<PAGE>
As filed with the Securities and Exchange Commission on December 3, 1997
Registration No. 333-35249
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
AMENDMENT NO. 1
TO
FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
PROSOFT I-NET SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
2333 North Broadway, Suite 300
Santa Ana, California 92706
(714) 953-1200
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Executive Offices)
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<S> <C> <C>
Nevada 8243 87-0448639
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
KEITH D. FREADHOFF
Chief Executive Officer
Prosoft I-Net Solutions, Inc.
2333 North Broadway, Suite 300
Santa Ana, California 92706
(714) 953-1200
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
____________________
Copy to:
William L. Twomey
Hewitt & McGuire, LLP
19900 MacArthur Boulevard, Suite 1050
Irvine, California 92612
____________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
____________________
If only the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
Pursuant to Rule 429 of the Securities Act of 1933, the Prospectus contained
herein is a combined Prospectus relating to securities registered hereby and
under Registration Statement No. 333-11247 and Registration Statement No. 333-
28993.
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____________________
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Class Amount Maximum Maximum
of Securities to be Offering Price Aggregate Amount of
to be Registered Registered Per Share(1) Offering Price(1) Registration Fee(2)
=================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share(3) 902,305 $11.125 $10,038,143 $3,042
=================================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) on the basis of the last trade price of
the Company's Common Stock on November 28, 1997, as reported by the NASDAQ
SmallCap Market.
(2) This registration fee relates to an increase of 902,305 shares in the number
of securities being registered by this pre-effective amendment. A filing
fee of $6,458 was previously paid with the initial filing of this
Registration Statement registering 1,894,258 shares.
(3) An additional 3,387,291 shares of Common Stock to be sold by stockholders
(including 379,747 shares issuable upon exercise of outstanding Common Stock
purchase warrants) have been registered under an earlier Registration
Statement on Form S-1 (File No. 333-11247, filing fee paid $22,192.75) which
was initially declared effective by the Securities and Exchange Commission
("SEC") on November 27, 1996, and an additional 595,664 shares of Common
Stock to be sold by stockholders have been registered under another
Registration Statement on Form S-1 (File No. 333-28993, filing fee paid
$1,174) which was initially declared effective by the SEC on July 2, 1997.
Both of these Registration Statements are being amended by filing of this
Registration Statement pursuant to Rule 429. Accordingly, all three
Registration Statements use the Prospectus that is a part of this
Registration Statement.
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 become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
<PAGE>
PROSPECTUS
- -------------------------------------------------------------------------------
PROSOFT I-NET SOLUTIONS, INC.
5,112,732 of Common Stock
349,999 Shares of Common Stock Issuable Upon Exercise
of Common Stock Purchase Warrants
- -------------------------------------------------------------------------------
This Prospectus relates to 5,462,731 Shares of Common Stock, par value $.001
per share, (the "Shares") of Prosoft I-Net Solutions, Inc., a Nevada corporation
(the "Company" or "Prosoft"), including 5,112,732 currently outstanding Shares
and 349,999 Shares issuable upon exercise of currently outstanding common stock
purchase warrants (the "Warrants"). The Shares may be offered and sold from time
to time by and for the account of one or more of the stockholders (the "Selling
Stockholders") of the Company identified under the caption "Selling
Stockholders." The Company will receive no part of the proceeds of such sales,
with the exception of the exercise price of such Warrants as may be exercised.
The Company will bear all of the expenses incurred in connection with the
registration of the Shares.
The Shares offered by this Prospectus may be sold from time to time by the
Selling Stockholders. The distribution of the Shares offered hereby may be
effected in one or more transactions that may take place in the over-the-counter
market, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such Shares
as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by the Selling Stockholders.
The Selling Stockholders and intermediaries through whom such Shares are sold
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Shares offered, and any
profits realized or commission received may be deemed underwriting compensation.
The Company has agreed to indemnify the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act.
The Company's Common Stock is currently traded on the NASDAQ SmallCap Market
under the symbol "POSO". On November 28, 1997, the closing bid price for the
Company's Common Stock was $11.125 per share.
____________________
THESE SHARES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY
INVESTORS WHO CANNOT AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
COMMENCING ON PAGE 6 OF THIS PROSPECTUS.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is _________, 1997.
1
<PAGE>
NO 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, ANY SELLING STOCKHOLDER OR ANY
OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
TABLE OF CONTENTS
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PAGE
----
<S> <C>
Available Information............................. 2
Incorporation of Certain Documents by Reference... 3
Forward-Looking Statements........................ 4
The Company....................................... 4
The Offering...................................... 5
Risk Factors...................................... 6
Use of Proceeds................................... 9
Selling Stockholders.............................. 9
Plan of Distribution.............................. 14
Legal Matters..................................... 15
Experts........................................... 15
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, NW, Room 1024,
Washington, D.C. 20549 and at the Commission's regional offices at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained at prescribed rates upon request from the Public Reference
Section of the Commission at 450 Fifth Street, NW, Washington, D.C. 20549. The
Common Stock of the Company is currently traded in the over-the-counter market
and is quoted on NASDAQ, SmallCap Market, and such reports, proxy statements and
other information can also be inspected at the offices of the National
Association of Securities Dealers, Inc., Reports Section, 1735 K Street N.W.,
Washington, D.C. 20006. In addition, such materials filed electronically by the
Company with the Commission are available at the Commission's World Wide Web
Site at http://www.sec.gov.
The Company has filed with the Commission three Registration Statements (Nos.
333-11247, 333-28993 and 333-35249) under the Securities Act with respect to the
Shares. This Prospectus, which
2
<PAGE>
constitutes a part of those Registration Statements, omits certain information
contained in said Registration Statements as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Company's Common Stock, reference is made to such Registration
Statements, including the exhibits thereto. Statements contained herein
concerning the contents of any contract or any other document are not
necessarily complete, and in each instance, reference is made to such contract
or other document filed with the Commission as exhibits to the Registration
Statements, or otherwise, each such statement being qualified in all respects by
such reference. The Registration Statements, including exhibits and schedules
thereto, may be inspected and copied as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents which have been filed with the Commission pursuant to the
Exchange Act and made a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1997;
(b) The Company's Proxy Statement dated November 20, 1997 related
to the Annual Meeting of Stockholders to be held on December 18, 1997;
and
(c) The description of the Company Common Stock as contained in
the Company's Registration Statement on Form 8-A dated October 11,
1996.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference into
this Prospectus and to be made a part hereof from the date of filing of such
document. 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 which also is incorporated or 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 furnish without charge, upon written or oral request,
to each person, including any beneficial owner, to whom this Prospectus is
delivered, a copy of any or all of the documents 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 Prosoft I-Net Solutions, Inc., 2333 North Broadway, Suite
300, Santa Ana, California 92706, Attention: Investor Relations. Telephone
number (714) 953-1200.
3
<PAGE>
FORWARD-LOOKING STATEMENTS
This Registration Statement contains statements relating to future
results of the Company (including certain projections and business trends) that
are "forward-looking statements." Actual results may differ materially from the
results discussed in or implied by the forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, which involves risks and uncertainties. Factors that might cause such a
difference include, but are not limited to, those set forth under "Risk Factors"
and detailed from time to time in the filings of the Company with the
Commission.
THE COMPANY
The Company is engaged in the business of training individuals in
small, medium and large organizations in Internet and Intranet technologies,
with a current emphasis on Netscape- and Microsoft-based Internet/Intranet
products and solutions. In addition, Prosoft is a certified Microsoft Authorized
Technical Education Center, a certified Private Post Secondary Institution in
the State of California, and an approved recipient of Job Training Partnership
Act funding, the last of which enables the Company to recruit, train and hire
its own advanced technology instructor staff. Prosoft also develops proprietary
Internet/Intranet courseware and offers customized, on-line, hands-on and
instructor-led Internet/Intranet-related courses for end-users, system engineers
and developers. The Company expects a significant majority of its revenues will
come from the delivery of commercial Internet/Intranet training to the employees
of organizations ranging from Fortune 1000 corporations and governmental
agencies to small entrepreneurial enterprises throughout the United States.
The business of the Company was initially operated as a sole
proprietorship (the "Proprietorship") beginning in February 1995. In December
1995, Pro-Soft Development Corp., a California corporation ("Old ProSoft") was
incorporated and acquired the business from the Proprietorship effective January
1, 1996. In March 1996, the Company entered into a reorganization (the
"Reorganization") with Old ProSoft and the Old ProSoft shareholders, whereby (i)
the Old ProSoft shareholders received shares of Common Stock of the Company in
exchange for their shares of Old ProSoft, (ii) the Company changed its name to
ProSoft Development, Inc., and (iii) Old ProSoft became a wholly-owned
subsidiary of the Company. The Company changed its name to Prosoft I-Net
Solutions, Inc. in October 1996. The Company was incorporated in Nevada in March
1985 as Tel-Fed, Inc. From its incorporation until the Reorganization, the
Company had no significant operations.
Under applicable accounting rules, for financial statement purposes,
the Reorganization is required to be accounted for as an acquisition of the
Company by Old ProSoft, with the additional shares held by the Company's prior
shareholders reflected as a recapitalization of Old ProSoft. As a result, the
consolidated financial statements incorporated by reference in this Prospectus
for the Company reflect, for the period prior to the Reorganization, the
operations of Old ProSoft. Financial statements of the Proprietorship are also
incorporated by reference herein. The Company's executive offices are located at
2333 North Broadway, Suite 300, Santa Ana, California 92706 and its telephone
number is (714) 953-1200.
4
<PAGE>
THE OFFERING
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<CAPTION>
<S> <C>
Common Stock Offered by the Selling Stockholders......... 5,462,731 shares(1)
Common Stock to be outstanding after this Offering....... 11,595,188 shares(1)(2)
Use of Proceeds.......................................... Other than the exercise price of such of the
Warrants as may be exercised, none of the
proceeds from the sale of shares by the Selling
Stockholders will be received by the Company.
The gross proceeds to the Company in the event
that all of the Warrants are exercised would be
approximately $1,959,995. Any proceeds
received by the Company will be utilized for
working capital and general corporate purposes.
NASDAQ SmallCap Symbol................................... POSO
____________________
(1) Includes 349,999 shares issuable upon exercise of the Warrants.
(2) Does not include 1,958,305 shares reserved for issuance upon the exercise
of outstanding stock options, including 778,800 options granted subject to
stockholder approval at the Company's Annual Meeting on December 18, 1997
</TABLE>
5
<PAGE>
RISK FACTORS
INVESTMENT IN THE COMPANY INVOLVES A HIGH DEGREE OF RISK AND THE
SECURITIES OFFERED HEREBY SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD
TO LOSE THEIR ENTIRE INVESTMENT. IN ADDITION TO THE OTHER FACTORS SET FORTH IN
THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY EVALUATE THE FOLLOWING
RISK FACTORS AND THOSE SET FORTH IN THE INFORMATION INCORPORATED HEREIN BY
REFERENCE BEFORE MAKING AN INVESTMENT DECISION.
Extremely Limited Operating History
The Company has an extremely limited operating history, which makes it
difficult to predict future operating results. Although the Company was formed
in 1985, from its incorporation until its acquisition of Old ProSoft in March
1996, it had no significant operations. The business of the Company was only
begun in February 1995 where it was run as the Proprietorship until its
acquisition by Old ProSoft in January 1996. The first Company-operated
Internet/Intranet Training and Resource Center ("Training Center") was not
opened until late 1995. As a result, there is little financial information
concerning the business of the Company of the type commonly used by investors to
evaluate a potential investment. In addition, certain aspects of the Company's
business are relatively new and have not yet been fully tested in the
marketplace. The Company has achieved only limited revenues to date. The
Company's ability to generate significant revenues in the future is subject to
uncertainty, particularly with respect to the Internet/Intranet training on
which it intends to focus. There can be no assurances that the Company will be
able to address any of those challenges, that its activities will be successful
or that significant revenues or profits will result from these activities.
Potential Fluctuations in Operating Results and Expectation of Continuing
Losses
As a result of the Company's extremely limited operating history as
well as the very recent emergence of the market addressed by the Company, the
Company has neither internal nor industry-based historical financial data for
any significant period of time upon which to base planned operating revenues and
expenses. The Company has incurred significant net losses to date and expects to
continue to incur losses on a quarterly basis through at least the second
quarter of fiscal 1998. The Company expects to be subject to some seasonal
fluctuations in its operating results, with revenues in November and December
expected to be lower because of decreased enrollment in its classes due to
holidays. However, the Company is unable to predict the extent of such seasonal
fluctuations with certainty due to its limited operating history.
Uncertainty of Rapidly Evolving Market
The market for Internet/Intranet products and services has only
recently begun to develop and is rapidly evolving. The Company and its prospects
must be considered in light of the risks, costs and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in the new and rapidly evolving Internet market. In order to be
successful, the Company must, among other things, continue to attract, retain
and motivate qualified training personnel, successfully implement its
Internet/Intranet training programs, open new Training Centers as the market
demands, respond to competitive developments and successfully develop its
internal infrastructure, particularly sales, marketing and administrative
personnel and its accounting system. Moreover, due to
6
<PAGE>
the intense competition in the emerging markets addressed by the Company, the
Company must seek to expand all aspects of its business rapidly, which increases
the challenges facing the Company, making it more difficult for the Company to
recover from business errors.
