U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number: 0-21853
CADAPULT GRAPHIC SYSTEMS, INC.
(Name of small business issuer in its charter)
DELAWARE 87-0475073
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Commerce Drive, Allendale, New Jersey 07401
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (201) 236-1100
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the 90 past days.
YES [X] NO [ ]
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $10,227,628
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The aggregate market value of voting and non-voting stock of the issuer
held by non-affiliates on September 24, 1999 was $2,847,914, based on the
average closing bid and asked prices of the issuer's common stock on September
24, 1999 of $1.75 and $2.375, respectively.
As of September 24, 1999, 3,068,307 shares of the issuer's common stock
were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
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CADAPULT GRAPHIC SYSTEMS, INC.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business 4
Item 2. Description of Property 22
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security Holders 24
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 25
Item 6. Management's Discussion and Analysis or Plan of Operation 27
Item 7. Financial Statements 30
Item 8. Changes In and Disagreements With Accountants on Accounting 48
and Financial Disclosure
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; 49
Compliance With Section 16(a) of the Exchange Act
Item 10. Executive Compensation 52
Item 11. Security Ownership of Certain Beneficial Owners and 59
Management
Item 12. Certain Relationships and Related Transactions 60
Item 13. Exhibits and Reports on Form 8-K 61
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS
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(a) Business Development
Cadapult Graphic Systems, Inc. ("Cadapult" or the "Company") is a
Delaware corporation which was originally incorporated under the laws of the
State of Utah on August 11, 1983 under the name Communitra Energy, Inc. At the
Company's inception, the Board of Directors authorized the issuance of
1,275,000 unregistered and restricted shares of its common stock to directors,
executive officers and persons who may be deemed to have been promoters or
founders of the Company for the total consideration of $3,000. Commencing in
November, 1983, and pursuant to an exemption provided in Section 3(a)(11) of
the Securities Act of 1933, as amended (the "1933 Act"), and Section 61-1-10
of the Utah Uniform Securities Act, the Company publicly offered and sold an
aggregate total of 3,000,000 shares of its common stock to public investors
who were residents of the State of Utah, at a price of one cent ($0.01) per
share. The offering was subsequently completed, with the Company receiving
aggregate gross proceeds of $30,000, before payment of legal, accounting and
printing expenses. On July 16, 1985, the Company filed with the Secretary of
State of the State of Utah Articles of Amendment to its Articles of
Incorporation, which changed the name of the Company to Seafoods Plus, Ltd.
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, on September 18, 1995, the corporation adopted
Articles of Amendment to its Articles of Incorporation: (i) to effect a 1
share for 16.17 reverse split of the Company's 5,658,250 then-outstanding
shares of common stock, effective as of the close of business on September 5,
1995, retaining the authorized capital at 50,000,000 shares and the par value
at one mill ($0.001) per share, with appropriate adjustments being made in
the additional paid in capital and stated capital accounts of the Company and
with fractional shares to be rounded to the nearest whole share. On
September 18, 1995, the Board of Directors, acting pursuant to Section
16-10a-821 of the Utah Revised Business Corporation Act, unanimously resolved
to issue 1,650,000 post-split unregistered and restricted shares of common
stock to Jenson Services, Inc., a consultant to the Company, in consideration
of the sum of $10,000, which funds were to be used to pay costs associated with
legal fees and accounting costs. Immediately following the above-referenced
reverse split, 350,012 shares of the Company's common stock were issued and
outstanding. Following the issuance of 1,650,000 "unregistered" and
"restricted" shares to Jenson Services, Inc., 2,000,012 shares of common
stock were currently issued and outstanding. On May 15, 1996, acting without
a meeting pursuant to Section 16-10a-821 of the Utah Revised Business
Corporation Act, the Board of Directors of the Company unanimously resolved
to adopt new Bylaws.
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On June 4, 1998, the Board of Directors authorized a 1 share for 3.5
reverse split of the Company's 2,000,012 then-outstanding shares of common
stock, while retaining the present authorized capital, shares and par value,
with appropriate adjustments in the stated capital and capital surplus
accounts of the Company, resulting in there being approximately 571,450
shares of common stock outstanding after the reverse split.
In June 1998, the Company filed a registration statement on Form S-8
for 66,068 shares of Common Stock. The Company issued the shares to four
individuals, including its officers and directors, pursuant to written
compensation agreements, as follows: Leonard W. Burningham, 63,068 shares;
Kathleen L. Morrison, 1,000 shares; Jason Osborn, 1,000 shares; and Terry
Hardman, 1,000 shares.
The Company did not engage in any substantive business activity from
approximately 1988 to June 18, 1998.
On June 18, 1998, the Company completed the acquisition of Cadapult
Graphic Systems Inc., a privately-held New Jersey corporation formed on May 1,
1987 ("CGSI"), in a transaction viewed as a reverse acquisition. CGSI was a
provider of computer graphics systems, peripherals, supplies and services to
visual communicators and graphics professionals. Pursuant to an Agreement and
Plan or Reorganization dated June 5, 1998, between the Company, CGSI, all of
the shareholders of CGSI, Jenson Services, Inc., a Utah corporation, Duane S.
Jenson and Jeffrey D. Jenson, the Company issued 1,650,000 shares of common
stock to the shareholders of CGSI in exchange for all of the outstanding
common stock of CSGI, resulting in there being approximately 2,287,518 shares
of common stock outstanding after the acquisition. Pursuant to the
acquisition, the shareholders of CSGI became the controlling shareholders of
the Company, the officers and directors of the Company resigned and elected
the CSGI nominees in their places, and CSGI became a wholly-owned subsidiary
of the Company.
Between June and August 1998, the Company conducted a private placement
through the sale of 524,000 shares of unregistered and restricted Common
Stock and raised gross proceeds of $655,000 in a transaction deemed to be
exempt under Rule 505 of Regulation D under the 1933 Act. The Company
applied the net proceeds to working capital, including the acquisition of
other businesses.
On August 14, 1998, the Company reincorporated under the laws of the
State of Delaware by merging with its wholly-owned Delaware subsidiary, a
corporation formed for the purpose of reincorporation. On August 14, 1998,
the Company merged its New Jersey subsidiary. The Company is now a single
entity operating under the laws of the State of Delaware as Cadapult Graphic
Systems, Inc. Except where the context otherwise indicates, the Company and
its former subsidiaries are collectively referred to herein as "Cadapult" or
as the "Company".
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On August 11, 1999, the Company formed Media Sciences, Inc. as a
wholly-owned New Jersey subsidiary ("Media Sciences"), for the manufacture and
distribution of digital color printer supplies. The Company intends to grow
this business through additional marketing, expansion of the existing channel
and distribution agreements, and potentially through joint ventures. The
Company presently intends that Media Sciences, Inc. will acquire and operate
the assets of ultraHue, Inc. The Company has entered into an asset purchase
agreement with ultraHue, Inc., which is expected to close on or about
December 1, 1999.
In August 1999, the Company amended its Certificate of Incorporation
to change its authorized capital from 50,000,000 shares of common stock, par
value $.001 per share, to 25,000,000 shares consisting of 20,000,000 shares of
common stock, par value $.001 per share, and 5,000,000 shares of preferred
stock, par value $.001 per share (the "Preferred Stock").
Certain terms of the Preferred Stock, including, without limitation,
dividend, liquidation and conversion rights have not been designated, and may
be designated by the Board of Directors at its sole discretion. The
amendment to the Certificate of Incorporation provides that the Company's
Board of Directors is expressly authorized to provide for the issue of all or
any shares of the Preferred Stock, in one or more series, and to fix for each
such series such voting powers, full or limited, and such designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of such series (a "Preferred Stock
Designation") and as may be permitted by the Delaware General Corporation
Law.
On September 13, 1999, the Company completed a private placement sale
of 127,750 shares (of which 50,000 shares are being held in escrow pending the
fulfillment of certain conditions subsequent) of unregistered and restricted
Common Stock and raised gross proceeds of approximately $255,500 in
transactions deemed to be exempt under Rules 505 and 506 of Regulation D under
the 1933 Act. The Company applied the net proceeds to development of its
Internet-based services, working capital, and other general corporate purposes.
As of September 24, 1999, 3,068,307 shares of the Company's common
stock were issued and outstanding, and an additional 239,040 shares of common
stock were reserved in escrow for potential issuance.
To management's knowledge, the Company has not been subject to
bankruptcy, receivership or any similar proceedings.
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(b) Business of Issuer
The Company is a provider of computer graphics systems, peripherals,
supplies and service to visual communicators and graphics professionals. The
Company is comprised of three business units, Reseller Operations, eCadapult
and Media Sciences. The Company has established itself as a leading supplier
of computer graphics solutions to the Northeast United States. In 1991, 1992
and 1993, the Company was listed on the INC magazine 500 list of America's
Fastest Growing Privately Held Companies. The Company has sought to increase
its margins through the refinement of its product lines and the addition of
services.
