Company shall, at any time before the
expiration of this Warrant, dissolve, liquidate or wind up its affairs, or
otherwise declare a dividend, or make a distribution to the holders of its
Common Stock generally, whether in cash, property or assets of any kind,
including any dividend payable in stock or securities of any other issuer owned
by the Company (excluding regularly payable cash dividends declared from time to
time by the Company's Board of Directors or any dividend or distribution
referred to in Section 5.2 or Section 5.3), the Exercise Price shall be reduced,
without any further action by the parties hereto, by the Per Share Value (as
hereinafter defined) of the dividend. For purposes of this Section 5.7, the "Per
Share Value" of a cash dividend or other distribution shall be the dollar amount
of the distribution on each share of Common Stock and the "Per Share Value" of
any dividend or distribution other than cash shall be equal to the fair market
value of such non-cash distribution on each share of Common Stock as determined
in good faith by the Board of Directors of the Company.
5.8 Adjustment of Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of the Warrant is adjusted, the Exercise
Price with respect to the Warrant
5
<PAGE> 6
Shares shall be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of the Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Warrant
Shares so purchasable immediately thereafter.
5.9 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Exercise Price of the
Warrant Shares is adjusted as provided herein, the Company shall mail to the
Holder a notice of such adjustment or adjustments, prepared and signed by the
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment, and the computation by which such adjustment
was made.
6. Notices to Holder. So long as this Warrant shall be outstanding (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any similar
rights or (c) if there shall be any capital reorganization of the Company in
which the Company is not the surviving entity, recapitalization of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or other transfer of all or substantially all
of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed to the Holder, at least twenty days prior to
the relevant date described below (or such shorter period as is reasonably
possible if twenty days is not reasonably possible), a notice containing a
description of the proposed action and stating the date or expected date on
which a record of the Company's stockholders is to be taken for the purpose of
any such dividend, distribution of rights, or such reclassification,
reorganization, consolidation, merger, conveyance, lease or transfer,
dissolution, liquidation or winding up is to take place, the effect of the
action, to the extent such effect may be known on the date of such notice, on
the Exercise Price and the kind and amount of shares of stock or other
securities or property deliverable on the exercise of the Warrant, and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event. All such notices shall
be deemed to have been received (i) in the case of personal delivery, on the
date of such delivery, and (ii) in the case of mailing, on the third business
day following the date of such mailing.
7. Transfer or Loss of Warrant.
7.1 Transfer. This Warrant may be transferred, exercised,
exchanged or assigned ("transferred"), in whole or in part, subject to the
provisions of this Section 7.1. The Holder shall have the right to transfer all
or a part of this Warrant and all or part of the Warrant Shares. The Company
shall register on its books any transfer of the Warrant, upon surrender of same
to the Company with a written instrument of transfer duly executed by the
registered Holder or by a duly authorized attorney. Upon any such registration
of a transfer, new Warrant(s) shall be issued to the transferee(s) and the
surrendered Warrant shall be cancelled by the Company. A Warrant may also be
exchanged, at the option of the Holder, for one or more new Warrants
representing the aggregate number of Warrant
6
<PAGE> 7
Shares evidenced by the Warrant surrendered. This Warrant and the Warrant Shares
or any other securities ("Other Securities") received upon exercise of this
Warrant or the conversion of the Warrant Shares shall be subject to restrictions
on transferability unless registered under the Securities Act, or unless an
exemption from registration is available. Until this Warrant and the Warrant
Shares are so registered, this Warrant and any certificate for Warrant Shares
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
stating that this Warrant or the Warrant Shares may not be sold, transferred or
otherwise disposed of unless, in the opinion of counsel satisfactory to the
Company, which may be counsel to the Company, that the Warrant or the Warrant
Shares may be transferred without such registration. This Warrant and the
Warrant Shares may also be subject to restrictions on transferability under
applicable state securities or blue sky laws. Until the Warrant and the Warrant
Shares are registered under the Securities Act, the Holder shall reimburse the
Company for its expenses, including attorneys' fees, incurred in connection with
any transfer or assignment, in whole or in part, of this Warrant or any Warrant
Shares.
7.2 Compliance with Laws. Until this Warrant or the Warrant Shares
are registered under the Securities Act, the Company may require, as a condition
of transfer of this Warrant or the Warrant Shares that the transferee (who may
be the Holder in the case of an exchange) represent that the securities being
transferred are being acquired for investment purposes and for the transferee's
own account and not with a view to or for sale in connection with any
distribution of the security. The Company may also require that the transferee
provide written information adequate to establish that the transferee is an
"accredited investor" within the meaning of Regulation D issued under the
Securities Act, or otherwise meets all qualifications necessary to comply with
exemptions to the Securities Act, all as determined by counsel to the Company.
7.3 Loss of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct its transfer
agent to execute and deliver, a new Warrant of like tenor and date, any such
lost, stolen or destroyed Warrant thereupon shall become void.
8. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or otherwise, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times, in good
faith, take all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
7
<PAGE> 8
9. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or three (3) business
days after mailing if mailed by registered or certified mail, postage prepaid,
addressed in the name and at the address of such Holder appearing on the records
of the Company. Notices or other communications to the Company shall be deemed
to have been sufficiently given if delivered by hand or three (3) business days
after mailing if mailed by registered or certified mail, postage prepaid, to the
Company at:
Bristol Retail Solutions, Inc.
5000 Birch Street, Suite 205
Newport Beach, California 92660
Either party may change the address to which notices shall be given by notice
pursuant to this Section 9.
10. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement
dated March 18, 1998, between the Company and the Buyer (as identified therein).
11. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has executed this Warrant as of March
18, 1998.
BRISTOL RETAIL SOLUTIONS, INC.,
a Delaware corporation
-------------------------------------
Richard H. Walker,
President and Chief Executive Officer
9
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Bristol Retail
Solutions, Inc. for the registration of 1,817,275 shares of its common stock and
to the incorporation by reference therein of our report dated March 27, 1997,
with respect to the consolidated financial statements of Bristol Retail
Solutions, Inc. included in its Annual Report for the year ended December 31,
1996; of our report dated March 5, 1997, with respect to the financial
statements of Automated Register Systems, Inc. included in its Form 8-K/A dated
March 14, 1997; and of our report dated July 15, 1997, with respect to the
financial statements of Electronic Business Machines, Inc. included in its Form
8-K/A dated August 12, 1997 filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Orange County, California
April 17, 1998
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EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Bristol Retail Solutions, Inc. and subsidiaries on Form S-3 of our report dated
March 27, 1998, appearing in the Annual Report on Form 10-KSB of Bristol Retail
Solutions, Inc. for the year ended December 31, 1997 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
Costa Mesa, California
April 16, 1998