Future Capital Requirements and Uncertainty of Future Funding
Since inception, the Company has been dependent on outside financing to
fund its growth. The Company raised approximately $27 million from the private
placement of 2,489,922 shares of Common Stock in February through April 1997 and
approximately $8.5 million for the private placement of 812,305 shares of Common
Stock in November 1997. The Company anticipates that the proceeds from these
offerings will be sufficient to meet its needs for working capital expenditures
through at least fiscal 1998. However, the Company's long-term capital
requirements are dependent on numerous factors, including the rate at which new
Training Centers are opened, the profitability of existing Training Centers and
the acquisition and/or development of additional training tools.
Risk of Inability to Manage Rapid Growth and Attract Qualified Personnel
The Company is currently experiencing a period of rapid growth that has
placed, and could continue to place, a significant strain on the Company's
financial, management and other resources. The Company's ability to manage its
growth effectively will require it to continue to improve its operational,
financial and management information systems, and to attract, train, motivate,
manage and retain key employees. There can be no assurance that management of
the Company will be able to effectively manage the expansion of the Company's
operations or achieve the rapid execution necessary to fully exploit any
potential market opportunity for the Company's products and services. If the
Company's management becomes unable to manage growth effectively, the Company's
business, operating results and financial condition could be materially
adversely affected.
Need to Respond to Rapid Technological Change
The market for the Company's products and services is characterized by
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards. These market characteristics are
exacerbated by the emerging nature of the Internet market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. The Company's future success will depend in significant part on its
ability to continually and on a timely basis introduce new products, services
and technologies and to continue to improve the Company's products and services
in response to both evolving demands of the marketplace and competitive product
offerings.
Dependence on Strategic Affiliates
The Company has focused and expects to continue to focus on the development
of strategic relationships with key strategic affiliates such as Microsoft,
Netscape and other Internet and Intranet software developers. The Company's
success will depend in part on the success of those strategic affiliates and the
Company's ability to establish successful strategic relationships with other
entities. Although the Company has entered into informal arrangements with
several key strategic affiliates, the Company has not entered into any long-term
agreements with any such affiliates and no assurances can be given that such
relationships will be maintained.
7
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Highly Competitive Market
The higher education market is highly competitive. The Company is subject
to intense competition from a large number of public and private companies
providing training, many of which are older, larger and have greater financial
and personnel resources than the Company. In addition, the market for Internet
products and services has only recently begun to develop, is rapidly evolving
and is characterized by an increasing number of market entrants with competing
products and services. There can be no assurance that the Company will be able
to compete successfully against its current or future competitors or that
competition will not have a material adverse effect on the Company's business,
operating results and financial condition.
Limited Market for Securities of the Company; Possible Volatility of Stock Price
There is a limited trading market for the securities of the Company. The
Common Stock was approved for quotation on the NASDAQ SmallCap Market effective
December 6, 1996. Previously, trading, if any, in the Company's securities was
conducted in the over-the-counter market on the NASD OTC Electronic Bulletin
Board established for securities that do not meet NASDAQ listing requirements.
The market price for the Common Stock of the Company may be highly volatile
depending on various factors, including the general economy, stock market
conditions, announcements by the Company or its competitors, the trading volume
of the Common Stock, and other events or factors.
Shares Eligible for Future Sale
Future sales of Common Stock by existing stockholders pursuant to Rule 144
under the Securities Act, pursuant to this Registration Statement or otherwise
could have an adverse effect on the price of the Company's Common Stock. On
December 1, 1997, the Company had outstanding 11,245,189 shares of Common Stock,
a majority of which are "restricted securities" as defined in Rule 144 and which
may not be sold without registration under the Securities Act unless pursuant to
an applicable exemption therefrom. Over 7,900,000 of such shares are eligible
for sale under Rule 144, subject to the satisfaction of certain conditions,
although holders of approximately 3,500,000 of such shares have agreed not to
sell their shares under Rule 144 prior to January 15, 1998 without the prior
written consent of the Company. In addition, the Company has registered the sale
of up to 5,462,731 shares of Common Stock under the Registration Statements of
which this Prospectus is a part. The Company also has registered up to 1,792,500
shares issuable upon exercise of outstanding options to purchase Common Stock of
the Company held by employees and consultants of the Company. As of December 1,
1997, 1,160,270 of these options were exercisable. In addition, the Company has
granted options to acquire an additional 778,800 shares, subject to approval of
the Company's stockholders at the Company's Annual Meeting on December 18, 1997.
If approved, the Company intends to register the issuance of these shares,
282,757 of which will be immediately exercisable.
The Company has had a limited trading volume in its Common Stock to date.
Sales of substantial amounts of Common Stock of the Company under Rule 144, this
Registration Statement or otherwise could adversely affect the prevailing market
price of the Common Stock and could impair the Company's ability to raise
capital at that time through the sale of its securities.
8
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No Dividends
As of the date of this Prospectus, the Company has not paid any cash
dividends on its Common Stock and does not intend to declare any such dividends
in the foreseeable future. The Company's ability to pay dividends is subject to
limitations imposed by Nevada law. Under Nevada law, dividends may be paid to
the extent that the corporation's assets exceed its liabilities and it is able
to pay its debts as they become due in the usual course of business.
Effect of Anti-Takeover Provisions
The Company is subject to the anti-takeover provisions of Sections 78.411
through 78.444 of the Nevada Revised Statutes, which restrict certain
"combinations" with "interested stockholders" unless certain conditions are met.
In addition, the Company's Bylaws provide that the Company's Board of Directors
will be divided into three classes of directors serving staggered three-year
terms and eliminate the right of stockholders to act by written consent without
a meeting, unless such written consent is unanimous. All of the foregoing could
have the effect of delaying or deterring unsolicited takeover attempts and could
adversely affect prevailing market prices for the Company's Common Stock.
USE OF PROCEEDS
Other than the exercise price of such of the Warrants as may be exercised,
the Company will not receive any proceeds from the sale of Shares by the Selling
Stockholders. Holders of the Warrants are not obligated to exercise their
Warrants, and there can be no assurance that such holders will choose to
exercise all or any of such Warrants. The gross proceeds to the Company in the
event that all of the Warrants are exercised would be approximately $1,959,995.
Any proceeds received by the Company will be utilized for working capital and
general corporate purposes.
SELLING STOCKHOLDERS
All of the Shares offered by this Prospectus are being offered by the
Selling Stockholders for their own respective accounts. The following table sets
forth certain information as of December 1, 1997, with respect to the Selling
Stockholders:
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially Owned Covered Beneficially Owned
Prior to By after the
Name of Selling Stockholder Offering Prospectus Offering(1)
--------------------------- ------------------ ---------- ------------------
<S> <C> <C> <C>
AGAPE International Center of Truth 4,000(2) 4,000(2) 0
Alder, Susan 800(3) 800 0
Alhadeff, Victor D. 9,000 9,000 0
American Ports Consultants, Inc. 95,236(3) 95,236 0
Baker, Jason R. & Kelly JTWROS 333(3) 333 0
Bannister, Henry F. 3,500 3,500 0
Banyan Investment Co. 1,530(3) 1,530 0
Basson, David N. 1,858(3) 1,858 0
Beebe, R. Scott 50,000(3) 50,000 0
Betlem Service Corporation 9,524 9,524 0
Bev Partners 21,000 21,000 0
Biggs, John W., D.C.,P.C. Pension Plan & Trust 5,000 5,000 0
</TABLE>
9
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<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially Owned Covered Beneficially Owned
Prior to By after the
Name of Selling Stockholder Offering Prospectus Offering(1)
--------------------------- ------------------ ---------- ------------------
<S> <C> <C> <C>
Bodon, Michael G. 300(3) 300 0
Boyko, Jeffrey A., D.C., P.C. Pension Plan 3,000 3,000 0
Brades, Doreen 4,000(3) 4,000 0
Butler, Jeffrey D. 7,071(3) 7,071 0
Carter, Kathy 2,560(3) 2,560 0
Cecala, Enrico 25,000(3) 25,000 0
Chaffetz, Alex 10,800(3) 800 10,000(4)
Chaffetz, Jason E. & Julie Marie, Trust 3,600(3) 3,600 0
Chaffetz, John 20,000(3) 20,000 0
Clark Fork Medical Associates, P.C. 401(K)
Profit Sharing Plan 2,000 2,000 0
Cochran, Kirby D. 100,000(3) 50,000 50,000(4)
Common Sense Partners 14,286 14,286 0
Cook, Steve 600(3) 600 0
Corbin, Brooks A.(21) 121,833(3)(5) 9,333(6) 112,500(7)
Cord Capital LLC 6,000 6,000 0
Cox, Craig & Susan 5,000 5,000 0
Cranshire Capital L.P. 47,619 47,619 0
Crilly, Patrick J. 7,143(3) 7,143 0
Cudd & Co. 30,000 30,000 0
Cunningham, Joe N. 5,733(3) 5,733 0
D'Ambrosio, Christianne C. & Kara C. 2,000(3) 2,000 0
D'Ambrosio, Kara C. 25,000(3) 25,000 0
D'Ambrosio, Louis J. 102,600(3) 102,600 0
D'Ambrosio, Louis J. & Kara C. 1,000(3) 1,000 0
D'Ambrosio, Louis J. & Sue R. JTWROS 15,000(3) 15,000 0
Davies, Paul M. 4,500 4,500 0
Defined Benefit Pension Plan of FMCNA 49,524 49,524 0
Defined Contribution Pension Plan of FMCNA 11,905 11,905 0
Delaware Charter Guarantee & Trust, FBO
Burt Cohen IRA 12,000 12,000 0
DiSanto, Frank J. 57,142 57,142 0
Dowling, Benjamin 300(8) 300(8) 0
DRC Corporation Pension Plan 27,999(3) 27,999 0
Eagle Growth Limited Partnership 50,000 50,000 0
Eggleston, Thomas & Mary 14,200(3) 14,200 0
EGS Associates 42,000 42,000 0
Evans, Pat 1,000(3) 1,000 0
Ervin, Cohen & Jessup Profit Sharing Plan FBO
Gary Freedman 3,000 3,000 0
Fliege, James R. 25,000(3) 25,000 0
Forrester, Michael & Pamela 853(3) 853 0
Gaeta, Frank 1,000(3) 1,000 0
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially Owned Covered Beneficially Owned
Prior to By after the
Name of Selling Stockholder Offering Prospectus Offering(1)
--------------------------- ------------------ ---------- ------------------
<S> <C> <C> <C>
Geary Partners 83,367 83,367 0
General Electric Pension Trust, Trustees 408,164 408,164 0
Gilbreth, Joseph Jr. & Jean 10,000 10,000 0
Gillen, Frank J. 16,140(3) 16,140 0
Gladstein, Gary S. 5,000 5,000 0
Glenn E. White Trust 19,048 19,048 0
Gramm, Colton 2,500 2,500 0
Granville, Richard 1,000(3) 1,000 0
Grubbs, Joel 2,660(3) 2,660 0
Gunn, Bob 2,660(3) 2,660 0
Harding, David 2,428(3) 2,428 0
Hartman, Douglas 725,000(9) 15,000(9) 710,000(10)
Haussman Holdings N.V. 40,000 40,000 0
Heiserman & Hamer 921(3) 921 0
Herron, Christopher & Elizabeth 300(3) 300 0
Holt, Dave 1,000(3) 1,000 0
Honig, Roy & Valeta 500(3) 500 0
Hunsaker, Stephen 2,000(3) 2,000 0
Independent Free Methodist 14,762 14,762 0
Investor Contacts Ltd. 60,000(11) 60,000(11) 0
IPESA NV 12,500(3) 12,500 0
Jackson, Valerie 120(3) 120 0
JMB/FEB Partners 10,417 10,417 0
J.M. Bryan Family Trust 10,416 10,416 0
Johnston, Susan 2,860(3) 2,860 0
Jones, Milton C. 25,000(3) 25,000 0
Ketcher, Fred 2,500 2,500 0
Keyway Investments 36,000 36,000 0
Keyway Investments Limited 76,200 76,200 0
Khaled, Michael E. 234,800(3)(12) 116,000(12) 118,800(13)
Koch, Ronald R. Living Trust 4,000 4,000 0
Lowe, Raymond E. IRA 36,000(3) 36,000 0
Lukoff, Jonathon 5,607(3) 5,607 0
Lyneis, Donald & Janet 200(3) 200 0
Malamut, Mark 1,333(3) 1,333 0
Manni, Arthur 20,000(3) 20,000 0
Marathon Investments, LTD 30,920(3) 30,920 0
McCulloch, Patricia 2,667(3) 2,667 0
Minkoff, Donald E. 2,500 2,500 0
Mock, David 130,700(3)(14) 130,700(14) 0
Modiano, Mario 9,600(3) 9,600 0
Moon, Cynthia 500(3) 500 0
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially Owned Covered Beneficially Owned
Prior to By after the
Name of Selling Stockholder Offering Prospectus Offering(1)
--------------------------- ------------------ ---------- ------------------
<S> <C> <C> <C>
Morgan Guaranty Trust Company of New York, as 113,494 113,494 0
Investment Manager for the Alfred F. Sloan
Foundation (Multi-Market Account) (15)
Morgan Guaranty Trust Company of New York, as 113,494 113,494 0
Trustee of the Multi-Market Special Investment Trust
Fund of Morgan Guaranty Trust Company of
New York (15)
Morgan Guaranty Trust Company of New York, as 680,959 680,959 0
Trustee of the Commingled Pension Trust Fund
(Multi-Market Special Investment Fund 11) of
Morgan Guaranty Trust Company of New York (15)
Morgan Guaranty Trust Company of New York, as 605,297 605,297 0
Trustee of the Commingled Pension Trust Fund
(Multi-Market Special Investment Fund 1) of Morgan
Guaranty Trust Company of New York (15)
Morning Star Partners 17,000 17,000 0
Mourlas, James 1,000(3) 1,000 0
NationWide Security 95,238 95,238 0
Nosseck, Noel 3,000 3,000 0
Olafson, Gregory 100,000(3)(16) 100,000(2)(16) 0
Olafson, Joan 1,330(3) 1,330 0
Patrou, John P. 5,000 5,000 0
Patterson, M. Lisa 500(3) 500 0
Peninsula Fund L.P. 33,333 33,333 0
Pillsbury, Jill & Taylor 1,000(3) 1,000 0
Presidio Partners 283,367 283,367 0
Resource Services Ltd. Money Purchase Pension 2,270(3) 2,270 0
& Profit Sharing Trust
Richardson, Eric W.(22) 153,166(3)(17) 10,666(18) 142,500(19)
Richardson, William E.(23) 123,750(3)(20) 23,750(20) 100,000(4)
Ronchetti, Jennifer Cook 300(3) 300 0
ROPAR, LLC 15,000 15,000 0
Rosenthal, Murray H. 11,336(3) 11,336 0
Ruenitz Associates 2,000 2,000 0
Schenker, Walter Milton 3,000 3,000 0
Schmidt Family Trust 5,000 5,000 0
Service Master Company Limited Partnership 142,857 142,857 0
Sheppard, Robert 68,200(3) 68,200 0
Slawson, Steve 3,000 3,000 0
Slobe, Roger D. 1,350(3) 1,350 0
Smith, Randy 7,830(3) 7,830 0
Smith, George R. 1,000(3) 1,000 0
Stevens, Sandra 1,000(3) 1,000 0
Sullivan, Gregory A. 23,333(3) 23,333 0
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially Owned Covered Beneficially Owned
Prior to By after the
Name of Selling Stockholder Offering Prospectus Offering(1)
--------------------------- ------------------ ---------- ------------------
<S> <C> <C> <C>
SunAmerica Small Company Growth Fund 333,300 333,300 0
Terreau, William R. & Marilyn J. JTWROS 500(3) 500 0
Thomas, William E. 20,500(3) 20,500 0
Thomas, William E., Custodian for
Kelly O'Rourke 4,000(3) 4,000 0
Thorp, Terry L. & Pamela A. JTWROS 3,000(3) 3,000 0
Travelers Indemnity Co. 285,714 285,714 0
Trimble, Kelly 92,200(3) 4,200 88,000(4)
Turnbow, Lynn 86,366(3) 86,366 0
Vanderhoof, Michael D. 196,990(3) 149,990 47,000(4)
Wasatch Textiles 9,700(3) 9,700 0
Weinstein, Ronald A. 9,000 9,000 0
Whisper Investment Company 4,000(3) 4,000 0
Whittal Company Limited 19,100 19,100 0
Whittier Equities Corp. 5,000 5,000 0
Wittwer, Chet A. 1,000(3) 1,000 0
Wood, Mark 3,500(3) 3,500 0
Wood, Mark & Jerri 10,000(3) 10,000 0
Young, Kenneth M. 30,000(3) 30,000 0
Zane and Alice Feldman Trust 2,142(3) 2,142 0
--------- --------- ---------
6,841,531 5,462,731 1,378,800
========= ========= =========
</TABLE>
____________________
(1) Assumes that each Selling Stockholder sells all of the Shares to which
this Prospectus relates.