Under its Reseller Operations, the Company is a systems integrator,
value added dealer or value added reseller of computer graphics equipment and
supplies. Its products include animation and design software and
workstations, publishing software and workstations, file servers, networks,
color scanners and color printers and copiers. Its markets include
advertising and marketing companies, printers, quick print shops, service
bureaus, animators, industrial designers as well as the broad corporate
market for color printers.
The Company intends to expand its business operations through
eCadapult, a division of the Company recently established to provide value
added services to the creative graphics community over the Internet. The
Company has launched one new service, SamplePrint.com, a one-stop evaluation
resource for buyers of color printing technology, and has proposed to offer
two new services, Cadapult Storefront and GraphicSmart.com, two e-commerce
websites through which customers can purchase computer graphics products and
supplies from the Company directly over the Internet.
The Company recently formed Media Sciences, Inc., a wholly owned New
Jersey subsidiary ("Media Sciences"), for the purpose of acquiring and
operating companies or their assets. The Company presently intends for Media
Sciences to acquire and operate the assets of ultraHue, Inc., a New Mexico
corporation. On September 8, 1999, Media Sciences entered into an asset
purchase agreement with ultraHue, Inc., which is subject to closing on or
about December 7, 1999 pending the fulfillment of certain conditions
subsequent. ultraHue, Inc. manufactures color solid ink and remanufactures
and refills color toner cartridges, all for use in Tektronix color printers.
ultraHue Inc. distributes these and other products to dealers and
distributors internationally. Media Sciences will manufacture and
distribute, internationally, these digital color printer supplies. The
Company intends to grow this business through expansion of the product line,
additional marketing, expansion of the existing channel and distribution
agreements and potentially through joint ventures.
Operating Strategy
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The computer industry is going through a consolidation that stems from
shrinking margins. This consolidation is likely to occur in the vertical
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markets in which the Company operates. The Company has the strategic
objective of becoming a comprehensive computer graphics services provider
throughout the United States and to provide color printing supplies
internationally. The Company believes it is ready to effect its plan to
expand its operations, leverage its infrastructure, acquire competitors and
consolidate the market.
The Company currently provides computer graphics services to commercial
customers primarily in the Northeast United States. The Company has taken
steps to grow substantially within the consolidating computer industry. In
October 1996, the Company began its expansion plan by opening a sales
location in Boston. In March 1998, the Company acquired the assets of BBG
Technologies, Inc., a computer products reseller in Boston, Massachusetts
with $2 million of annual revenues. In January 1999, the Company acquired
the assets of Tartan Technical, Inc., a computer products reseller in
Massachusetts with $3.5 million of annual revenues. In June 1999, the
Company acquired the assets of WEB Associates, Inc., a computer products
reseller in Pennsylvania with $2.7 million of annual revenues. The Company
intends to acquire additional computer graphics businesses in areas
contiguous to the Company's existing operations as well as in other regions
of the United States. Any acquisitions will be predicated upon available
cash flow or other sources of financing, of which there can be no assurance.
In addition, the Company intends to further implement its business strategy
by continuing its commitment to improving the efficiency of its existing
operations. There can be no assurance that the Company will have sufficient
resources to make any additional acquisitions.
The Company intends Media Sciences to become a leading supplier of
alternative supplies for digital color printers. ultraHue, Inc. is currently
the only alternative to high cost ink produced by Tektronix for Tektronix
solid ink printers, and is the only third party provider of toner cartridges
for Tektronix Phaser 560 color laser printers. Media Sciences is planning to
expand its product line to include remanufactured and refilled toner
cartridges for Tektronix color laser printers. The Company believes it can
expand Media Sciences' business through a product line expansion, through
alternative applications for its solid ink technology, through an expansion
of its distribution channels and through joint ventures and other
partnerships.
The Company anticipates that the relationship between its reseller
operations and Media Sciences will be synergistic. The Company expects its
reseller operations to develop and implement marketing and service programs,
such as No-Cap Color, to strengthen Media Sciences market position.
Acquisitions
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On March 13, 1998, the Company completed the acquisition of BBG
Technologies, Inc., a Massachusetts corporation ("BBG"), pursuant to an Asset
Purchase Agreement whereby the Company purchased all the assets and assumed
certain trade liabilities of BBG. The assets acquired by the Company from
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BBG pursuant to the agreement included, but were not limited to, accounts
receivable, inventory of supplies and printers, customer lists, use of the
name "BBG Technologies" for eighteen months, sales and service and vendor
contracts, and the liabilities assumed by the Company included BBG's
Tektronix account payable and certain other trade payables. The Company
obtained covenants not to compete from BBG and its shareholders, Daniel
McCartney and Joseph Nicholson, who also agreed not to contact any customer
or disclose customer identity to third persons for five years and not to
engage in or compete with the business within 150 miles of Boston for two
years. The Company obtained a two year covenant not to compete from Cathy
Rogers, a key employee of BBG.
On January 7, 1999, the Company completed the acquisition of certain
assets of Tartan Technical, Inc., a Massachusetts corporation ("Tartan")
pursuant to an Asset Purchase Agreement. Tartan was engaged in the sale and
servicing of computer graphics and of imaging equipment and supplies. Under
the agreement, the Company acquired certain assets of Tartan, including, but
not limited to: accounts receivable, less allowances; inventory at lower of
cost or fair market value; certain property and equipment; corporate name;
its customer lists and related files; sales, service and vendor contracts and
security deposits; telephone numbers; databases; rights to
www.tartantechnical.com URL; and, trade show deposits, health insurance
premiums and other prepaid commitments. The Company issued 92,850 shares of
unregistered and restricted Common Stock to Tartan, reserved in escrow an
additional 92,850 shares of unregistered and restricted Common Stock for
possible future issuance to Tartan, and assumed the following liabilities of
Tartan: certain trade payables as of the date of the closing; certain
customer deposits payable as of the date of the closing; and, certain bank
debt. The consideration given was subject to post-closing adjustments,
dependent on the difference of the dollar value of the liabilities assumed in
relation to assets acquired. The Company also has entered into employment
relationships with Thomas H. McLeod and Kathleen C. McLeod, who were officers
and the sole shareholders of Tartan. The Company has employment agreements
with Thomas H. McLeod, Kathleen C. McLeod, and Susan M. Gardner to serve as
Business Development Manager, Account Manager, and Administrative Assistant,
respectively, each for a term of two years. Susan M. Gardener is no longer
with the Company.
On June 23, 1999, the Company completed the acquisition of certain
assets of WEB Associates, Inc., a Pennsylvania corporation ("WEB"), pursuant
to an Asset Purchase Agreement. WEB was engaged in the sale and servicing of
computer graphics and of imaging equipment and supplies. Under the
agreement, the Company acquired certain assets of WEB, which included, but
were not limited to: accounts receivable, less allowances; inventory at
lower of cost or fair market value; certain property and equipment; use of
its corporate name; its customer lists and related files; sales, service and
vendor contracts and security deposits; telephone numbers; databases; and,
other prepaid commitments. The Company paid consideration of $242,200,
issued 86,190 shares of unregistered and restricted common stock to WEB,
reserved in escrow an additional 86,190 shares of unregistered and restricted
common stock for possible future issuance to WEB, and assumed the following
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liabilities of WEB: certain trade payables as of the date of the closing,
and certain customer deposits payable as of the date of the closing. The
consideration given is subject to post-closing adjustments, dependent upon
achieving certain defined gross profit targets. The Company has also entered
into employment relationships with Wayne M. Breisch and Barbara O'Brien, who
were officers and shareholders of WEB. Wayne M. Breisch serves as Account
Manager under a two year employment agreement, and Barbara O'Brien serves as
Account Manager under a one year employment agreement. Elizabeth Breisch, an
officer and shareholder of WEB, entered into an agreement with the Company
that restricts her from competing with the Company, and from soliciting any of
WEB's customer for a term of three years.
On September 8, 1999, Media Sciences, Inc., a wholly-owned subsidiary of
the Company, entered into an asset purchase agreement (the "Asset Purchase
Agreement"), dated September 7, 1999, with ultraHue, Inc., a New Mexico
corporation ("ultraHue"), and Donald Gunn and Randy Hooker, shareholders of
ultraHue, for the acquisition of certain assets and the assumption of certain
liabilities of ultraHue. The closing of the Asset Purchase Agreement is
expected to occur on or about ninety days from the date of execution.
Upon the closing of the Asset Purchase Agreement, Media Sciences is
expected to acquire certain proprietary information and intellectual property
rights of ultraHue and other assets owned and used by ultraHue in the
operation of its business, including: any and all right, title and interest
in and to ultraHue's trade secrets; accounts receivable, less allowances;
inventory at lower of cost or fair market value; certain property and
equipment; all right, title and interest in and to the name ultraHue and any
other trademarks, service marks or any copyrights heretofore used and/or
owned by ultraHue; customer lists and all files relating thereto; sales,
service and vendor contracts and security deposits; existing telephone and
fax numbers; databases; and on-going business records.