(2) Includes 4,000 shares subject to a currently exercisable warrant.
(3) These Selling Stockholders have agreed generally not to sell, under
this Prospectus, more than 1% of their respective Shares held as of
November 27, 1996 for each month that elapses after that date unless
the consent of the Company is obtained.
(4) Represents less than 1% of the Company's shares after this offering.
(5) Includes 112,500 shares subject to currently exercisable options and
2,333 shares subject to a currently exercisable warrant.
(6) Includes 2,333 shares subject to a currently exercisable warrant.
(7) Represents 1% of the Company's shares after this offering.
(8) Includes 300 shares subject to a currently exercisable warrant.
(9) Includes 15,000 shares subject to a currently exercisable warrant.
(10) Represents 6.3% of the Company's shares after the offering.
(11) Includes 60,000 shares subject to a currently exercisable warrant.
(12) Includes 25,000 shares subject to a currently exercisable warrant.
(13) Represents 1.1% of the Company's shares after this offering.
(14) Includes 130,700 shares subject to a currently exercisable warrant.
(15) J.P. Morgan & Co., Incorporated is the ultimate parent of the trustee
of each of these stockholders.
(16) Includes 55,000 shares subject to a currently exercisable warrant.
13
<PAGE>
(17) Includes 112,500 shares subject to currently exercisable options and
2,666 shares subject to a currently exercisable warrant.
(18) Includes 2,666 shares subject to a currently exercisable warrant.
(19) Represents 1.3% of the Company's shares after this offering.
(20) Includes 25,000 shares subject to a currently exercisable warrant.
(21) Mr. Corbin is the Chief Financial Officer of the Company.
(22) Mr. Eric Richardson is General Counsel and Secretary of the Company.
(23) Mr. William Richardson is a former member of the Board of Directors of
the Company.
PLAN OF DISTRIBUTION
The sale of the Shares by the Selling Stockholders may be effected from
time to time in transactions (which may include block transactions by or for the
account of the Selling Stockholders) in the over-the-counter market or in
negotiated transactions, a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale or at negotiated prices.
Selling Stockholders may effect such transactions by selling their Shares
directly to purchasers, through broker-dealers acting as agents for the Selling
Stockholders or to broker-dealers who may purchase Shares as principals and
thereafter sell the Shares from time to time in the over-the-counter market, in
negotiated transactions or otherwise. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers for whom such broker-dealers may act as
agents or to whom they may sell as principals or otherwise (which compensation
as to a particular broker-dealer may exceed customary commissions).
The Selling Stockholders and broker-dealers, if any, acting in connection
with such sales may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities by them might be deemed to be underwriting
discounts and commissions under the Securities Act. The Company has agreed to
indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act.
From time to time this Prospectus will be supplemented and amended as
required by the Securities Act. During any time when a supplement or amendment
is so required, the Selling Stockholders are to cease sales until the Prospectus
has been supplemented or amended. Pursuant to registration rights granted to
certain of the Selling Stockholders, the Company has agreed to update and
maintain the effectiveness of this Prospectus until April 1999 and, in certain
instances, until such shares have been sold or could be sold under Rule 144
within a 90-day period. Certain of the Selling Stockholders also may be entitled
to sell their Shares without the use of this Prospectus, provided that they
comply with the requirements of Rule 144 promulgated under the Securities Act.
The Company has agreed to pay the fees and expenses incurred by it in
connection with the preparation and filing of the Registration Statements
of which this Prospectus is a part.
14
<PAGE>
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby have been passed
upon for the Company by Eric W. Richardson, General Counsel to the Company. As
of December 1, 1997, Mr. Richardson beneficially owned 153,166 shares of Common
Stock of the Company.
EXPERTS
The consolidated financial statements of Prosoft I-Net Solutions, Inc. as
of July 31, 1997 and 1996, and for the year ended July 31, 1997 and the period
from December 8, 1995 (date of incorporation) to July 31, 1996, appearing in
Prosoft I-Net Solutions, Inc.'s Annual Report (Form 10-K) for the year ended
July 31, 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 Professional Development Institute as of
December 31, 1995, and for the period from February 1, 1995 (date of inception)
to December 31, 1995, appearing in this Prospectus and Registration Statement
have been audited by Kelly & Company, independent auditors, as set forth in
their report thereon, appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered. All of the amounts
shown are estimates, except the Securities and Exchange Commission registration
and NASDAQ filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee... $ 9,500
Accounting fees and expenses.......................... $ 4,500
Blue sky fees and expenses (including counsel fees)... $ 2,000
Other legal fees and legal expenses................... $10,000
Miscellaneous expenses................................ $ 1,000
-------
Total............................................ $27,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Nevada Private Corporation Law ("NPCL") provides that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party, by reason of the fact that such person was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to (x) any action or suit by or in the right
of the corporation against expenses, including amounts paid in settlement and
attorneys' fees, actually and reasonably incurred, in connection with the
defense or settlement believed to be in, or not opposed to, the best interests
of the corporation, except that indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction to be liable to the corporation or for amounts paid in
settlement to the corporation and (y) any other action or suit or proceeding
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred, if he or she acted in good
faith and in a manner which he or she reasonably believed to be in, or not
opposed to, reasonable cause to believe his or her conduct was unlawful. To the
extent that a director, officer, employee or agent has been "successful on the
merits or otherwise" the corporation must indemnify such person. The articles of
incorporation or bylaws may provide that the expenses of officers and directors
incurred in defending any such action must be paid as incurred and in advance of
the final disposition of such action. The NPCL also permits the corporation to
purchase and maintain insurance on behalf of the corporation's directors and
officers against any liability arising out of their status as such, whether or
not the corporation would have the power to indemnify him against such
liability. These provisions may be sufficiently broad to indemnify such persons
for liabilities arising under the Securities Act.
The Company's Restated Articles of Incorporation provide that the Company
shall indemnify any director or officer of the Company in connection with
certain actions, suits or proceedings, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred. The Company is also required to pay any expenses incurred by a
director or officer in defending the Company or its stockholders for damages for
breach of fiduciary duty as a director or
II-1
<PAGE>
officer, provided that such a provision must not eliminate or limit the
liability of a director or officer for: (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the payment
of illegal distributions. The Company's Restated Articles of Incorporation
include a provision eliminating the personal liability of directors for breach
of fiduciary duty except that such provision will not eliminate or limit any
liability which may not be so eliminated or limited under applicable law.
The Company's Bylaws generally require the Company to indemnify, as well
as to advance expenses, to its directors and its officers to the fullest extent
permitted by Nevada Law upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it should be ultimately determined
that they are not entitled to indemnification by the Company. The Company has
also entered into indemnification agreements with its directors and officers
which similarly provide for the indemnification and advancement of expenses by
the Company.
The Company maintains liability insurance for its directors and officers
covering, subject to certain exceptions, any actual or alleged negligent act,
error, omission, misstatement, misleading statement, neglect or breach of duty
by such directors or officers, individually or collectively, in the discharge of
their duties in their capacity as directors or officers of the Company.
Item 16. Exhibits and Financial Statement Schedules.
(a) Index of Exhibits
<TABLE>
<CAPTION>
Exhibit Description of Exhibits
No.
- ------- -------------------------------------------------------------------
<C> <S>
2 Agreement and Plan of Reorganization dated March 26, 1996 between
the Company, Pro-Soft Development Corp. and the shareholders of
Pro-Soft Development Corp. Filed as Exhibit 2 to the Company's
Registration Statement on Form S-1 (No. 333-11247) ("Registration
Statement No. 333-11247") and incorporated herein by reference.*
3.1 Restated Articles of Incorporation of the Company, as amended.
Filed as Exhibit 3.1 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
3.2 Amended and Restated Bylaws of the Company. Filed as Exhibit 3.2 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
4 Specimen Stock Certificate. Filed as Exhibit 4 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
5 Opinion of Eric W. Richardson.
10.1 Pro-Soft Development Corp. 1996 Stock Option Plan. Filed as Exhibit
10.1 to Registration Statement No. 333-11247 and incorporated
herein by reference.*
10.2 ProSoft I-Net Solutions, Inc. Amended 1996 Stock Option Plan. Filed
as Exhibit 10.2 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibits
No.
- ------- -------------------------------------------------------------------
<C> <S>
10.3 Stock and Warrant Purchase Agreement dated April 15, 1996 by and
among the Company, Donald L. Danks, Keith D. Freadhoff, Douglas
Hartman and various investors. Filed as Exhibit 10.3 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
10.4 Form of Subscription Agreement, entered into in July and August
1996, between the Company and various investors. Filed as Exhibit
10.4 to Registration Statement No. 333-11247 and incorporated
herein by reference.*
10.5 Form of Registration and Lock-Up Agreement dated September __, 1996
between the Company and certain of the Selling Stockholders. Filed
as Exhibit 10.5 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
10.6 Microsoft/Internet Contract Teaching Agreement dated as of April
29, 1996 by and between the Company and Merisel, Inc. Filed as
Exhibit 10.6 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
10.7 AT&T Professional Consultant Agreement dated March 28, 1997 by and
between the Company and AT&T Corp.*
10.8 Lease dated September 29, 1995 between Douglas E. Hartman dba
Professional Development Institute and Steven R. Layton, as
Receiver. Filed as Exhibit 10.8 to Registration Statement No. 333-
11247 and incorporated herein by reference.*
10.9 Xerox Order Agreement dated September 26, 1995 between Professional
Development Institute and Xerox Corporation. Filed as Exhibit 10.9
to Registration Statement No. 333-11247 and incorporated herein by
reference.*
10.10 Term Lease Master Agreement dated as of April 19, 1996 between Pro-
Soft Development Corp. and IBM Credit Corporation. Filed as Exhibit
10.10 to Registration Statement No. 333-11247 and incorporated
herein by reference.*
10.11 Lease Agreement dated as of June 21, 1996 between Pro-Soft
Development Corp. and Sanwa Leasing Corporation. Filed as Exhibit
10.11 to Registration Statement No. 333-11247 and incorporated
herein by reference.*
10.12 Promissory Notes dated July 3, 1996 and July 31, 1996 made by Keith
Freadhoff in favor of the Company. Filed as Exhibit 10.12 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
10.13 Form of Indemnification Agreement between the Company and its
Directors and Officers. Filed as Exhibit 10.13 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
10.14 Licensing Agreement dated August 6, 1996 between Street
Technologies, Inc. and the Company. Filed as Exhibit 10.14 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibits
No.