Under the Asset Purchase Agreement, Media Sciences is expected to
assume the following liabilities of ultraHue: accounts payable as of the
date of closing; customer deposits as of the date of closing; warranties on
products sold prior to the date of closing; leases and contracts to the
extent they are to be performed after the date of closing.
The consideration to be given by Media Sciences under the Asset
Purchase Agreement are: payment of $2,340,000 at closing; delivery of a
promissory note, executed by Media Sciences and guaranteed by the Company, in
the principal sum of $1,160,000, with interest at the annual rate of 7%, with
the full principal and accrued interest due and payable in full on the first
anniversary of the closing; a sum equivalent to ultraHue's cost for
ultraHue's inventory that is delivered to Media Sciences at closing; the
difference between all accounts receivable collected by Media Sciences less
accounts payable, as collected and paid, respectively; for a period of one
year from the date of closing, payment of a sum equivalent to ten percent of
the quarterly net profits derived by Media Sciences from the first $1,500,000
dollars of gross profits plus thirty percent of the net profits attributable
to gross profits in excess of $1,500,000 dollars (in the event there is a net
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loss in any quarter during this one year period, the amount of such loss
shall be set off against the net profits for any subsequent quarter, provided
that if there is no subsequent quarter in this one year period, then a refund
shall be due Media Sciences); and for a period of two years from the first
anniversary of the date of closing, after certain distributions shall have
terminated, payment of a sum equivalent to ten percent of the quarterly net
profits derived by Media Sciences from the first $1,000,000 of gross profits,
plus thirty percent of the net profits attributable to the gross profits in
excess of $1,000,000 dollars (in the event there is a net loss in any quarter
during this two year period, the amount of such loss shall be set off against
the net profits for any subsequent quarter, provided that if there is no
subsequent quarter in this two year period, then a refund shall be due Media
Sciences). Upon execution of the Asset Purchase Agreement, Media Sciences
deposited $50,000 in escrow pending the closing.
The consideration to be given was negotiated at "arms-length" between
the directors and executive officers of Media Sciences and the Company, and
the directors, executive officers and controlling shareholders of ultraHue.
The Board of Directors of Media Sciences and of Cadapult determined in good
faith that the consideration given under the Asset Purchase Agreement was
reasonable under the circumstances.
The obligation of Media Sciences under the Asset Purchase Agreement is
conditioned upon Media Sciences obtaining financing of not less than $3,000,000
to fund the purchase. If Media Sciences does not obtain the financing by
the closing, either party shall then have the option to terminate the Asset
Purchase Agreement, and all of the rights and obligations of the parties
under the Asset Purchase Agreement shall be deemed null, void and of no
further effect, except that ultraHue shall have the right to retain the
$50,000 deposit being held in escrow as liquidated damages.
At closing, ultraHue is to deliver confidentiality agreements executed
by Donald Gunn and Randy Hooker agreeing not to disclose, and in all other
respects to maintain the secrecy of, ultraHue's trade secrets. In addition,
ultraHue is to assign to Media Sciences all of its right, title and interest
in and to certain Non-Disclosure/Non-Compete Agreements between ultraHue and
certain of its employees who have knowledge of ultraHue's trade secrets and
proprietary information. The Company has invited Donald Gunn, a shareholder
of ultraHue, to join the Company's Board of Directors after the closing.
(1) Principal Products and Services
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Reseller Operations
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Systems
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Products sold by the Company's reseller operations business include
publishing software and workstations, file servers, networks, color scanners
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and color printers and copiers. The Company typically purchases directly
from the manufacturer of the equipment or through a distributor of those
products.
Supplies
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Approximately one third of the Company's revenues are derived from the
sale of digital color printer and copier supplies. The Company intends to
grow this reoccurring revenue stream through proactive sales and marketing
efforts, and by adding new supplies to its product line.
Hardware and Software Service and Support
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This represents a growing opportunity for the Company, as is most
clearly shown by the conversion of its Tektronix client base from
manufacturer's service to its own. This conversion is expected to continue
and to apply to any acquired business. The opportunity to service other
products in the computer graphics market exists. The Company is adding
service authorizations, but is limited by the saturation of its personnel.
Therefore, the Company plans to add service technicians as its customer base
and authorizations increase. In addition, the Company plans to add dedicated
sales personnel to actively market these services.
No-Cap Color
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The Company has launched a new program called No-Cap Color. Under this
program, a customer will be provided with one or more color printers, at no
charge, in return for a commitment to purchase certain supplies over a two
year period. The printer remains the property of the company.
No-Cap Color is beneficial to all parties involved: the Company, the
printer vendor and the customer. The customer receives a quality workgroup
printer in exchange for a commitment to purchase supplies which they would
purchase anyway. The printer vendors increase their installed base and
garner revenues from the printer sale and certain supplies and service
components. Finally, the Company benefits from a profitable ongoing revenue
stream. The Company plans to expand this program through aggressive
marketing, through the creation of an agent program and through the addition
of more printers eligible under the program.
eCadapult: Internet Services
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eCadapult is the new interactive division of the Company. The mission
of the eCadapult division is to establish an Internet-based market within the
creative graphics industry for the Company's services and computer graphics
equipment and related merchandise. The Company has developed and launched
one new interactive service, SamplePrint.com, and plans for the development
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of two e-commerce sites, Cadapult Storefront and GraphicSmart.com, which are
expected to be introduced in fall 1999, as well as several other interactive
services.
SamplePrint.com
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SamplePrint.com is a website dedicated to helping business buyers
evaluate color printer and copier products over the Internet. The Company
expects SamplePrint.com to function as a one-stop evaluation resource for
buyers of color printing technology-an objective resource for buyers by
providing product information, technical benchmarks, sample prints and other
services. A critical decision making factor for buyers of color printing and
copying equipment is the ability to evaluate the buyers' own images and files
printed from the products. SamplePrint.com allows any buyer to submit files
over the Internet which will be printed and time tested on a variety of
printer choices. The Company expects that the cost of these samples will be
borne by the buyer if the manufacturer of that printer is not a sponsor, or
by the manufacturer if it is a sponsor. The Company's goal is to provide all
samples free to the buyer and have the manufacturers bear the costs. This
service provides a prospective business buyer with the ability to make a
purchase decision based on the image quality of the print samples and
additional information provided on the web site.
The Company plans for SamplePrint.com to support both buyers and
manufacturers of workgroup color printers. With the market for color
printers and copiers growing, the need for generating samples for buyers is
about to explode. International Data Corporation forecasts the market for
desktop color printers in unit shipments is expected to grow at an average
growth rate of 42.9% through the year 2001. The Company anticipates that
SamplePrint.com will become a service to manufacturers by off loading their
sample printing support requirements while providing an objective resource
for the buyer. The Company launched SamplePrint.com in June 1999, with
initial sponsorship from Hewlett-Packard and Okidata. The Company is
currently in discussions with several other leading printer manufacturers to
sponsor this site.
The Company expects that the cost of these samples will be borne by the
buyer if the manufacturer of that printer is not a sponsor, or by the
manufacture if it is a sponsor. The Company's goal is to provide all samples
free to the buyer and have the manufacturers bear the costs.
Buyers who visit the SamplePrint.com site may benefit by:
- A single independent site that can provide them samples from a
controlled environment.
- Comparative information on printer features.
- Sales brochures from the manufacturer will be provided with the
sample.
- Fast turnaround. Targeted 24-48 hours with a return via
overnight service.
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The manufacturers who sponsor the SamplePrint.com site may benefit by:
- Being able to send potential buyers to an independent site for
samples.
- Having their printer samples provided at no charge even if not
requested. This is especially important if a potential buyer
requests samples of a directly competitive product.
- Monthly reports as to who requested and were sent samples.
- Monthly reports will follow-up to sample requesters as to their
purchasing decisions.
The Company may benefit by:
- Revenue stream from the sample prints.
- Revenue stream from banner advertising on the site.
- Qualified prospects for the sale of products, supplies and
service.
Cadapult Storefront
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Cadapult Storefront is intended to be an e-commerce site where existing
customers can purchase supplies and products from the Company directly over
the Internet, seven days a week, 24 hours a day. The Company intends to
integrate Cadapult Storefront with the Company's accounting and order
processing system to increase efficiency in the ordering process. This e-
commerce site will echo the products and margins associated with the
Company's traditional reseller business. Cadapult Storefront is intended to
be an alternative means of placing orders for existing customers.
GraphicSmart.com.
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The Company intends to launch an additional e-commerce site as an
alternative to the Cadapult Storefront and other Internet commerce sites.
This site will offer a broad selection of computer graphics products at
aggressive discounts. The purpose of this site is to capture the price
sensitive customers and businesses that are moving and will be moving to the
Internet as a source of supply.
Internet Creative Search Engine.
--------------------------------
The Company is evaluating a plan that may result in the development of
an Internet site where consumers of creative services, such as an art
directors, could search for creative talent, such as photographers. The
source of revenue of such a site could include placement fees for the
creative talent and advertising.
-14-
<PAGE>
GraphicAuction.com.
-------------------
The Company intends to offer an on-line auction site for computer
graphics equipment and related merchandise where buyers and sellers are
brought together in an efficient forum that is available 24 hours a day,
seven days a week to buy and sell computer graphics products. The Company
plans to design GraphicAuctions.com to permit the Company, manufacturers and
the public to list items for sale, which may be browsed through in a fully
automated, topically arranged, and easy-to-use format, and allow buyers to
bid on and purchase items of interest. The Company plans to offer buyers a
large selection of list new, refurbished, reconditioned, used, demonstration,
and discontinued items that can be costly to find and purchase through the
traditional marketplace. The Company intends to charge the seller a nominal
fee for each completed transaction, but sellers and bidders will not be
charged for listing items or for making bids through GraphicAuction.com. The
Company believes that this auction forum may attract more potential customers
and create more interest in the Company's products and services, as well as
permit the Company to better gauge market demand for certain products.
Marketing and Sales Plans
- -------------------------
The Company intends to increase its marketing and sales efforts. The
goal of these efforts is to increase revenues through increased market
awareness about the Company, through the introduction of new products and
services to the customer base and through the increase in the number of
salespeople.
Industry and Market Overview
- ----------------------------
The market for computer graphics, in which the Company operates, has
exploded over recent years and is expected to continue to expand at a rapid
pace. The Company focuses its products and services on the following
markets:
- Digital Pre-Press
- Display Graphics
- Presentation Graphics
- Digital Imaging
- Digital Color Printing
Digital Pre-Press
-----------------
Over the last several years, there has been a dramatic shift in the
process printing industry from manual, analog production of printed materials
to the use of computers. Historically, the production of a printed brochure,
magazine or catalog involved numerous manual steps using photographic
materials to produce the final press-ready copy.
-15-
<PAGE>
With rapid advances in software and hardware, much of today's printed
materials are produced digitally. The print production process now allows a
printed piece to go from concept to imaged printing plate in a fully digital
environment. Copy writing, proofing and revisions all take place on a desktop
computer, increasing the speed and efficiency of the pre-press process, and
streamlining personnel requirements in the process. The Company believes this
market is in a period of rapid transition regarding the manner in which
electronics products are delivered to the traditional printing customer. When
digital pre-press systems sold for $200,000 per seat (user), most
manufacturers used a captive direct sales force to sell to the end-user.
Today, the typical seat sells for under $20,000, forcing manufacturers to
utilize a reseller channel to deliver their products.
Display Graphics
----------------
The most rapidly growing segment of the computer graphics output market
is display graphics. Display graphics, or large format graphics, describes a
process that allows computer-generated or captured images to be printed in
sizes up to 60 inches wide.
Historically, these images could only be printed on color electrostatic
printers costing over $120,000. However, over the last several years,
significant advances in ink-jet technology, software, specialty inks and
media have placed the cost of entry for display graphics systems starting at
under $10,000, and market acceptance has been rapid. End-users of this
technology include a wide range of industries and markets, such as:
- Trade-show graphics - production of booth and arcade displays
- Point of Sale graphics - floor displays
- Sign Shops - traditional signage, fleet graphics
- Print-for-Pay (e.g., Kinkos, Sir Speedy)
- Package Design - package prototyping
- Graphic Arts - imposition proofing
Presentation Graphics
---------------------
This segment of the computer graphics market consists of the creation
of visual communication materials such as slides, overhead transparencies,
multimedia presentations and associated hard copy materials. Once a highly
specialized business, presentations can now be created by just about any
individual with a computer and presentation software. The presentation
itself is displayed or printed on digital color printers, film recorders and
digital projectors. These devices range in price from $3,000 to $30,000.
Digital Imaging
---------------
This segment of the computer graphics market consists of the capture,
manipulation, storage, databasing, transfer and output of digital images
-16-
<PAGE>
(assets). Examples include digital photo restorations and compositing of
images (combining several disparate images into one new image). As more and
more digital content is created, different technology is required to address
each of the above facets of digital imaging. These include scanners and
digital cameras that capture images, and specialized software that allows the
user to change, manipulate, combine and retouch images. Digital images,
especially color images are inherently large and therefore have specialized
storage requirements such as RAID (Redundant Array of Inexpensive Disks)
technology, CD-ROM and tape storage. A large volume of digital assets
dictates a database, or asset management solution, to manage, search and
retrieve these images. High bandwidth networks are required to transfer
these images within a user environment and to external destinations.
Finally, a variety of digital output devices, as described above are used to
print these images.
Digital Color Printing
----------------------
This broad segment of the computer graphics market includes all
business color printers from desktop color printers to high speed connected
color copiers. Desktop color printers are starting to replace black and
white printers in the office environment as quality and speed improve and
costs are reduced. The market for desktop color printers is expected to grow
at an annual rate of 42.9% in units through the year 2001. These products
range from $3,000 to $10,000. For those who need more volume, higher speeds
or better quality, color copiers can be connected to a network and become
very fast, high quality digital color printers. These solutions range from
$10,000 to $50,000. Also including in the digital color printing market
segment are display graphics and presentation graphics products as discussed
above.
Digital color printers (and copiers) create an ongoing requirement for
service and supplies. This reoccurring business often exceeds the original
cost of the device over its lifetime. Today in the business color printer
market, supplies for these printers are manufactured by, and distributed by,
the printer manufacturer. There exists little to no competition to these
sources of supplies. As adoption of color printing technology continues, the
Company expects demand for alternative supplies to grow dramatically. In the
black and white printer market, third party supply manufacturers provide
approximately 20-25% of the supplies consumed. The Company believes that a
similar opportunity exists in the color market.
(2) Distribution Methods of the Products and Services
-------------------------------------------------
The Company sells directly to end users through telesales, outside
sales and Internet sales.
-17-
<PAGE>
(3) Status of any Publicly Announced New Product or Service
-------------------------------------------------------
The Company plans for the development of two e-commerce sites, Cadapult
Storefront and GraphicSmart.com, which are expected to be introduced in fall
1999.
(4) Competition
-----------
All facets of the computer graphics business are competitive. The color
printer business is becoming increasingly competitive as the products become
commoditized. On the systems side of the business, there are other systems
integrators, VARs and dealers that offer similar or the same products, some of
which are substantially larger and better funded than the Company. On the
supplies front, the Company competes with other supply dealers as well as
supply only companies that are often national and catalog based companies.
Based on the sales volumes of these companies, it is often difficult to
compete on a price basis; therefore, the Company competes based upon local
delivery and better availability of product.
The Company seeks to compete by servicing most of the products it sells
as opposed to some of its competitors who rely on manufacturer or third party
service. The Company offers a seven day a week, 24 hours a day premium
service on many products, unlike many of its competitors.
The Company's principal competitors are larger and better funded than
the Company, and include: Globix Corporation, AOE Ricoh, MCS Canon, Minolta
Business Systems, Professional Graphics Systems and Services, Inc.,
Electronic Business Products, Inc., Charrette, NAPC, and Cambridge
Electronics, Inc.
Media Sciences' primary competitor will be Tektronix, Inc. Tektronix,
Inc. is the leading manufacturer of solid ink for use in digital color
printers, representing approximately ninety seven percent of the United States
market of solid ink.
(5) Principal Suppliers
-------------------
The Company typically purchases directly from the manufacturer of the
equipment or through a distributor of those products. The Company currently
obtains certain equipment and supplies from a limited number of sources of
supply. Vendors include Tektronix, Inc., Silicon Graphics, Inc., Mita
Corporation, Access Graphics, Ricoh, Alias, Merisel, Ingram, and Tekgraf.
The Company has been and will continue to be dependent on third party vendors
for the computer equipment and supplies it sells. The loss of any particular
agreement may have a material affect on the operations of the Company.
-18-
<PAGE>
In October 1996, the Company entered into a non-exclusive dealer
agreement with Mita Copystar America, Inc. to market and service the
integrated document imaging equipment and related products on a year to year
basis. The agreement sets forth certain minimum sales goals. The Company's
areas of prime responsibilities under the agreement include five counties in
New Jersey and New York.
The Company entered into an evergreen Value Added Dealer Agreement with
Tektronix, as supplemented in December 1996, for printers, service
installation and service extended warranty, accessories, supplies and
software. The agreement contains a minimum sales volume expectation in order
to qualify for certain resale discounts. Under the agreement, the Company is
to sell, market and promote Tektronix supplies for use with Tektronix
printers.
In February 1999, the Company entered into an Indirect
Reseller/Indirect VAR Agreement with Silicon Graphics, Inc. Under the
agreement, the Company is authorized to purchase and resell desktop and
workgroup products, enterprise and technical service products, and high-end
graphics products through its New Jersey, New York and Massachusetts offices.