- ------- -------------------------------------------------------------------
<C> <S>
10.15 Office Building Lease dated as of December 16, 1996 between COSCAN
California Limited Partnership and the Company. Filed as Exhibit 10
to the Company's Report on Form 10-Q for the quarter ended January
31, 1997 and incorporated herein by reference.*
10.16 Form of Subscription Agreement, entered into in February through
April 1997, between the Company and various investors. Filed as
Exhibit 10.16 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
10.17 Registration Rights Agreement dated as of March 13, 1997 among the
Company and various investors. Filed as Exhibit 10.17 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
10.18 Subscription Agreement between the Company and General Electric
Pension Trust dated April 4, 1997. Filed as Exhibit 10.18 to
Registration Statement No. 333-11247 and incorporated herein by
reference.*
10.19 Escrow Agreement among the Company, General Electric Pension Trust
and State Street Bank and Trust dated April 4, 1997. Filed as
Exhibit 10.19 to Registration Statement No. 333-11247 and
incorporated herein by reference.*
10.20 Secured Promissory Note dated April 9, 1997 in favor of the
Company. Filed as Exhibit 10.20 to Registration Statement No. 333-
11247 and incorporated herein by reference.*
10.21 Form of Subscription Agreement, entered into in November 1997
between the Company and various investors.
10.22 Registration Rights Agreement dated as of November 12, 1997 among
the Company and various investors.
21 Subsidiaries of the Company. Filed as Exhibit 21 to Registration
Statement No. 333-11247 and incorporated herein by reference.*
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Kelly & Co., Independent Auditors
23.3 Consent of Eric W. Richardson (included in the opinion filed as
Exhibit 5).
24 Power of Attorney (included on signature page).
</TABLE>
- ---------------
* Previously filed
II-4
<PAGE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually, or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum Offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(230.424(b) of this Chapter) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the
maximum aggregate Offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the Offering of such securities
at that time shall be deemed to be the initial bona fide
Offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the Offering.
Insofar as indemnification for liabilities arising from the Securities
Act of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa Ana,
State of California on the 1st day of December, 1997.
PROSOFT I-NET SOLUTIONS, INC.
By: /s/ Keith D. Freadhoff
----------------------
Keith D. Freadhoff,
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Keith
D. Freadhoff and Jerrell M. Baird his true and lawful attorney-in-fact and
agent, acting alone, with full powers of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement (including Registration Statements Nos. 333-11247 and 333-28993 which
are amended hereby), any amendments thereto and any Registration Statement for
the same offering which is effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, each acting alone,
full powers and authority to do and perform each and every act and thing
requisite and 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 said attorney-in-fact and agent, acting alone, 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
Amendment to Registration Statement has been signed below by the following
persons on behalf of the Company in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- ------------------------- ------------------------------ ----------------
<S> <C> <C>
/s/ Keith D. Freadhoff Chief Executive Officer and December 1, 1997
- ------------------------- Chairman of the Board
Keith D. Freadhoff (Principal Executive Officer)
/s/ Donald L. Danks Vice Chairman and Director December 1, 1997
- -------------------------
Donald L. Danks
/s/ Brooks A. Corbin Chief Financial Officer December 1, 1997
- ------------------------- (Principal Financial and
Brooks A. Corbin Accounting Officer)
/s/ Andrew Stallman Director December 1, 1997
- -------------------------
Andrew Stallman
/s/ Jeffrey G. Korn Director December 1, 1997
- -------------------------
Jeffrey G. Korn
</TABLE>
II-6
<PAGE>
Exhibit 5
December 1, 1997
Prosoft I-Net Solutions, Inc.
2333 North Broadway, Suite 300
Santa Ana, CA 92706
Re: Registration Statement on Form S-1
----------------------------------
Gentlemen and Ladies:
I have acted as counsel to Prosoft I-Net Solutions, Inc., a
Nevada corporation ("Company"), in connection with the registration under the
Securities Act of 1933, as amended, on Form S-3 (Registration No. 333-35249) of
up to 2,796,563 shares ("Shares") of the Company's Common Stock, $.001 par value
per share, being offered by existing stockholders, all of which are currently
issued and outstanding.
I am familiar with the corporate actions taken, and with the
additional corporate actions proposed to be taken, by the Company in connection
with the authorization, issuance and sale of the Shares and have made such
examinations, inquiries and investigations as I have deemed advisable for
purposes of rendering this opinion.
Based on the foregoing and in reliance thereon, it is my opinion
that the Shares have been legally and validly issued and are fully paid and
nonassessable.
I consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference made to me and the use of my name
under the caption "Legal Matters" in the Registration Statement and the
Prospectus included in the Registration Statement.
Very truly yours,
Eric W. Richardson
<PAGE>
Exhibit 10.21
SUBSCRIPTION AGREEMENT
----------------------
COMMON STOCK
Prosoft I-Net Solutions, Inc.
2333 North Broadway
Suite 300
Santa Ana, CA 92706
The undersigned hereby subscribes to become a shareholder in Prosoft
I-Net Solutions, Inc., a Nevada corporation (the "Company"), and to purchase the
number of shares of Common Stock of the Company (the "Shares") indicated below.
The Company is concurrently offering shares to the undersigned and a limited
number of other investors under the terms set forth in this Agreement (the
"Offering").
The undersigned acknowledges that any questions regarding this
document or the subscription should be directed to: ____________________________
________________________________________________________________________________
1. Subscription. Subject to the terms and conditions hereof, (i)
------------
the undersigned hereby irrevocably agrees to purchase the Shares set forth on
the signature page hereof at the purchase price of $10.50 per Share and to
tender the cash purchase price set forth on the signature page hereof by means
of a check (cashiers, certified or personal), money order or wire transfer
payable to Prosoft I-Net Solutions, Inc. upon acceptance of the undersigned's
subscription by the Company in accordance with the provisions hereof and (ii)
the Company hereby agrees, upon such acceptance, to sell the Shares to the
undersigned in accordance with the provisions hereof.
2. Representations and Warranties. The undersigned represents and
------------------------------
warrants to the Company as of the date hereof as follows:
(a) The undersigned has received and read and understands the
Company's Annual Report on Form 10-K for the year ending July 31, 1997 (the
"Form 10-K"), which contains important information relating to the Company and
has relied solely on the Form 10-K; the undersigned has not relied on any oral
representations or oral information furnished to the undersigned in connection
with the purchase of the Shares.
(b) The undersigned has had the opportunity to seek from the
Company or its representatives, and has received from such parties, all
information deemed necessary by the undersigned to evaluate the merits and risks
of an investment in the Company. The undersigned has had the opportunity to
verify the accuracy of the information contained in the Form 10-K and to seek
investment, tax or legal counsel prior to investing in the Company.
(c) The undersigned understands that, except as provided in
Section 5 below, the Shares will not be registered for sale under the Securities
Act of 1933, as amended (the "1933 Act"), or registered or qualified under any
state securities laws in reliance upon
<PAGE>
exemptions from such registration and qualification, and that such
exemptions depend in large part on the undersigned's representations and
warranties herein.
(d) The undersigned, if a corporation, partnership, trust or other
entity, is authorized and duly empowered to purchase and hold the Shares, has
its principal place of business at the address set forth on the signature page
and has not been formed for the specific purpose of acquiring the Shares.
(e) The Shares are being purchased for the account specified on the
signature page hereof, for investment and not with a view to resale or
distribution to any person, corporation or other entity. The undersigned also
understands that there will not be any public market for the sale of such
Shares.
(f) The undersigned has such knowledge and experience in financial and
business matters that will enable the undersigned to utilize the information
made available to it in connection with this investment to evaluate the merits
and risks of an investment in the Company.
(g) The undersigned is able to bear the economic risks related to a
purchase of Shares (i.e., the undersigned is able to afford a complete loss of
the Shares the undersigned is subscribing to purchase). The undersigned has made
other investments of a similar nature and, by reason of the undersigned's
business and financial experience, has acquired the capacity to protect its own
interests in investments of this nature. The undersigned has carefully reviewed
the Form 10-K, and has made its own examination of the investment, as well as
the accounting and tax aspects of this transaction, and will depend on the
advice of its own counsel and accountants.
(h) The undersigned recognizes that the Shares involve a high degree
of risk, including those special risks referred to or set forth in the Form
10-K.
(i) The undersigned is both (A) an "accredited investor" within the
meaning of Rule 501 of Regulation D as promulgated under the 1933 Act, and (B) a
"qualified institutional buyer" within the meaning of Rule 144A promulgated
under the 1933 Act.
(j) All information which the undersigned has provided to the Company,
including, but not limited to, the undersigned's financial position and
knowledge of financial and business matters, is true, correct and complete as of
the date of execution of this Subscription Agreement. The undersigned
understands that the Company will rely to a material degree upon the
representations contained herein.
(k) The undersigned is aware that no federal or state agency has made
any finding or determination as to the fairness of investment in, nor any
recommendation or endorsement of, the Shares.
<PAGE>
(l) The undersigned understands that the Shares are subject to
restrictions on transferability and resale and may not be transferred or resold
except as permitted under the 1933 Act and applicable state securities laws,
pursuant to either a registration or an exemption therefrom.
(m) The undersigned further represents and warrants to the Company
that, with respect to each source of funds to be used by it to purchase Shares
hereunder (each being referred to as the "Source"), at least one of the
following statements is and shall be accurate as of the date hereof:
(i) the Source is not the assets of any "plan" (as such term is
defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended
(the "Code")) subject to Section 4975 of the Code, or any "employee benefit
plan" (as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) subject to Section 406 of ERISA
(each such plan and employee benefit plan, being referred to as a "Benefit
Plan") or otherwise out of "plan assets" within the meaning of United States
Department of Labor regulation Section 2510.3-101, 29 CFR 2510.3-101;
(ii) the Source is the assets of a "governmental plan" (as such
term is defined in Section 3(32) of ERISA);
(iii) the undersigned is an insurance company and the Source is
the assets of its general asset account and the conditions set forth in Sections
I(a) and IV of Prohibited Transaction Class Exemption ("PTCE") 95-60 have been
satisfied with respect to the undersigned's purchase of the Shares;
(iv) the undersigned is an insurance company and the Source is the
assets of an insurance company pooled separate account within the meaning of
PTCE 90-1 issued by the United States Department of Labor and either (x) no
Benefit Plan has assets in such separate account which exceed or are expected to
exceed 10% of the total assets of such separate account as of the date hereof
(for purposes of this clause (iv), all Benefit Plans maintained by the same
employer or employee organization are deemed to be a single plan), or (y) the
undersigned has disclosed to the Company in writing prior to the date hereof the
identity of each Benefit Plan whose assets in such separate account exceed or
are expected to exceed 10% of the total assets of such separate account as of
the date hereof;
(v) the undersigned is a bank and the Source is assets of a
collective investment fund as defined in Section IV(e) of PTCE 91-38 and either
(x) no Benefit Plan has assets in such collective investment fund which exceed
or are expected to exceed 10% of the total assets of such collective investment
fund as of the date hereof (for purposes of this clause (v), all Benefit Plans
maintained by the same employer or employee organization are deemed to be a
single plan), or (y) the undersigned has disclosed to the Company in writing
prior to the date hereof the identity of each Benefit Plan whose assets in such
collective investment fund exceed or are expected to exceed 10% of the total
assets of such collective investment fund as of the date hereof;
<PAGE>
(vi) the Source is assets of an "investment fund" managed by a
"qualified professional asset manager" or "QPAM" (as such terms are defined in
Part V of PTCE 84-14), and the conditions set forth in Sections I(c), (d), (e)
and (g) of PTCE 84-14 have been satisfied, and the identity of such QPAM and the
names of all Benefit Plans whose assets are included in such investment fund
(other than, in the case of a collective investment fund described in the clause
(v) above, any Benefit Plan the identity of which is not required to be
disclosed to the Company pursuant to clause (v) above) have been identified in
writing to the Company prior to the date hereof pursuant to this clause (vi); or
(vii) the Source is assets of a Benefit Plan or a separate account
comprised of Benefit Plans, which Benefit Plans have been identified in writing
to the Company prior to the date hereof pursuant to this clause (vii).
3. Indemnification.
---------------
(a) The undersigned hereby indemnifies the Company, its affiliates and
its agents and holds them harmless from and against any and all loss, damage,
liability or expense, including costs and reasonable attorney's fees, incurred
by the Company (or its affiliates or agents) by reason of or in connection with
any misrepresentation made by the undersigned, any breach of any of the
undersigned's warranties, or failure of the undersigned to fulfill any covenants
or agreements under this Subscription Agreement; provided, however, that,
notwithstanding anything to the contrary herein, in no event shall the
undersigned be liable hereunder to the Company, its affiliates and its agents or
any other party for special, incidental, consequential or punitive damages,
including without limitation loss of profits sustained or claimed. This
Subscription Agreement and the representations and warranties contained herein
shall survive the undersigned's purchase of the Shares.