The agreement expires on January 31, 2000, subject to one year renewal terms.
The Company has a non-exclusive dealer agreement with Ricoh to market
and sell the Ricoh Aficio Color line of copiers, printers, supplies and
services. The agreement expires on March 31, 2000, subject to automatic one
year renewals.
(6) Dependence on Major Customers
-----------------------------
The Company is not dependent on any customer, the loss of which would
have a material adverse affect on the Company.
(7) Intellectual Property
---------------------
The Company's future success depends in part upon its ability to
protect its proprietary technology and information. Giving effect to the
acquisition of ultraHue, Inc., the Company will own substantial trade secrets
regarding the formulation and manufacturing processes behind solid ink for
printers. The Company seeks to protect intellectual property rights and to
limit access to proprietary information through a combination of patents,
trademarks, copyrights, trade secrets, and nondisclosure and licensing
arrangements, all of which, even if available, afford only limited
protection. There can be no assurance that any patent will issue from the
patent applications to be filed on the Company's products, or that any claims
allowed from such applications will be of sufficient scope or strength, or be
issued in all countries where the Company's products can be sold, to provide
meaningful protection or any commercial advantage to the Company. Also,
competitors of the Company may be able to design around the licensed patent
applications, even if issued. The laws of certain foreign countries in which
-19-
<PAGE>
the Company's products are or may be developed, manufactured or sold,
including various countries in Asia, may not protect the Company's products
or intellectual property rights to the same extent as the laws of the United
States, and thus, may increase the likelihood of piracy of the Company's
technology and products. There can be no assurance that the steps taken by
the Company to protect its intellectual property rights will be adequate to
prevent misappropriation of its technology or the many larger competitors
will not independently develop technologies substantially equivalent or
superior to the Company's technology.
(8) Need for Government Approval
----------------------------
Not applicable.
(9) Government Regulation
---------------------
The Company is not subject to government regulation in its business
operations. There are currently few domestic or foreign laws or regulations
that apply directly to access or commerce on the Internet, but such laws and
regulations are becoming more prevalent. Applicability to the Internet of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, export or
import matters, obscenity and personal privacy is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet. Because of the
Internet's popularity and increasing use, new laws and regulations with
respect to the Internet have been or in the future may be adopted. Such laws
and regulations may cover issues such as: user privacy; pricing; taxation;
content; copyrights; distribution; and characteristics and quality of
products and services. In addition, the growth of the Internet, coupled with
publicity regarding Internet fraud, may lead to the enactment of more
stringent consumer protection laws. The Company could be materially
adversely affected by proposed regulation on voice transmission over the
Internet, encryption technology and access charges for Internet service
providers, as well as the continuing deregulation of the telecommunications
industry. In addition, because the Company's services may be accessible
worldwide, other jurisdictions may claim that the Company is required to
qualify to do business as a foreign corporation in a particular state or
foreign country. These legal uncertainties may impose additional burdens on
the Company's business and increase the cost of potential litigation. The
enactment of any additional laws or regulations may impede the growth of the
Internet, decrease the demand for the Company's products and services,
increase the Company's costs of doing business, decrease the Company's
potential revenues, or in some manner adversely affect the Company's
business, financial condition and results of operations.
-20-
<PAGE>
The Company may become subject to legal claims relating to the content
in the website that the Company hosts. The law relating to the liability of
online services companies for information carried on or disseminated through
their services is currently unsettled. It is possible that claims could be
made against online services companies under both United States and foreign
law for defamation, libel, invasion of privacy, negligence, copyright or
trademark infringement, or other theories based on the nature and content of
the materials disseminated electronically and subsequently distributed to
others. Providers of Internet products and services have been sued in the
past (sometimes successfully) based on the content of material. If the
Company has to take costly measures to reduce the Company's exposure to these
risks, or if such measures are required to defend the Company against such
claims, the Company's business, financial condition and results of operations
may be materially and adversely affected. The Company intends to obtain
general liability insurance, however, it may not be adequate to fully
compensate the Company and any costs or imposition of liability that is not
covered by insurance or in excess of insurance coverage could have a material
adverse effect on the Company's business, financial condition and results of
operations.
(10) Research and Development
------------------------
In the 1999 fiscal year, the Company spent approximately $150,000 on
research and development activity in connection with the development of the
Company's SamplePrint.com service. The Company expects to allocate a
significant amount of the resources towards Media Sciences. The Company
expects to conduct ongoing research and development through Media Sciences,
which activities involve the formulation of new and improved products
for new and existing applications, investment in tooling and manufacturing
equipment and facilities.
(11) Compliance with Environmental Laws
----------------------------------
Not applicable.
(12) Employees
---------
The Company currently has thirty-three full-time employees, including
six management employees.
(13) Year 2000 Disclosure
--------------------
The Company has conducted a preliminary review of the Company's
internal programs and has determined that there are no significant Year 2000
issues within the Company's systems or services. At this time, the Company
does not anticipate any significant expense in ensuring that the Company is
Year 2000 compliant. The Company believes that the Company's systems are
-21-
<PAGE>
Year 2000 compliant. The Company utilizes third-party equipment and software
and the Company has been informed that such are or will be Year 2000
compliant. The Company presently does not have a contingency plan related to
Year 2000 issues, and upon further assessment, the Company may create one.
The failure of the Company's contingency plan or the software applications or
internal systems of other companies on which the Company's systems rely or to
which they are connected or of other Internet-related companies, including
Internet web hosting companies, Internet access providers, or Internet root
server operators, none of which the Company controls, to be Year 2000
compliant upon January 1, 2000 could have a material adverse effect on the
operation of the Internet and/or a material adverse effect on the Company's
business, financial condition and results of operations. Until the Company
completes a thorough evaluation of the Company's Year 2000 issues, the
Company is uncertain of the risks and the costs related to addressing such
issues.
- -------------------------------------------------------------------------------
ITEM 2. DESCRIPTION OF PROPERTY
- -------------------------------------------------------------------------------
The Company maintains its executive offices in approximately 7212
square feet, including 1200 square feet of warehouse space, at Allendale, New
Jersey, pursuant to a lease expiring on March 31, 2002. The Company also
maintains four (4) sales offices in the eastern United States.
The following table sets forth the location, approximate square
footage, approximate annual rent, use of each location and expiration date of
each lease:
-22-
<PAGE>
<TABLE>
<CAPTION>
APPROX.
APPROX. ANNUAL LEASE
LOCATION SQ. FEET RENT(1) USE EXPIRATION DATE
- --------------------- -------- -------- ---------------- ------------------
<S> <C> <C> <C> <C>
110 Commerce Drive 7,212 $101,993 Executive Office Mar. 31, 2002(2)
Allendale, NY Warehouse
137 Fifth Avenue 1,400 $ 39,690 Sales Office July 14, 2000
New York, NY
125 Wolf Road 923 $ 14,306 Sales Office Feb. 28, 2000(3)
Albany, NY
24 Westech Drive 4,000 $ 28,748 Sales Office Jan. 31, 2002(4)
Tyngsboro, MA
2551 Industry Lane 2,500 $ 12,000 Sales Office June 30, 2000
Norristown, PA
</TABLE>
(1) Certain of these leases provide for moderate annual rental increases.
(2) Lease provides for a five year renewal option.
(3) Lease provides for a one year renewal option.
(4) Lease provides for a renewal option for either a three year or five
year term.
The Company presently intends to seek corporate executive office,
warehousing and manufacturing facilities of 12,000-15,000 square feet to
accommodate increased warehouse requirements, expanded service facilities,
and to support the manufacturing requirements of Media Sciences, Inc.
Although the Company believes that its facilities are adequate for its
existing operations, the Company regularly evaluates the adequacy of these
facilities in light of its growth and expansion plans. The Company may not
find suitable facilities at reasonable rates. The Company intends to acquire
additional sales office space by virtue of its acquisition efforts, if
consummated.
-23-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS.
- -------------------------------------------------------------------------------
In August 1999, the Company instituted an action against Tektronix,
Inc. before the Superior Court in New Jersey, which action has been moved
before the United States District Court for the District of New Jersey. The
Company's lawsuit seeks certain injunctive relief and an indeterminate amount
of damages, and alleges that Tektronix, Inc. violated the New Jersey
Franchise Practices Act, the New Jersey Antitrust Act, federal acts
prohibiting restraints of trade, breach of contract and unfair competition,
among other claims. In its lawsuit, the Company alleges that, in August
1999, Tektronix, Inc. unilaterally, and without notice, illegally terminated
the Company's Tektronix Premier Plus Reseller franchise because the Company
is selling a non-Tektronix product, Cadapult solid ink supplied to the
Company by ultraHue. The Company is informed that Tektronix controls 97% of
the U.S. solid ink market for digital printers (which essentially are only
Tektronix printers). The results of the Company's pending lawsuit could have
material positive or material adverse consequences to the Company, or both
adverse and positive consequences. The Company derived 45% of its fiscal
year 1999 revenues from sales and services of Tektronix products. The
lawsuit has only recently commenced and may or may not be resolved in the
near future. The loss of all or a part of this lawsuit could have a material
adverse affect on the Company.