(b) The Company hereby indemnifies the undersigned, its affiliates,
directors, officers, agents and employees and holds them harmless from and
against any and all loss, damage, liability or expense, including costs and
reasonable attorneys' fees, incurred by the undersigned (or its affiliates,
directors, officers, agents and employees) by reason of or in connection with
any misrepresentation made by the Company, any breach of any of the Company's
warranties, or failure of the Company to fulfill any covenants or agreements
under this Subscription Agreement. This Subscription Agreement and the
representations and warranties contained herein shall survive the Company's
issuance of the Shares.
4. Acceptance or Rejection of Subscription. The parties hereto agree
---------------------------------------
that:
(a) the Company reserves the right to reject the undersigned's
subscription, in whole or in part, at the sole discretion of the Company for any
reason;
(b) the undersigned's subscription will be accepted or rejected within
15 days from receipt and will be effective only upon acceptance by the Company;
and
<PAGE>
(c) upon acceptance of the undersigned's subscription by the Company,
(i) the undersigned's subscription will be irrevocable, (ii) the obligations of
the undersigned and the Company hereunder to purchase and sell the Shares,
respectively, will become effective immediately thereafter and (iii) the Company
will deliver the Shares to the undersigned against payment therefor within 15
days from the Company's receipt of this Subscription Agreement.
5. Registration Rights. The Company hereby grants to the undersigned the
-------------------
registration rights provided in the Registration Rights Agreement attached
hereto as Exhibit 1.
6. Antidilution Protection.
-----------------------
(a) If at any time after the date of this subscription agreement and
prior to the earlier of: (i) the occurrence of a firmly underwritten public
offering of the Company's Common Stock pursuant to an effective registration
statement filed by the Company with the Securities and Exchange Commission with
gross proceeds of at least $25 million; or (ii) such time as all of the Shares
held by the undersigned may immediately be sold under Rule 144 during any 90-day
period, the Company sells or issues shares of capital stock or options, rights
or warrants entitling the holders thereof to subscribe for or purchase shares of
capital stock in a Financing (as defined below) at a purchase price less than
$10.50 per share (as adjusted to reflect any increase or decrease or change into
or exchange for a different number or kind of shares or other securities of the
Company by reason of any recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company), the undersigned will receive
additional shares of Common Stock under this Subscription Agreement so that the
total number of Shares received by the undersigned under this Subscription
Agreement (after taking into account that additional issuance) equals the total
purchase price paid by the undersigned divided by the Adjusted Price (as defined
----------
below).
(b) For purposes of this Section, the following definitions shall
apply:
(1) "Adjusted Price" shall mean (i) with respect to the issuance
of equity securities, the price per share determined by multiplying the Existing
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Financing plus the number of
shares of Common Stock which the aggregate consideration received by the Company
in such Financing would have purchased at the Existing Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Financing plus the number of shares actually issued in
such Financing and (ii) with respect to the issuance of options, rights or
warrants entitling the holders thereof to subscribe for or purchase shares of
equity securities, the price per share determined by multiplying the Existing
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Financing plus the number of
shares of Common Stock which the aggregate consideration received by the Company
in such Financing (including both the issue price of the options, rights or
warrants and the exercise price thereof) would have purchased at the Existing
Price, and the denominator of
<PAGE>
which shall be the number of shares of Common Stock outstanding immediately
prior to such Financing plus the number of shares such holders of options,
rights and warrants would own if they exercised the options, rights or warrants
received by them in the Financing. For the purposes of the foregoing
calculation, the number of shares of Common Stock outstanding immediately prior
to such Financing shall be calculated on a fully diluted basis, as if all
outstanding warrants or options to purchase Common Stock had been fully
exercised immediately prior to such Financing as of such date, but shall not
include shares of Common Stock held in the treasury of the Company.
(2) "Existing Price" shall initially mean the purchase price per
share paid by the undersigned (as adjusted to reflect any increase or decrease
or change into or exchange for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split-up, combination of shares, exchange of shares, stock dividend or
other distribution payable in capital stock, or other increase or decrease in
such shares effected without receipt of consideration by the Company), and after
any adjustments pursuant to this Section, shall mean the then current Adjusted
Price.
(3) "Financing" shall mean any issuances of equity securities or
options, rights or warrants entitling the holders thereof to subscribe for or
purchase equity securities by the Company for cash or any other form of
consideration, but shall not include (i) the issuance of shares or options to
employees, directors or consultants of the Company to the extent that all such
issuances pursuant to this subclause (i) do not result in the issuance to
employees, directors or consultants of the Company, at a price per share less
than $10.50 (as adjusted to reflect any increase or decrease or change into or
exchange for a different number or kind of shares or other securities of the
Company by reason of any recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company), of a number of shares (and/or
options, rights or warrants to buy a number of shares) in excess of 10% of the
outstanding shares of Common Stock in the aggregate immediately after the
consummation of the Offering, or (ii) the issuance of shares upon exercise of
outstanding warrants or options described in the Form 10-K.
7. Representations, Warranties and Covenants of the Company. By accepting
--------------------------------------------------------
this subscription, the Company hereby represents and warrants to, and covenants
with, the undersigned as follows:
(a) Organization. The Company is duly organized, validly existing and
------------
in good standing under the laws of the State of Nevada. The Company has full
power and authority to own, lease and operate its properties and to conduct its
business as currently conducted and is registered or qualified to do business
and is in good standing in each jurisdiction in which it owns or leases property
or transacts business and where the failure to be so qualified would have a
material adverse effect upon the business, financial condition, prospects,
properties or operations of the Company.
<PAGE>
(b) Due Authorization. The Company has all requisite power and
-----------------
authority to execute, deliver and perform its obligations under this
Subscription Agreement, and this Subscription Agreement has been duly authorized
and validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution and delivery of this
-----------------
Subscription Agreement, the issuance and sale of the Shares to be sold by the
Company hereunder, and the consummation of the transactions contemplated hereby
will not conflict with or constitute a violation of, or default (with the
passage of time or otherwise) under, any material agreement or instrument to
which the Company is a party or by which it is bound or the Articles of
Incorporation (the "Charter") or the Bylaws of the Company nor result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or an acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any material bond, debenture, note or any other
evidence of indebtedness or any material indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the Company is
subject, nor conflict with, or result in a violation of, any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company. No consent, approval,
authorization or other order of, or registration, qualification or filing with,
any regulatory body, administrative agency, or other governmental body in the
United States is required for the valid issuance and sale of the Shares to be
sold pursuant to this Agreement (other than such as have been made or obtained).
(d) Capitalization. The authorized and outstanding capital stock of
--------------
the Company and rights to acquire capital stock of the Company are as set forth
in the Form 10-K. Except as set forth in the Form 10-K, there are no outstanding
shares of, or rights to acquire shares of, capital stock of the Company. The
Shares have been duly authorized, and when issued and paid for in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable.
(e) Legal Proceedings. There is no legal or governmental proceeding
-----------------
pending or, to the knowledge of the Company, threatened or contemplated to which
the Company is or may be a party or of which the business or property of the
Company is or may be subject that, if adversely determined, would have a
material adverse effect upon the business, financial condition, prospects,
properties or operations of the Company.
(f) No Violations. The Company is not in violation of its Charter or
-------------
Bylaws, in violation of any law, administrative regulation, ordinance or order
of any court or governmental agency, arbitration panel or authority (including
without limitation any law, regulation or order relating to ERISA) applicable to
the Company, which violation, individually
<PAGE>
or in the aggregate, would have a material adverse effect on the business
or financial condition of the Company, or in default in any material
respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness in any indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company is a party or by which the
Company is bound or by which the properties of the Company are bound or
affected, and there exists no condition which, with the passage of time or
the giving of notice or both, would constitute a material default under any
such document or instrument or result in the imposition of any material
penalty or the acceleration of any indebtedness.
(g) Government Permits, Etc. The Company has all necessary
------------------------
franchises, licenses, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department, or body
that are currently necessary for the operation of the business of the Company as
currently conducted, the absence of which would have a material effect on the
business or operations of the Company.
(h) Financial Statements. The financial statements of the Company and
--------------------
the related notes contained in the Form 10-K present fairly the financial
position of the Company as of the dates indicated therein and its results of
operations for the period therein specified, were prepared in accordance with
generally accepted accounting principles and are true, correct and complete in
all respects.
(i) No Material Adverse Change. Except as described in the Form 10-K,
--------------------------
since July 31, 1997, the Company has not incurred any material liabilities or
obligations, direct or contingent, other than in the ordinary course of
business, and there has not been any material adverse change in its business,
financial condition, prospects, properties or results of operations.
(j) Form 10-K. The Form 10-K does not contain any untrue statement of
---------
a material fact nor does it omit to state a material fact necessary to make the
statements made therein not misleading.
(k) Offers of Shares. Neither the Company nor anyone acting on its
----------------
behalf has offered the Shares or any similar securities to, or solicited any
offer to purchase the same from, or otherwise approached or negotiated in
respect thereof with, any person, or has taken any other action, which in all
cases mentioned above would require the registration of the Shares under Section
5 of the 1933 Act or under the registration and qualification provisions of any
securities or "blue sky" law of any applicable jurisdiction.
(l) Contingent Liabilities. The Company does not have any contingent
----------------------
liabilities that would be material to the Company that are not provided for or
disclosed in the financial statements that are included in the Form 10-K.
<PAGE>
(m) Transaction with Affiliates. All of the Company's
---------------------------
transactions and relationships with affiliates are on fair and reasonable terms
comparable to those that would be obtained in an arm's-length transaction
between unrelated third parties.
(n) Fees and Commissions. No broker's or finder's fee or
--------------------
commission will be payable by the Company with respect to the issuance and sale
of the Shares or the transactions contemplated hereby, and the Company shall
hold the undersigned harmless from any claim, demand or liability for any such
broker's or finder's fees or commission alleged to have been incurred in
connection herewith.
(o) Investment Company Act. The Company is not and, after giving
----------------------
effect to the offering and sale of the Shares and the application of the
proceeds thereof, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act").
The Company is not directly or indirectly controlled by or acting on behalf of
any person which is an "investment company" as such term is defined in the
Investment Company Act.
(p) ERISA. (i) Assuming the accuracy of the representation set
-----
forth in Section 2(m), the execution and delivery of the Subscription Agreement
and the issue and purchase of the Shares hereunder will not, as of the date
hereof, involve any transaction that is prohibited under Section 406(a)(1) of
ERISA or which is a "prohibited transaction" as defined in Section 4975(c)(1) of
the Code, in either case for which a statutory or administrative exemption is
not available.
(ii) The Company does not maintain, contribute to or have any
liability with respect to any Plan or Multiemployer Plan.
(iii) The Company has no ERISA Affiliates.
(iv) The Company is not a party to any collective bargaining
agreement.
For purposes of this Section, the following terms shall be defined as stated
below:
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which, together with the Company, is treated as a single employer
under Title IV of ERISA or Section 414 of the Code.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Company, any of its subsidiaries or any
ERISA Affiliate is then making or accruing an obligation to make contributions
or has within any of the preceding five plan years made or accrued an obligation
to make contributions, including for these purposes any person which ceased to
be an ERISA Affiliate during such five-year period.
"Plan" means an employee benefit plan, other than a Multiemployer
Plan, which is subject to Title IV of ERISA or subject to the minimum funding
standards under Section 412
<PAGE>
of the Code or Section 302 of ERISA, and either (i) is maintained for employees
of the Company, any of its subsidiaries or any ERISA Affiliate or in which any
such employees participate or to which contributions are made by the Company,
any of its subsidiaries or any ERISA Affiliate, or (ii) has at any time within
the preceding five years been maintained for employees of the Company, any of
its subsidiaries or any ERISA Affiliate or any person which was at such time an
ERISA Affiliate or in which any such employees participated at such time, or
(iii) with respect to which the Company, any of its subsidiaries or any ERISA
Affiliate could be subjected to any liability under Title IV of ERISA (including
without limitation Section 4069 of ERISA) in the event that such plan has been
or were to be terminated.
8. Acceptance. Execution and delivery of this Subscription
----------
Agreement shall constitute an irrevocable offer to purchase the Shares
indicated, which offer may be accepted or rejected by the Company in its sole
discretion for any cause or for no cause. Acceptance of this offer by the
Company shall be indicated by the execution hereof by an officer of the Company
and delivery of the Shares to the undersigned against payment therefor within 15
days from the Company's receipt of this Subscription Agreement.
9. Binding Agreement. The parties hereto agree that, upon
-----------------
acceptance hereof by the Company, they may not cancel, terminate or revoke this
Subscription Agreement or any agreement made by them hereunder, and that, upon
acceptance hereof by the Company, this Subscription Agreement shall be binding
upon the successors and assigns of the parties hereto.
10. Incorporation by Reference. The statement of the number of
--------------------------
Shares subscribed and related information set forth on the signature page are
incorporated as integral terms of this Subscription Agreement.
11. Other Agreements. The Company hereby represents and warrants
----------------
that it has not entered into or agreed to any agreement with any other purchaser
of stock in the Offering that confers rights or benefits more favorable than the
rights and benefits conferred upon the undersigned hereunder. The Company shall
not enter into any agreement with any other purchaser of stock in the Offering
that shall confer rights or benefits more favorable than the rights and benefits
conferred upon the undersigned, unless, in each case, the undersigned has been
notified in writing and been provided with a copy of such proposed agreement at
least 15 days prior to the effective date of such agreement and has been given
the opportunity to receive the rights and benefits in such agreement as of the
date of such agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the date set forth on the signature page.