- -------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------------------------
The Company, as authorized by the necessary approvals of the Board of
Directors and the holders of the majority of the Company's Common Stock,
including certain members of Management and the Board of Directors of the
Company (collectively "Majority Stockholders") has adopted resolutions
Regarding amending the Company's Certificate of Incorporation to decrease the
number of authorized capital stock and to authorize a class of preferred
stock by changing the authorized capital stock that the Company is authorized
to issue to twenty five million (25,000,000), consisting of twenty million
(20,000,000) shares of Common Stock with $.001 par value per share and five
million (5,000,000) shares of preferred stock with $.001 par value
("Preferred Stock"). The Board of Directors of the Company has approved, and
the Majority Stockholders have delivered written consents in lieu of a
meeting of stockholders approving the certificate amendment actions.
-24-
<PAGE>
- -------------------------------------------------------------------------------
PART II
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- -------------------------------------------------------------------------------
(a) Market Information
------------------
Beginning July 10, 1998, the Common Stock of the Company was quoted on
the OTC Bulletin Board under the symbol "GRFX". The following table sets
forth for the periods indicated, the high and low closing bid prices for the
Common Stock as reported by the OTC Bulletin Board.
Fiscal Year 1999
----------------
Quarter Ended High Low
- ------------- ---- ---
September 30, 1998 $ 4.00 $ 2.00
December 31, 1999 $ 3.620 $ 2.125
March 31, 1999 $ 3.250 $ 1.75
June 30, 1999 $ 3.562 $ 2.50
The foregoing quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
(b) Holders
-------
The approximate number of holders of record of the Company's Common
Stock as of September 24, 1999 was 386. As of that date, there were
approximately 450 beneficial shareholders, including shareholders holding
stock under nominee security position listings.
(c) Dividends
---------
No cash dividends have been declared by the Company on the Company's
Common Stock. The Company may pay dividends on its Preferred Stock in the
near future, under such terms as may be set forth in a Preferred Stock
Designation. Future cash dividends on the Company's Common Stock, if any,
will be at the discretion of the Company's Board of Directors and will depend
upon, among other things, the Company's future operations and earnings,
capital requirements and surplus, general financial condition, contractual
restrictions, and such other factors as the Board of Directors may deem
relevant.
-25-
<PAGE>
(d) Sale of Unregistered Securities
-------------------------------
In August 1998, the Company granted Dan Brecher 5-year warrants to
purchase 50,000 shares of common stock at $4.00 per share, and Fischbein
Badillo Wagner Harding 5-year warrants to purchase 25,000 shares of common
stock at $4.00 per share.
In February 1999, the Company granted Bruce Meisel 5-year warrants to
purchase 30,000 shares of common stock at $5.00 per share.
On June 23, 1999, the Company completed the acquisition of certain
assets of WEB Associates, Inc., pursuant to an Asset Purchase Agreement.
Under the agreement, the Company issued 86,190 shares of unregistered and
restricted common stock to WEB Associates, Inc. and reserved in escrow an
additional 86,190 shares of unregistered and restricted for possible future
issuance to WEB Associates, Inc. in a transaction deemed to be exempt under
Section 4(2) of the 1933 Act.
On September 13, 1999, the Company completed a private placement sale
of 127,750 shares (of which 50,000 shares are being held in escrow pending the
fulfillment of certain conditions subsequent) of unregistered and restricted
Common Stock and raised gross proceeds of approximately $255,500. The Common
Stock issued in the private placement was not registered with the Securities
and Exchange Commission under the Securities Act and was offered and sold
primarily to "accredited investors" in reliance on exemptions from
registration provided in Sections 4(2) and 3(b) of the Securities Act and
Rules 505 and 506 of Regulation D under the Securities Act. The private
placement was conducted by the Company's officers and directors and was not
underwritten.
-26-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
- -------------------------------------------------------------------------------
"FORWARD-LOOKING" INFORMATION
- -----------------------------
This report on Form 10-KSB contains certain "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which represent the Company's expectations and
beliefs, including, but not limited to statements concerning the Company's
expected growth. The words "believe," "expect," "anticipate," "estimate,"
"project," and similar expressions identify forward-looking statements, which
speak only as of the date such statement was made. These statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
the Company's control, and actual results may differ materially depending on a
variety of important factors.
The following discussion and analysis should be read in conjunction with
the information set forth in the audited financial statements for the year
ended June 30, 1999. On June 24, 1998 the Company elected to change its fiscal
year from April 30 to June 30. For the purposes of this analysis, the
results of operations for the year ended June 30, 1999 are being compared to
the results of operations for the year ended April 30, 1998.
Results of Operations
For the Year Ended June 30, 1999
Sales. Sales for the year ended June 30, 1999 compared to the year period
ended April 30, 1998 increased approximately 44% to $10,227,628 from
$7,103,906. The revenue mix in 1999 has shifted with supplies revenue
increasing as a percentage of total sales, while systems revenue has
decreased as a percentage of total sales. Service revenues, as a percentage
of sales have remained consistent. The increase in sales can be attributed
to the Tartan and Web acquisitions and to internal growth.
Cost of Sales. Cost of Sales for the year ended June 30, 1999 were
$7,442,239 or approximately 73% of sales, as compared to $5,174,402 or
approximately 73% for the year period ended April 30, 1998. Gross profit
margins remained stable for the year ended June 30, 1999 as compared to the
year ended April 30, 1998 despite the acquisition of businesses that were
previously generating significantly lower margins. This was achieved
primarily through the conversion of manufacturer service agreements to
agreements fulfilled by the Company and through the sale of private label
supplies.
-27-
<PAGE>
Selling, General and Administrative. Selling, General and Administrative
expenses for the year ended June 30, 1999 increased to $3,069,682 from
$2,138,915 for the year ended April 30, 1998. The Selling, General and
Administrative expenses were approximately 30% of sales for both periods.
Selling, General and Administrative expenses for the year ended June 30, 1999
included increased legal, accounting and consulting fees associated with the
merger with Seafoods Plus, Ltd. in June of 1998, with being a publicly held
company, the amortization of goodwill resulting from acquisitions, and to
increase in payroll attributable to the acquisitions and development of the
Company's infrastructure for future growth. Selling, General and
Administrative expenses for the year ended June 30, 1999 includes a one time
expense of $130,000 for the development of SamplePrint.com.
Interest Expense. Interest Expense for the year ended June 30, 1999
increased to $160,081 from $90,829 incurred for the year ended April 30,
1998. The increase in 1999 was due primarily to an increase in borrowings to
finance the Company's increased receivables and inventory due to the
acquisitions.
Income Taxes. For the year ended June 30, 1999, the Company recorded a tax
benefit of $217,000 primarily due to a net operating loss carryforward offset
by a valuation allowance of $217,000. For the one year ended April 30, 1998,
the Company recorded a tax benefit of $62,498 primarily due to the
utilization of a net operating loss carryback.
Net Income (Loss). For the one year ended June 30, 1999, the Company had a
net loss of $444,374 or $0.16 per share as compared to a net loss of $219,242
or $0.14 per share for the year ended April 30, 1998.
Liquidity and Capital Resources
The Company has an agreement with a lender under which it can borrow up to
$6,000,000 under a revolving line of credit, subject to availability of
collateral. Borrowings bear interest at 2% over the lender's base rate, are
payable on demand and are collateralized by all assets of the Company. As of
June 30, 1999 the Company had used $1,677,024 of this line.
In August 1998, the Company completed a private placement for $655,000
consisting of 524,000 shares of Common Stock at a purchase price of $1.25.
Expenses associated with the private placement were approximately $35,000,
providing the Company with net proceeds of $620,000. The Company used
substantially all of the proceeds in the retirement of bank debt assumed in
the acquisition of Tartan in January 1999.
-28-
<PAGE>
The Company experienced positive cash flow of $10,336 for the year ended June
30, 1999. Cash used in operations resulted in negative cash flows of
$221,653 primarily due to a loss of $444,374 offset by a non cash charge to
depreciation and amortization of $180,494 , a decrease in accounts receivable
of $89,130 and a decrease in inventory of $170,259 and a increase in deferred
revenue of $149,489, and a decrease in accounts payable of $473,241. Cash
used in investing activities was primarily comprised of purchase of equipment
and the acquisitions of WEB Associates and Tartan Technical. The above uses
of cash were offset by increased borrowing under the Company's credit
facility and proceeds from the sale of common stock.