The undersigned desires to take title in the Shares as follows (check
one):
____ (a) Trust (Trustee(s) must sign on Page 12);
____ (b) Partnership (general partner(s) must sign on Page 13);
____ (c) Corporation (authorized officer must sign on Page 14).
The exact spelling of name under which title to the Shares shall be
taken is (please print):
________________________________________________________________________________
The exact location (including account number and receiving person, if
applicable) for delivery of common stock: _____________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
<PAGE>
SUBSCRIPTION AGREEMENT
SIGNATURE PAGE
FOR TRUST INVESTORS
-------------------
Total Shares subscribed: #__________________ $________________________
____________________________________________
Name of Trust (Please print or type)
____________________________________________
Name of Trustee (Please print or type)
____________________________________________
Date Trust was formed
By:_________________________________________
Trustee's Signature
Taxpayer Identification Number:_____________
Trustee's Address __________________________
__________________________________
__________________________________
Attention: _______________________
Executed at ___________________________, this ___ day of __________, 1997.
SUBSCRIPTION ACCEPTED:
PROSOFT I-NET SOLUTIONS, INC.,
a Nevada corporation
By:_________________________________________
Printed Name
and Title:________________________
<PAGE>
SUBSCRIPTION AGREEMENT
SIGNATURE PAGE
FOR PARTNERSHIP INVESTORS
-------------------------
Total Shares subscribed: #_____________________ $________________________
_______________________________________________
Name of Partnership (Please print or type)
_______________________________________________
Name of General Partner (Please print or type)
By: _______________________________________
Signature of a General Partner
_______________________________________________
Name of General Partner (Please print or type)
By: _______________________________________
Signature of Additional General Partner
(if required by partnership agreement)
Taxpayer Identification Number:________________
Partnership's Address _________________________
____________________________________
____________________________________
Mailing Address (if different) ________________
____________________________________
____________________________________
Attention: _________________________
Executed at ___________________________, this ___ day of ____________, 1997.
SUBSCRIPTION ACCEPTED:
PROSOFT I-NET SOLUTIONS, INC.,
a Nevada corporation
By:____________________________________________
Printed Name
and Title:__________________________
<PAGE>
SUBSCRIPTION AGREEMENT
SIGNATURE PAGE
FOR CORPORATE INVESTORS
-----------------------
Total Shares subscribed: #_______________________________ $__________________
_________________________________________________________
Name of Corporation (Please print or type)
_________________________________________________________
Name and Title of Authorized Agent (Please print or type)
By: _______________________________________________
Signature of Authorized Agent
Title: _______________________________________________
Taxpayer Identification Number: _________________________
Corporation's Address ___________________________________
_______________________________________________
_______________________________________________
Mailing Address (if different) __________________________
_______________________________________________
_______________________________________________
Attention: ____________________________________
Executed at ___________________________, this ___ day of ____________, 1997.
SUBSCRIPTION ACCEPTED:
PROSOFT I-NET SOLUTIONS, INC.,
a Nevada corporation
By:______________________________________________________
Printed Name
and Title:_____________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of November 12, 1997, by and
among Prosoft I-Net Solutions, Inc., a Nevada corporation (the "Company"), and
the Persons set forth on Schedule I attached hereto (the "Investors").
The Investors intend to purchase shares of the Company's Common Stock
pursuant to separate subscription agreements between the Company and each of the
Investors. The execution and delivery of this Agreement is a condition to the
Investors' purchase of the Common Stock. Capitalized terms used herein shall
have the meanings set forth in Section 9 below.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, agree as follows:
1. REGISTRATION STATEMENTS.
(a) Shelf Registration. (i) The Company shall, on or before December 12,
1997, prepare and file with the Commission under the Securities Act a
Registration Statement with respect to the Registrable Securities, and shall use
its best efforts to cause such Registration Statement to be declared effective
at the earliest practicable date. The Company shall, subject to Sections
1(a)(v) and (vi), ensure the availability of a Prospectus meeting the
requirements of Section 10(a) of the Securities Act and shall take any and all
other actions necessary in order to ensure the ability of the holders of the
Registrable Securities to effect a resale of their Registrable Securities, for
such period as the Company is obligated to maintain the effectiveness of a
Registration Statement pursuant to Section 1(a)(ii).
(ii) The Company shall use its best efforts to cause any such
Registration Statement described in Section 1(a)(i) to remain effective (or, if
required by applicable law, to cause another Registration Statement with respect
to the Registrable Securities to become and remain effective) until the earlier
to occur of: (i) such time as all the Registrable Securities have been sold by
the Investors and (ii) such time as all the Registrable Securities held by the
Investors could be sold under Rule 144 of the Securities Act during any 90-day
period.
(iii) Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities to give at least five Business Days' prior notice to
the Company of any intended distribution of Registrable Securities under any
Registration Statement described in Section 1(a)(i), which notice shall specify
the date on which such holder intends to begin such distribution.
(iv) As soon as possible after the date notice is provided pursuant to
Section 1(a)(iii), and in any event within five Business Days of such date, the
Company shall, subject to Sections 1(a)(v) and 1(a)(vi): (A) file such
amendments to the Registration Statement and the
<PAGE>
Prospectus, file such documents as may be required to be incorporated by
reference in any of such documents, and take all other actions as may be
necessary to ensure to the holders of Registrable Securities the ability to
effect the public resale of their Registrable Securities for a period of at
least 90 days following the date set forth in such notice (including without
limitation taking any actions necessary to ensure the availability of a
Prospectus meeting the requirements of Section 10(a) of the Securities Act), (B)
provide each holder of Registrable Securities copies of any documents prepared
pursuant to Section 1(a)(iv)(A), and (C) inform each holder of Registrable
Securities that the Company has complied with the obligations in Seciton
1(a)(iv)(A) and that such holder may sell such holder's Registrable Securities.
(v) The Company may suspend the effectiveness of any Registration
Statement filed pursuant to this Section 1(a) if, in its reasonable judgment,
(A) maintaining the effectiveness of such Registration Statement at such time
would adversely affect a proposed financing, reorganization or recapitalization,
or pending negotiations relating to a merger, consolidation, acquisition or
similar transaction, or otherwise adversely affect the Company; or (B) financial
statements meeting the requirements of Regulation S-X are not available at such
time because of any such pending proposal or negotiations; provided, however,
that the right of the Company pursuant to this subsection (v) to suspend the
effectiveness of the Registration Statement shall not extend for more than 90
days; and provided, further, that the Company shall give to each holder of
Registrable Securities prior written notice of such suspension.
(vi) No holder of Registrable Securities shall distribute its
Registrable Securities in an Underwritten Offering pursuant to a Registration
Statement filed pursuant to this Section 1(a) unless the holders of Registrable
Securities then constituting greater than 40% of the Registrable Securities have
given notice to the Company of their request for an Underwritten Offering. If a
request for an Underwritten Offering is made pursuant to this Section 1(a) by
less than all of the holders of Registrable Securities, the Company shall
promptly give notice of such request to all other holders of Registrable
Securities; and each of such holders shall have the right, by giving written
notice to the Company promptly (and in any event within 10 days after such
notice is given by the Company), to join in such request and to have included in
the Underwritten Offering such number of Registrable Securities as such holder
shall specify in such notice.
(b) Incidental Registration. (i) In addition to and independent of the
rights afforded by Section 1(a), prior to filing with the Commission any
Registration Statement (on Form S-1 or Form S-3 or any general form for the
registration of securities now or hereafter adopted comparable to either of such
Forms as now in effect (other than a Registration Statement on Form S-4 or Form
S-8 or any successor form to such Forms)), during the period from and including
September 13, 1997 to but excluding March 13, 2000, with respect to any
underwritten public offering of the Company's equity securities or any
securities convertible into or exchangeable or exercisable for such equity
securities, the Company shall notify each Significant Investor Group of such
proposed filing and the price at which the shares are expected to be offered
pursuant thereto. Any such Significant Investor Group wishing to have any of
its
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<PAGE>
members' Registrable Securities included in such Registration Statement shall
promptly (and in any event within 30 days after such notice is given by the
Company) give written notice to the Company requesting registration of such
members' Registrable Securities, specifying the member(s) whose Registrable
Securities are requested to be registered, specifying the number of Registrable
Securities requested to be registered by each such member and describing the
proposed method of disposition thereof, and specifying the number of Registrable
Securities which each such member of such Significant Investor Group wishes to
dispose of pursuant to such Underwritten Offering; provided, that no Significant
Investor Group shall be permitted to register more than one-half of the
Registrable Securities held by the members of such Significant Investor Group.
(ii) At any time prior to the time that a Registration Statement as to
which notice has been given by the Company pursuant to this Section 1(b) has
been filed by the Company or, if filed, has been declared effective, the Company
may determine not to file, or may withdraw, such Registration Statement, in
either of which events the Company shall have no obligation pursuant to this
Section 1(b) to register any Registrable Securities in connection with such
proposed Registration Statement.
(c) Underwritten Offerings. In connection with any Underwritten Offering
as to which notice is given by the Company pursuant to Section 1(b) or if the
proposed method of disposition of Registrable Securities selected by the holders
of Registrable Securities under Section 1(a) is to be an Underwritten Offering:
(i) the Company shall request the underwriter(s) participating in such
offering to purchase and sell all Registrable Securities the disposition of
which pursuant to such Underwritten Offering shall have been requested by the
holders thereof in notices given pursuant to Section 1(a) or 1(b);
(ii) each holder of Registrable Securities giving a notice pursuant to
Section 1(a) or 1(b) agrees, by the giving of such notice, that if the
underwriter(s) desire(s) to purchase any of the requested Registrable Securities
by such holder to be purchased, such holder shall sell such Registrable
Securities to such underwriter(s) pursuant to an underwriting agreement to be
entered into by and among the Company, the underwriter(s), such holder and any
other holders of securities of the Company participating in such Underwritten
Offering, unless, upon written notice to the Company and the managing
underwriter given at least five days prior to the date that the Registration
Statement with respect to such offering is proposed to become effective, such
holder withdraws its Registrable Securities from such Underwritten Offering;
provided, however, that if the Registration Statement is amended in any way,
including without limitation amendments to the pricing information therein, or
requires recirculation for any reason, which such amendment or recirculation
results in a later proposed effective date of the Registration Statement, then
such holder of Registrable Securities shall be permitted to withdraw its
Registrable Securities from such Underwritten Offering upon written notice to
the Company and the managing underwriter given at least five days prior to such
later proposed effective date.
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<PAGE>
(iii) if the underwriter(s) elect(s) to purchase less than all
securities (including Registrable Securities) which it is requested to purchase
in connection with such offering, the Company shall use its best efforts to
cause purchases, if any, by such underwriter(s), (A) if such Underwritten
Offering is the result of a request for registration pursuant to Section 1(a),
first, of securities to be offered for the account of Persons other than the
Company requested by each such holder pursuant to Section 1(a) to be included in
the Underwritten Offering, to be made pro rata according to the number of
Registrable Securities requested by each such holder to be included in the
Underwritten Offering, and, second, of securities to be offered for the account
of the Company and (B) if such Underwritten Offering is the result of a
registration contemplated under Section 1(b), first, of securities to be offered
for the account of the Company, and, second, of securities to be offered for the
account of Persons other than the Company, to be made pro rata according to the
number of securities requested by each such holder to be included in the
Underwritten Offering;
(iv) if pursuant to Section 1(c)(iii), any of the Registrable
Securities requested by holders of Registrable Securities to be disposed of
pursuant to any Underwritten Offering shall not have been purchased by the
underwriter(s) thereunder, then such holders of Registrable Securities shall
have the right to distribute their remaining Registrable Securities in a
subsequent Underwritten Offering conducted in accordance with the provisions
hereof.
(d) Restrictions on Sale of Securities by Holder. Each holder of
Registrable Securities agrees, upon the written request of the Company or the
underwriter(s) in connection with the first Underwritten Offering, not to sell,
sell short, grant an option to buy, or otherwise dispose of shares of the
Company's Common Stock for a period of 120 days after the closing date of such
Underwritten Offering, to the extent timely so requested in writing by the
Company or such underwriter(s); provided, however, that nothing in this Section
1(d) shall be construed as to limit in any way the incidental registration
rights of any Significant Investor Group as described in Section 1(b).
The foregoing provision shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute, regulation or
preexisting fiduciary duty from entering into any such agreement.
(e) Restrictions on Sale of Securities by the Company. The Company agrees
not to effect any public or private offer, sale or distribution of its equity
securities or any security convertible into or exchangeable or exercisable for
such equity security, including a sale pursuant to Regulation D under the
Securities Act, during the 10-day period prior to, and during the 90-day period
(or such longer period, not exceeding 180 days, as is required by the
underwriter(s)) beginning on, the closing date of each Underwritten Offering
permitted pursuant to Section 7 or for such period as may be reasonably required
by the underwriter(s) in such Underwritten Offering, to the extent timely and
reasonably so requested in writing by the underwriter(s) (except as part of such
registration, if permitted, or pursuant to registrations on
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Form S-4 or Form S-8 or any successor form to such Forms or pursuant to an
issuance of Common Stock of the Company where such Common Stock is exempted from
the Securities Act pursuant to Section 3(a)(10) thereof); provided, however,
that a private offer, sale or distribution of such securities shall be permitted
with the consent of the holders of a majority of the Registrable Securities
owned by the Investors to be disposed of in such Underwritten Offering, which
consent shall not be unreasonably withheld. Without limitation, the withholding
of such consent by the holders of Registrable Securities shall be deemed to be
reasonable if (A) such holders determine in good faith that the private offer,
sale or distribution of such securities proposed to be made by the Company would
have a material adverse effect on such Underwritten Offering and (B) such
withholding would not have a Material Adverse Effect.