In September 1999, the Company completed a private placement for $255,500
consisting of 127,750 shares of Common Stock (of which 50,000 shares are
being held in escrow pending the fulfillment of certain conditions
subsequent) at a purchase price of $2.00. Expenses associated with the
private placement were approximately $15,000, providing the company with net
proceeds of $240,500 of which $100,000 is due to the Company pending the
fulfillment of certain conditions subsequent. The Company used
substantially all of the proceeds to invest in its Internet initiatives
including SamplePrint.com and the upgrade of its accounting system in
preparation for the Cadapult storefront.
On August 19, 1999 the Company entered into a Letter of Intent with a placement
agent for a proposed private offering of up to $5,000,000. The proposed
private offering is of 500,000 units of the Company's securities with a face
value of $10.00 per unit, each unit consisting of one share of convertible
adjustable preferred stock and one warrant to purchase two shares of common
stock at $4.50. The preferred stock will originally be convertible at $3.25
per share. In addition, the preferred stock will carry a dividend, paid
quarterly, of 11.5% per annum. The offering is to be sold to accredited
investors only in states where permitted. The use of proceeds will be
targeted at additional acquisitions, expansion of Cadapult's "No-Cap Color"
printer program and for working capital. The offering is on a "best efforts"
basis, but could ultimately raise up to $11 million for the Company if fully
sold and if the included warrants are exercised.
-29-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 7. FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
Financial Report - June 30, 1999
Independent Auditors' Report F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Changes in Shareholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-7
-30-
<PAGE>
[Letterhead of Wiss & Company, LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Cadapult Graphic Systems, Inc.
We have audited the accompanying balance sheets of Cadapult Graphic Systems,
Inc. as of June 30, 1999 and June 30, 1998 and the related statements of
operations, changes in shareholders' equity and cash flows for the year ended
June 30, 1999, the two months ended June 30, 1998 and the year ended April
30, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cadapult Graphic Systems,
Inc. at June 30, 1999 and 1998, and the results of its operations and its
cash flows for the periods indicated above in conformity with generally
accepted accounting principles.
/s/ Wiss & Company
WISS & COMPANY, LLP
Livingston, New Jersey
August 18, 1999
-31-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
June 30,
------------------------------
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 33,157 $ 22,821
Accounts receivable, less allowance for doubtful
accounts of $35,000 in 1999 and $22,500 in 1998 1,950,399 1,653,624
Attorney escrow - 320,000
Inventories 1,276,621 1,016,381
Prepaid and refundable income taxes - 46,295
Prepaid expenses and other current assets 77,471 38,591
------------ ------------
Total Current Assets 3,337,648 3,097,712
------------ ------------
PROPERTY AND EQUIPMENT, NET 627,029 232,023
------------ ------------
OTHER ASSETS:
Goodwill and other intangible assets, net 835,889 410,195
Deferred acquisition costs 34,542 -
Security deposits 33,523 31,343
------------ ------------
903,954 441,538
------------ ------------
$ 4,868,631 $ 3,771,273
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $ 1,677,024 $ 695,000
Current maturities of long-term debt 87,547 89,219
Accounts payable 1,710,861 1,940,770
Accrued expenses and other current liabilities 131,767 131,510
Due to officer - 20,000
Deferred revenues 294,089 144,600
------------ ------------
Total Current Liabilities 3,901,288 3,021,099
------------ ------------
OTHER LIABILITIES:
Long-term debt, less current maturities 69,445 156,992
Notes payable to affiliates 20,832 20,832
------------ ------------
90,277 177,824
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, .001 par value,
Authorized 20,000,000 shares; issued 3,058,308
shares in 1999 and 2,583,518 in 1998 3,058 2,583
Additional paid-in capital 1,171,782 423,167
Retained earnings (deficit) (297,774) 146,600
------------ ------------
Total Shareholders' Equity 877,066 572,350
------------ ------------
$ 4,868,631 $ 3,771,273
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
-32-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
Two Months Year Ended
Year Ended Ended June 30, April 30,
June 30, 1999 1998 1998
------------- -------------- ----------
<S> <C> <C> <C>
NET SALES $10,227,628 $1,623,754 $7,103,906
----------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 7,442,239 1,282,495 5,174,402
Selling, general and administrative expenses 3,069,682 472,766 2,138,915
----------- ---------- ----------
10,511,921 1,755,261 7,313,317
----------- ---------- ----------
LOSS FROM OPERATIONS (284,293) (131,507) (209,411)
----------- ---------- ----------
OTHER EXPENSE (INCOME):
Interest expense, net 160,081 21,894 90,829
Gain on sale of equipment - - (18,500)
----------- ---------- ----------
160,081 21,894 72,329
----------- ---------- ----------
LOSS BEFORE INCOME TAXES (CREDITS) (444,374) (153,401) (281,740)
----------- ---------- ----------
INCOME TAXES (CREDITS):
Current - - (39,698)
Deferred - - (22,800)
----------- ---------- ----------
- - (62,498)
----------- ---------- ----------
NET LOSS $ (444,374) $ (153,401) $ (219,242)
=========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 2,844,819 2,019,677 1,622,682
=========== ========== ==========
NET LOSS PER COMMON SHARE -
BASIC AND DILUTED $ (.16) $ (.08) $ (.14)
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
-33-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
Additional Retained Total
Common Stock Paid-in Earnings Shareholders'
----------------------
Shares Amount Capital (Deficit) Equity
---------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCES, APRIL 30, 1997 1,548,450 $ 300 $ - $ 519,243 $ 519,543
YEAR ENDED APRIL 30, 1998:
Sale of common stock to
employees 101,550 102 44,898 - 45,000
Change in par value - 1,248 (1,248) - -
Net loss - - - (219,242) (219,242)
---------- -------- ----------- --------- ---------
BALANCES, APRIL 30, 1998 1,650,000 $ 1,650 $ 43,650 $ 300,001 $ 345,301
TWO MONTHS ENDED JUNE 30, 1998:
Sale of common stock through
private placement 256,000 256 319,744 - 320,000
Issuance of common stock upon
conversion of note payable 40,000 40 49,960 - 50,000
Issuance of common stock in
connection with merger 571,450 571 (571) - -
Issuance of common stock for
services 66,068 66 10,384 - 10,450
Net loss - - - (153,401) (153,401)
---------- -------- ----------- --------- ---------
BALANCES, JUNE 30, 1998 2,583,518 2,583 423,167 146,600 572,350
YEAR ENDED JUNE 30, 1999:
Sale of common stock through
private placement 228,000 228 249,772 - 250,000
Issuance of common stock for
acquisition - Tartan 92,850 93 185,607 - 185,700
Issuance of warrants for legal
services - - 20,510 - 20,510
Sale of common stock through
private placement 67,750 68 120,432 - 120,500
Issuance of common stock for
acquisition - WEB 86,190 86 172,294 - 172,380
Net loss - - - (444,374) (444,374)
---------- -------- ----------- --------- ---------
BALANCES, JUNE 30, 1999 3,058,308 $ 3,058 $ 1,171,782 $(297,774) $ 877,066
========== ======== =========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
-34-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
Year Ended Two Months Year Ended
June 30, Ended June 30, April 30,
1999 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (444,374) $ (153,401) $ (219,242)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 180,494 19,063 73,525
Gain on sale of equipment - - (18,500)
Deferred income taxes - (10,000) (22,800)
Common stock and warrants for services 20,510 10,450 -
Provision for bad debts 6,000 - -
Changes in operating assets and liabilities:
Accounts receivable 89,130 (538,646) 394,474
Inventories 170,259 (236,454) (7,528)
Prepaid and refundable income taxes 46,295 - (46,295)
Prepaid expenses and other current assets 35,710 11,855 (91,318)
Security deposits (2,180) - (4,852)
Accounts payable (473,241) 914,997 9,523
Accrued expenses and other current liabilities 255 (41,971) 137,596
Deferred revenues 149,489 (11,748) 26,322
----------- ----------- -----------
Net cash flows from operating activities (221,653) (35,855) 230,905
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (303,271) (4,069) (105,703)
Proceeds from sale of equipment - - 18,500
Purchase of intangible assets (102,350) - -
Cost of net assets of acquired business (242,200) - (546,431)
Deferred acquisition costs (34,542) - -
----------- ----------- -----------
Net cash flows from investing activities (682,363) (4,069) (633,634)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable to bank, net 333,071 (305,000) 450,000
Proceeds of long-term debt - - 250,000
Payments on long-term debt (89,219) (14,823) (10,147)
Attorney escrow account 320,000 (320,000) -
Advances from officer (20,000) - 20,000
Sale of common stock 370,500 320,000 45,000
----------- ----------- -----------
Net cash flows from financing activities 914,352 (319,823) 754,853
----------- ----------- -----------
NET CHANGE IN CASH 10,336 (359,747) (352,124)
CASH, BEGINNING OF PERIOD 22,821 382,568 30,444
----------- ----------- -----------
CASH, END OF PERIOD $ 33,157 $ 22,821 $ 382,568
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
-35-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
Year Ended Two Months Year Ended
June 30, Ended June 30, April 30,
1999 1998 1998
----------- ------------ -----------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 155,846 $ 21,894 $ 94,377
=========== =========== ===========
Income taxes paid $ - $ - $ 5,032
=========== =========== ===========
Issuance of common stock upon conversion of
Note payable to related party $ - $ 50,000 $ -
=========== =========== ===========
Non cash investing activity -
Acquisition of business:
Fair value of assets acquired $ 1,459,457 $ - $ 865,115
Fair value of liabilities assumed 859,177 - 318,684
Fair value of common stock issued 358,080 - -
----------- ----------- -----------
Net cash payment $ 242,200 $ - $ 546,431
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-6
-36-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Nature of the Business - Cadapult Graphic Systems, Inc. (the "Company")
provides computer graphic systems, peripherals, supplies, training and
service to visual communicators and graphics professionals. The Company is a
systems integrator and a value added dealer/reseller of computer graphics
equipment and supplies to customers. The Company has its corporate
headquarters in New Jersey and has offices in Massachusetts, Albany and New
York City, New York and Pennsylvania.