(f) Amendments. Upon the occurrence of any event that would cause any
Registration Statement (i) to contain a material misstatement or omission or
(ii) not to be effective and usable for resale of Registrable Securities during
the period that such Registration Statement is required to be effective and
usable, the Company shall promptly file an amendment to the Registration
Statement, in the case of clause (i), correcting any such misstatement or
omission, and in the case of either clause (i) or (ii), using its best efforts
to cause such amendment to be declared effective and such Registration Statement
to become usable as soon as practicable thereafter.
2. REGISTRATION PROCEDURES.
In connection with any Registration Statement and subject to the provisions
of Section 1 the Company shall use its best efforts to effect such registration
to permit the sale of the Registrable Securities being sold in accordance with
the intended method or methods of distribution thereof, and pursuant thereto the
Company shall as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Securities Act, which form
shall be available for the sale of the Registrable Securities being sold in
accordance with the intended method or methods of distribution thereof and shall
include all financial statements required by the Commission to be filed
therewith (including, if required by the Securities Act or any regulation
thereunder, financial statements of any Subsidiary of the Company which shall
have guaranteed any indebtedness of the Company), cooperate and assist in any
filings required to be made with the NASD and use its best efforts to cause such
Registration Statement to become effective and approved by such governmental
agencies or authorities as may be necessary to enable the selling holders to
consummate the disposition of such Registrable Securities; provided, that before
filing a Registration Statement or any Prospectus, or any amendments or
supplements thereto, the Company shall (i) furnish to the holders of the
Registrable Securities and the underwriter(s), if any, copies of all such
documents proposed to be filed, which documents shall be subject to the review
of such holders and (ii) make the Company's representative available for
discussion of such documents; and provided, further, the Company shall not file
any Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which either the holders of a
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<PAGE>
majority of Registrable Securities owned by the Investors and covered by such
Registration Statement or the underwriter(s), if any, shall reasonably object
within 10 Business Days after the receipt thereof. For purposes of the preceding
proviso, an objection made by a holder of the Registrable Securities or an
underwriter, if any, shall be deemed to be reasonable if, including without
limitation, the Registration Statement, amendment, Prospectus or supplement, as
applicable, as filed or proposed to be filed, contains a material misstatement
or omission;
(b) prepare and file with the Commission such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for the applicable period set forth in Section
1; in the case of any Registration Statement filed pursuant to Rule 415 under
the Securities Act, cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner, and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(c) if requested by the holders of a majority of the Registrable Securities
owned by Investors and being sold in an Underwritten Offering or the
underwriter(s) thereof, promptly incorporate in a Prospectus, Prospectus
supplement or post-effective amendment such information as such underwriter(s)
and the holders of a majority of the Registrable Securities being sold agree
should be included therein relating to the plan of distribution of the
Registrable Securities, including, without limitation, information with respect
to the number of Registrable Securities being sold to such underwriter(s), the
purchase price being paid therefor and with respect to any other terms of the
offering of the Registrable Securities to be sold in such offering; and make any
required filings of such Prospectus, Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the matters to
be incorporated in such Prospectus, Prospectus supplement or post-effective
amendment;
(d) advise the underwriter(s), if any, and holders of the Registrable
Securities promptly and, if requested by such Persons, confirm such advice in
writing:
(i) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or any
post-effective amendment thereto, when the same has become effective;
(ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto;
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(iii) if at any time the representations and warranties of the
Company contemplated by clause (l)(i) below cease to be true and correct;
(iv) of the existence of any fact and the happening of any event that
makes any statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document incorporated by
reference therein untrue, or that requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to make the
statements therein not misleading; and
(v) of the issuance by the Commission of any stop order or other order
suspending the effectiveness of the Registration Statement, or any order issued
by any state securities commission or other regulatory authority suspending the
qualification or exemption from qualification of such Registrable Securities
under state securities or "blue sky" laws. If at any time the Company shall
receive any such stop order suspending the effectiveness of the Registration
Statement, or any such order from a state securities commission or other
regulatory authority, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(e) furnish to each holder of the Registrable Securities and each of the
underwriter(s), if any, without charge, at least one complete conformed copy of
the Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference);
(f) deliver to each holder of the Registrable Securities and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of the
Prospectus and any amendment or supplement thereto by each of the holders of the
Registrable Securities and each of the underwriter(s), if any, in connection
with the offering and the sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(g) prior to any public offering of Registrable Securities, cooperate with
the holders of the Registrable Securities, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of the
Registrable Securities under the securities or "blue sky" laws of such
jurisdictions as the holders of the Registrable Securities or underwriter(s) may
reasonably request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement;
(h) cooperate with the holders of the Registrable Securities and the
underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities being sold without bearing any
restrictive legends; and enable such Registrable
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Securities to be in such denominations and registered in such names as such
holders or the underwriter(s), if any, may request at least two Business Days
prior to any sale of Registrable Securities made by such underwriter(s);
(i) use its best efforts to cause the Registrable Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriter(s), if any, to consummate the disposition of
such Registrable Securities;
(j) if any fact or event contemplated by clause (d)(iv) above shall exist
or have occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Registrable Securities, the Prospectus will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(k) provide a transfer agent and registrar (if the Company does not already
have such an agent) and CUSIP number for all Registrable Securities not later
than the effective date of the Registration Statement;
(l) enter into such agreements (including an underwriting agreement) and
take all such other actions in connection therewith as may be reasonably
required in order to expedite or facilitate the disposition of the Registrable
Securities pursuant to the Registration Statement, and in connection with any
such underwriting agreement entered into by the Company:
(i) make such representations and warranties to the holders of the
Registrable Securities and the underwriter(s), in form, substance and scope as
are customarily made by issuers to underwriters in primary underwritten
offerings;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the underwriter(s) and the holders of the Registrable Securities
being sold), addressed to the underwriter(s) covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may reasonably be requested by such holders and underwriters; and use its
best efforts to have such opinions addressed to each such selling holder;
(iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants, addressed to the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters to underwriters in connection
with primary underwritten offerings; and use its best efforts to have such
letters and updates addressed to each selling holder of Registrable Securities;
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<PAGE>
(iv) set forth in full or incorporate by reference in the underwriting
agreement the indemnification provisions and procedures of Section 4 with
respect to all parties to be indemnified pursuant to said Section; and
(v) deliver such documents and certificates as may be reasonably
requested by the holders of the Registrable Securities being sold or the
underwriter(s) of such Underwritten Offering to evidence compliance with
subclause (i) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company pursuant
to this clause (l).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder;
(m) make available for inspection by a representative of the holders of the
Registrable Securities, any underwriter participating in any disposition
pursuant to the Registration Statement, and any attorney, accountant or other
professional retained by such holders or any of the underwriters, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such holder, underwriter, attorney,
accountant or other professional in connection with such Registration Statement
subsequent to the filing thereof and prior to its effectiveness, except that the
aforementioned advisors may be required to sign a reasonably acceptable
confidentiality agreement;
(n) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make generally available to the holders of
the Registrable Securities, as soon as practicable, a consolidated earnings
statement (which need not be audited) for the 12-month period (A) commencing at
the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not sold
to underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement;
(o) use its best efforts to cause all Registrable Securities to be listed
on each securities exchange, if any, on which equity securities issued by the
Company are then listed; and
(p) use its best efforts to take all other steps necessary to effect the
registration of the Registrable Securities contemplated hereby.
Each holder of the Registrable Securities as to which any Registration
Statement is being effected agrees to furnish promptly to the Company all
information reasonably known to such holder to be necessary to make the
information previously furnished to the Company by such holder not materially
misleading.
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Each holder of the Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 2(d)(iv), or notice of a
stop order or suspension described in Section 2(d)(v), such holder shall
forthwith discontinue disposition of Registrable Securities and cease to use the
Prospectus in use under such Registration Statement. The Company shall, as
promptly as practicable, provide each holder with copies of the supplemented or
amended Prospectus contemplated by Section 2(j), or advise the holders in
writing that the use of the Prospectus may be resumed, and provide each holder
with copies of any additional or supplemental filings which are incorporated by
reference in the Prospectus. If so directed by the Company, each such holder
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
3. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement shall be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses (including
filings made with the NASD);
(ii) fees and expenses of compliance with federal securities and
state "blue sky" or securities laws;
(iii) expenses of printing (including printing certificates for the
Registrable Securities and Prospectuses), messenger and delivery services and
telephone;
(iv) in connection with any Underwritten Offering, fees and
disbursements of counsel for the Company and one counsel for the holders of the
Registrable Securities (subject to the provisions of Section 3(b));
(v) all application and filing fees in connection with listing the
Registrable Securities on a national securities exchange or automated quotation
system pursuant to the requirements hereof;
(vi) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(vii) any reasonable out-of-pocket expenses of the holders of the
Registrable Securities (or the agents who manage their accounts); and
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(viii) such other reasonable and customary expenses as may be, at
such time (A) associated with underwritten offerings and (B) customarily borne
by the issuer.
The Company shall, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, rating
agency fees and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with any Underwritten Offering, the Company shall
reimburse the holders of the Registrable Securities for the reasonable fees and
disbursements of not more than one counsel chosen by the holders of a majority
of the Registrable Securities covered by such Registration Statement.
Notwithstanding the provisions of this Section 3, each holder shall pay
registration expenses if and to the extent required by applicable law.
4. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each holder of the
Registrable Securities and each Person, if any, who controls such holder within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages, liabilities and
expenses (including, without limiting the foregoing but subject to Section 4(c),
the reasonable legal and other expenses incurred in connection with any action,
suit or proceeding or any claim asserted) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages, liabilities or expenses are caused directly by an untrue
statement or omission contained in information relating to such holder,
furnished in writing to the Company by or on behalf of such holder expressly for
use therein. In connection with any Underwritten Offering permitted by Section
7, the Company shall also indemnify underwriters, if any, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act and the Exchange Act) to the
same extent as provided above with respect to the indemnification of the
holders, if requested in connection with any Registration Statement.
(b) As a condition to the inclusion of its Registrable Securities in any
Registration Statement pursuant to this Agreement, each holder thereof shall
furnish to the Company in writing, promptly after receipt of a request therefor,
such information as the Company may reasonably request for use in connection
with any Registration Statement, Prospectus or preliminary prospectus (including
such completed and executed questionnaires as the Company may reasonably
request) and agrees to indemnify and hold harmless, severally and not jointly,
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the Company and its directors, its officers who sign such Registration
Statement, and any Person controlling the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the indemnity from the Company to each holder and Persons controlling such
holder, but only with reference to information relating specifically to such
holder furnished in writing by or on behalf of such holder expressly for use in
such Registration Statement or the Prospectus or any preliminary prospectus
included therein, and of which none of the Company, its directors, officers or
Affiliates has any actual or constructive knowledge independent of such holder;
provided, however, that such holder of Registrable Securities shall not be
liable in any such case to the extent that the holder has furnished in writing
to the Company prior to the filing of any such Registration Statement,
Prospectus or preliminary prospectus information expressly for use in such
Registration Statement, Prospectus or preliminary prospectus which corrected or
made not misleading information previously furnished to the Company, and the
Company failed to include such information therein. In case any action shall be
brought against the Company, any of its directors, any such officer, or any such
controlling Person based on the Registration Statement, the Prospectus or any
preliminary prospectus and in respect of which indemnity may be sought against
one or more of the holders, such holders shall have the rights and duties given
to the Company by Section 4(c) (except that if the Company as provided in
Section 4(c) shall have assumed the defense thereof such holders shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof but the fees and expenses of such counsel shall be at such
holder's expense) and the Company and its directors, any such officers, and any
such controlling Person shall have the rights and duties given to the holders by
Section 4(c). In no event shall the liability of any selling holder hereunder be
greater than the net proceeds (i.e., proceeds net of underwriting discounts,
fees, commissions and any other expenses payable by such selling holder)
received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought against any current or
former holder of the Registrable Securities or any Person controlling such
holder, with respect to which indemnity may be sought against the Company
pursuant to Section 4(a), such holder or such Person controlling such holder
shall promptly notify the Company in writing and the Company shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such holder and payment of all fees and expenses relating thereto. Such holder
and such Persons controlling such holder shall have the right to employ separate
counsel in any such action or proceeding and participate in the defense thereof,
but the fees and expenses of such counsel shall be at such holder's expense
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company, which authorization shall not be unreasonably withheld,
(ii) the Company has not assumed the defense and employed counsel reasonably
satisfactory to such holder within 15 days after notice of any such action or
proceeding, or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both such holder or any Person
controlling such holder and the Company and such holder or any Person
controlling such holder shall have been advised by such counsel that there may
be one or more
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<PAGE>
legal defenses available to such holder or Person controlling such holder that
are different from or additional to those available to the Company and, in the
reasonable opinion of such counsel, could not be asserted by the Company's
counsel without creating a conflict of interest (in which case the Company shall
not have the right to assume the defense of such action or proceeding on behalf
of such holder or controlling Person, it being understood, however, that the
Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to all
local counsel which is necessary, in the good faith opinion of both counsel for
the indemnifying party and counsel for the indemnified party in order to
adequately represent the indemnified parties) for all such holders and
controlling Persons, which firm shall be designated in writing by the holders of
a majority of the Registrable Securities currently or formerly held by such
holders and that all such fees and expenses shall be reimbursed as they are
incurred upon written request and presentation of invoices). The Company shall
not be liable for any settlement of any such action effected without the written
consent of the Company (which consent shall not be unreasonably withheld), but
if settled with the written consent of the Company or if there is a final
judgment for the plaintiff, the Company agrees to indemnify and hold harmless
such holder and all Persons controlling such holder from and against any loss or
liability by reason of such settlement or judgment. The Company shall not,
without the prior written consent of the holder, effect any settlement of any
pending or threatened proceeding in respect of which any holder or any Person
controlling such holder is a party and indemnity has been sought hereunder by
such holder or any Person controlling such holder unless such settlement
includes an unconditional release of such holder or such controlling Person from
all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 4 is unavailable to
an indemnified party under paragraphs (a), (b) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the holders of the Registrable Securities on the other hand
from the original sale by the Company of the Registrable Securities, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and such holders on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and such holders on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company on the one hand or
by such holders on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by an indemnified party as a result of the
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<PAGE>
losses, claims, damages, liabilities or expenses shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.
(e) The Company and the holders of the Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 4 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in subsection
(d) above. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to in subsection
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding any other provision of this Agreement, no holder of
the Registrable Securities shall be required to contribute an amount greater
than the net proceeds received by such holder with respect to the sale of
Registrable Securities giving rise to any indemnification or contribution
obligation under this Section 4. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5. RULE 144A. The Company hereby agrees with each holder of the
Registrable Securities for so long as any of the Registrable Securities remain
outstanding and during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act, to make available to any beneficial owner of
Registrable Securities in connection with any sale thereof and any prospective
purchaser of such Registrable Securities from such beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act.
6. RULE 144. The Company agrees with each holder of Registrable
Securities to:
(a) comply with the requirements of Rule 144(c) under the Securities Act
with respect to current public information about the Company;
(b) use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act (at any time it is subject to such reporting requirements); and
(c) furnish to any holder of Registrable Securities upon request (i) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c) and the reporting requirements of the Securities Act and the
Exchange Act (at any time it is subject to such reporting requirements), (ii) a
copy of the most recent annual or quarterly report of the Company, and (iii)
such other reports and documents of the Company as such holder may reasonably
request to avail itself of any similar rule or regulation of the Commission
allowing it to sell any such securities without registration.
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<PAGE>
7. PARTICIPATION IN UNDERWRITTEN OFFERINGS. No holder of the Registrable
Securities may participate in any Underwritten Offering hereunder unless such
holder (a) agrees to sell such holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements; provided, that no holder of Registrable Securities included in any
Underwritten Offering shall be required to make any representations or
warranties to the Company or the underwriter(s) other than representations and
warranties regarding such holder and such holder's intended method of
distribution.
8. SELECTION OF UNDERWRITERS. In any Underwritten Offering of Registrable
Securities requested pursuant to Section 1(a), the investment banker(s) and
manager(s) that will administer the offering shall be selected by the holders of
a majority of the Registrable Securities with respect to which the request for
an Underwritten Offering was made under Section 1(a); provided, that, in either
case, such investment banker(s) and manager(s) must be reasonably acceptable to
the Company; and provided, further, that non-acceptance by the Company shall be
deemed reasonable if, inter alia, such investment banker(s) and manager(s) are
not of national stature and the Company's non-acceptance is on the basis that
such investment banker(s) and manager(s) are not of national stature; and
provided, further, that non-acceptance by the Company shall not be deemed
reasonable if, inter alia, such non-acceptance is on the basis that the Company
has entered into any agreement or contract (which agreement or contract the
Company entered into without the consent of the holders of a majority of the
Registrable Securities included in such offering) giving to specific investment
banker(s) and/or manager(s) the right to administer an Underwritten Offering.
9. INTERPRETATION OF AGREEMENT; DEFINITIONS.
(a) Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined.
"AFFILIATE" means, as to any Person, a Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the first Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
stock, through an investment advisory or other fiduciary arrangement, by
contract or otherwise.
"AGREEMENT" means this Registration Rights Agreement and all Schedules
hereto.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which banks in New York are required by law to close or are customarily closed.
15
<PAGE>
"COMMISSION" means the Securities and Exchange Commission as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Exchange Act, then the Person performing
such duties at such time.
"COMMON STOCK" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company.
"COMPANY" has the meaning assigned in the first paragraph of this
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"INVESTORS" means, collectively, the Persons listed on Schedule I, and any
successors or permitted assignees of any of their rights hereunder that hold
Registrable Securities.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, operations, prospects, liabilities or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
"NASD" means National Association of Securities Dealers, Inc.
"OFFERING" means the November 1997 offering of up to $10,000,000 of shares
of Common Stock to the Investors under the terms set forth in separate
subscription agreements between the Company and each of the Investors.
"PERSON" means an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"PROSPECTUS" means the prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
"REGISTRABLE SECURITIES" means all shares of Common Stock purchased in the
Offering held at the relevant time by an Investor. As to any particular
securities, such securities will cease to be Registrable Securities when (i)
they have been transferred in a public offering registered under the Securities
Act, (ii) they have been transferred in a sale made through a broker, dealer or
market-maker pursuant to Rule 144 under the Securities Act or (iii) the holder
thereof is able to sell all of such securities under Rule 144 under the
Securities Act during any 90-day period.
16
<PAGE>
"REGISTRATION STATEMENT" means any registration statement of the Company
relating to the registration for resale of Registrable Securities, including any
registration statement filed pursuant to the provisions of this Agreement,
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIDE ARRANGEMENT" has the meaning assigned in Section 10(c).
"SIGNIFICANT INVESTOR GROUP" means any group of Investors that are
Affiliates and that collectively purchased at least 500,000 shares of Common
Stock in the Offering.
"UNDERWRITTEN OFFERING" means a registration in which securities of the
Company are sold to an underwriter for reoffering to the public.
(b) Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with the
generally accepted accounting principles in effect from time to time, to the
extent applicable, except where such principles are inconsistent with the
express requirements of this Agreement including without limitation the
definitions set out in Section 9.
(c) Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
10. MISCELLANEOUS.
(a) Remedies. Each holder of the Registrable Securities, in addition to
being entitled to exercise all rights provided herein, and granted by law,
including recovery of damages, shall be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company shall not, 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 such holders of the Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any other agreements.
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<PAGE>
(c) Comparable Agreements. The Company hereby represents and warrants that
it has not entered into or agreed to any side letter or similar arrangement or
other agreement with any other holder or prospective holder of any securities of
the Company providing for registration rights with respect to the securities of
the Company that confers rights or benefits more favorable than the rights and
benefits conferred upon the holders of the Registrable Securities hereunder
(such a letter, arrangement or agreement, whether or not it confers such more
favorable rights or benefits, a "Side Arrangement"). The Company shall not
enter into any Side Arrangement with any holder or prospective holder of any
securities of the Company that shall confer rights or benefits more favorable
than the rights and benefits conferred upon the holders of the Registrable
Securities hereunder, unless, in each case, each of the holders of the
Registrable Securities have been notified in writing and been provided with a
copy of such a proposed Side Arrangement at least 20 Business Days prior to the
effective date of such Side Arrangement and have been given the opportunity to
receive the rights and benefits in such Side Arrangement as of the date of such
Side Arrangement.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the written consent of the Company and each of the Investors.
(e) Notices. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery.
Such notices, demands and other communications will be sent to any Investor at
the address indicated on Schedule I, to any other holder of Registrable
Securities at such holder's address of record appearing on the Company's books
and to the Company at the address indicated below:
Prosoft I-Net Solutions, Inc.
2333 North Broadway
Suite 300
Santa Ana, CA 92706
Attention: President
Telecopier: (714) 953-1200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. All
such notices, demands and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; upon receipt, if
mailed postage prepaid; when answered back, if telexed; when receipt is
acknowledged, if telecopied; or at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the Investors,
including without limitation
18
<PAGE>
and without the need for an express assignment, Affiliates of the Investors;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon transferees of the Investors that are not Affiliates of the
Investors and do not hold at least 25,000 shares of Common Stock. In addition,
whether or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of the Investors are also for the benefit
of, and enforceable by, any subsequent holder of Registrable Securities that is
either an Affiliate of an Investor or a holder of at least 25,000 shares of
Common Stock.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Governing Law. THE CORPORATE LAW OF THE STATE OF NEVADA SHALL
GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS AND OBLIGATIONS
OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND
THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF, EXCEPT SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW.
(i) Severability. Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts, or portion which may, for any reason, be hereafter declared
invalid.
(j) Submission to Jurisdiction. THE COMPANY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, WITH RESPECT TO ALL ACTIONS OR PROCEEDINGS RELATING TO
THIS AGREEMENT, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED
TO IT AT THE ADDRESS OF THE COMPANY SET FORTH IN SECTION 10(E) ABOVE, AND THAT
SERVICE SO MADE, SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT AND FIVE BUSINESS DAYS AFTER THE SAME
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<PAGE>
SHALL HAVE BEEN POSTED TO THE COMPANY'S ADDRESS, AS THE CASE MAY BE, IN
ACCORDANCE HEREWITH. THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT (IF SUCH A PROCEDURE IS AVAILABLE UNDER
APPLICABLE LAW) OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING CONTAINED IN
THIS SECTION SHALL AFFECT THE RIGHT OF ANY INVESTOR TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING IN THE
COURTS OF ANY JURISDICTION AGAINST THE COMPANY OR TO ENFORCE A JUDGMENT OBTAINED
IN THE COURTS OF ANY OTHER JURISDICTION.
(k) Captions. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
(l) Waiver of Jury Trial. EACH OF THE COMPANY AND THE INVESTORS
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
(m) Effectiveness of Agreement. This Agreement shall become effective
upon execution by the Company and delivery hereof by the Company to at least one
Investor and the execution by such Investor and delivery hereof by such Investor
to the Company, notwithstanding the fact that any other potential Investors
listed in Schedule I have not so executed and delivered this Agreement.
(n) Final Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
PROSOFT I-NET SOLUTIONS, INC.
By:
-------------------------------
Name:
Title:
[Signatures of Investors are contained in Schedule I.]
21
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<TABLE>
<CAPTION>
SCHEDULE I
----------
INVESTORS
---------
SHARES OF
NAME AND SIGNATURE ADDRESS COMMON STOCK
<S> <C> <C>
Morgan Guaranty Trust Company of New Morgan Guaranty Trust Company of New York 200,000
York, as Trustee of the Commingled 522 Fifth Avenue
Pension Trust Fund (Multi-Market New York, NY 10036
Special Investment Fund I) of Morgan Attn: Ms. Anne Mancuso
Guaranty Trust Company of New York Telecopier: (212) 837-9046
By:___________________________ with a copy to:
Name:
Title: J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
Attn: Mr. Kurt J. Wolfgruber
Telecopier: (212) 837-2651
Morgan Guaranty Trust Company of New Morgan Guaranty Trust Company of New York 225,000
York, as Trustee of the Commingled 522 Fifth Avenue
Pension Trust Fund (Multi-Market New York, NY 10036
Special Investment Fund II) of Morgan Attn: Ms. Anne Mancuso
Guaranty Trust Company of New York Telecopier: (212) 837-9046
By:___________________________ with a copy to:
Name:
Title: J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
Attn: Mr. Kurt J. Wolfgruber
Telecopier: (212) 837-2651
Morgan Guaranty Trust Company of New Morgan Guaranty Trust Company of New York 37,500
York, as Trustee of the Multi-Market 522 Fifth Avenue
Special Investment Trust Fund of Morgan New York, NY 10036
Guaranty Trust Company of New York Attn: Ms. Anne Mancuso
Telecopier: (212) 837-9046
By:___________________________
Name: with a copy to:
Title:
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
Attn: Mr. Kurt J. Wolfgruber
Telecopier: (212) 837-2651
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Morgan Guaranty Trust Company of New Morgan Guaranty Trust Company of New York 37,500
York, as Investment Manager and Agent 522 Fifth Avenue
for the Alfred P. Sloan Foundation New York, NY 10036
(Multi-Market Account) Attn: Ms. Anne Mancuso
Telecopier: (212) 837-9046
By:___________________________
Name: with a copy to:
Title:
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
Attn: Mr. Kurt J. Wolfgruber
Telecopier: (212) 837-2651
</TABLE>
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<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to Form S-1 in the Registration Statement (Form S-3 No. 333-35249) and
related Prospectus of Prosoft I-Net Solutions, Inc. for the registration of
2,796,563 shares of its common stock and the Post-Effective Amendment on Form
S-3 to Registration Statements (form S-1 No. 333-11247 and 333-28993) for the
registration of an aggregate of 3,742,729 shares of its common stock and to the
incorporation by reference therein of our report dated October 24, 1997, with
respect to the consolidated financial statements of Prosoft I-Net Solutions,
Inc. as of July 31, 1997 and 1996, and for the year ended July 31, 1997 and the
period from December 8, 1995 (date of incorporation) to July 31, 1996, included
in its Annual Report (Form 10-K) for the year ended July 31, 1997, filed with
the Securities and Exchange Commission.
Ernst & Young LLP
Orange County, California
December 2, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Amendment No. 1 to Form S-1 on Form S-3
Registration Statement (No. 333-35249) relating to 2,796,563 shares of common
stock of Prosoft I-Net Solutions, Inc. and the Post-Effective Amendment on Form
S-3 to Registration Statements on Form S-1 (Nos. 333-11247 and 333-28993)
relating to an aggregate of 3,742,729 shares of common stock of Prosoft I-Net
Solutions, Inc. amended thereby of our report dated March 8, 1996, appearing in
the Prospectus, which is part of such Registration Statements.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
KELLY & COMPANY
Newport Beach, California
December 1, 1997