Estimates and Uncertainties (The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results, as determined at a
later date, could differ from those estimates.
Revenue Recognition - Revenue is recognized at the point of shipment
for goods sold, and ratably through the duration of service contracts.
Deferred revenue consists principally of billings on service contracts prior
to rendering related services.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to concentration of credit risk consists primarily of
cash and unsecured trade receivables. The Company maintains its cash
balances in financial institutions which are insured by the Federal Deposit
Insurance Corporation up to $100,000 each. At June 30, 1999, the Company has
uninsured balances totalling approximately $150,000.
Concentrations of credit risk with respect to all trade receivables are
considered to be limited due to the quantity of customers comprising the
Company's customer base. The Company performs ongoing credit evaluations of
its customers' financial condition and does not require collateral.
Management feels that credit risk beyond the established allowance at June
30, 1999 is limited.
Inventories - Inventories are stated at the lower of cost (specific
identification method) or market.
F-7
-37-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Property and Equipment - Property and equipment are stated at cost.
The Company provides for depreciation using the straight-line and accelerated
methods by charges to income at rates based upon the recovery periods of 5 to
7 years for furniture and equipment and over the useful lives or the lease
term, if shorter, for leasehold improvements.
Goodwill and Other Intangible Assets - Goodwill consists of the excess
of cost over fair market value of the net assets of the acquired business.
The intangible assets are being amortized on the straight-line method over
the following years:
Life (Years)
------------
Goodwill $781,670 15
Covenants-not-to-compete 51,000 3-5
Financing costs 74,880 1-3
--------
907,550
Accumulated amortization 71,661
--------
$835,889
========
The carrying value of intangible assets is periodically reviewed by the
Company based on expected future undiscounted operating cash flows. Based
upon its most recent analysis, the Company believes that no material
impairment exists at June 30, 1999.
Income Taxes - Deferred income taxes reflect the net tax effects of
temporary differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss carryforwards.
Employee Benefit Plan - The Company has a 401(k) savings/retirement
plan for all of its eligible employees. The plan allows for employee
contributions to be matched by the Company on a pro-rata basis. Contributions
made by the Company for the year ended June 30, 1999, the two months ended
June 30, 1998 and the year ended April 30, 1998, were $14,502, $1,401 and
$10,461, respectively.
Deferred Acquisition Costs - Acquisition costs have been deferred,
pending the outcome of the negotiations. If the acquisition is completed,
these costs will be capitalized; otherwise they will be charged to expense.
Net Loss Per Share - Basic and diluted loss per share are based upon
the weighted average number of common shares outstanding during the period.
The computation of diluted earnings per share does not assume the conversion,
exercise or contingent issuance of securities that would have a dilutive
effect on loss per share.
F-8
-38-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Stock Options - The Company accounts for stock option grants using the
intrinsic value based method prescribed by APB Opinion No. 25. Since the
exercise price equaled or exceeded the estimated fair value of the underlying
shares at the date of grant, no compensation was recognized in 1999 and 1998
for stock option grants.
Had compensation cost been based upon fair value of the option on the
date of grants, as prescribed by SFAS No. 123, the Company's proforma net
loss and net loss per share would have been $1,018,000 and $.36 in 1999 and
$288,000 and $.14 for the two months ended June 30, 1998 using the Black-
Scholes option pricing model. The proforma net loss and net loss per share
for the year ended April 30, 1998 would not have been materially different.
The fair value of options granted in 1999 and 1998 were estimated at
the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions, respectively: risk-free interest
rates of 6.0%, dividend yield of 0.0%, volatility factors of the expected
market price of the Company's Common Stock of 108% and a weighted-average
expected life of the options of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of normal
publicly traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employees stock options.
Recently Issued Accounting Standards - In June 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities and will be adopted in the year ended June 30, 2000. The Company
does not engage in, nor does it expect to engage in derivative or hedging
activities, and therefore, the Company anticipates that the adoption of this
statement will have no impact on its financial statements.
Change in Fiscal Year - On June 24, 1998, the Company elected to change
from an April 30 to June 30 fiscal year. Therefore, the accompanying
financial statements include transitional financial statements for the two
months ended June 30, 1998. It is not practicable and cannot be cost
justified to furnish financial statements for the corresponding period of the
prior year; accordingly, unaudited financial data for the two months ended
June 30, 1997 follow which is the corresponding period of the preceding
fiscal year. There were no seasonal factors that affect the comparability of
information or trends reflected.
F-9
-39-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Net sales $ 821,623
=========
Gross profit $ 207,051
=========
Income tax credit $ (47,800)
=========
Net loss $(128,992)
=========
Net loss per share $ (.08)
=======
NOTE 2 - PURCHASE OF BUSINESSES:
On January 7, 1999, the Company issued 185,700 shares of its
unregistered and restricted common stock in exchange for certain assets and
the assumption of certain liabilities of Tartan Technical, Inc. ("Tartan") a
Massachusetts corporation. The assets purchased included accounts
receivable, inventories, property and equipment and the liabilities included
notes payable and accounts payable. The excess of the purchase price and
related costs over the fair value of the net liabilities assumed ($321,789)
was allocated to goodwill. Currently, 92,850 of the shares are held in
escrow pursuant to the resolution of a contingency based on Tartan achieving
certain gross profit levels over the next two years. When the contingency is
resolved, some or all of the 92,850 shares will either be recorded by the
Company as an additional cost of Tartan, or cancelled.
Effective June 18, 1999, the Company acquired for $242,200 in cash and
the issuance of 172,380 shares of its unregistered and restricted common
stock, certain assets and assumed certain liabilities of WEB Associates, Inc.
("WEB") a Pennsylvania corporation. The assets purchased included accounts
receivable, inventories, property and equipment and a covenant not-to-compete
($1,000) and the liabilities included accounts payable. The excess of the
purchase price and related costs over the fair value of net assets ($89,996)
was allocated to goodwill. Currently, 86,190 of the shares are held in
escrow pursuant to the resolution of a contingency based on WEB achieving
certain gross profit levels over the next two years. When the contingency is
resolved, some or all of the 86,190 shares will either be recorded by the
Company as an additional cost of WEB, or cancelled.
The following unaudited pro forma consolidated results of operations
for the years ended June 30, 1999 and April 30, 1998, assumes the Tartan and
WEB acquisition had occurred on May 1, 1997 giving effect to purchase
accounting adjustments and financing. The pro forma results have been
prepared for informational purposes only and do not reflect any benefit from
economies, which might be achieved from combined operations. The pro forma
results do not represent results which would have occurred if the acquisition
had taken place on the basis assumed above, nor are they indicative of the
results of future combined operations.
F-10
-40-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
Two Months
Year Ended Ended Year Ended
June 30, June 30, April 30,
1999 1998 1998
----------- ---------- -----------
<S> <C> <C> <C>
Net sales $14,250,322 $2,521,860 $15,980,206
=========== ========== ===========
Net loss $ (556,819) $ (195,215) $ (36,617)
=========== ========== ===========
Basic and diluted loss
per share (.19) (.08) (.02)
=========== ========== ===========
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
<TABLE>
June 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Office equipment $ 997,359 $ 598,931
Furniture and fixtures 165,213 129,109
Automobiles 65,379 65,379
Leasehold improvements 98,568 18,624
----------- -----------
1,326,519 812,043
Less: Accumulated depreciation and
amortization 699,490 580,020
----------- -----------
$ 627,029 $ 232,023
=========== ===========
</TABLE>
NOTE 4 - NOTE PAYABLE TO BANK:
The Company has an agreement with a bank under which it can borrow up
to $6,000,000 under a revolving line-of-credit, subject to availability of
collateral. Borrowings bear interest at 2% over the bank's base rate, are
payable on demand and are collateralized by all assets of the Company.
Advances under the note payable to bank become immediately due
and payable if certain financial covenants, as defined in the loan
agreements, are not met.
F-11
-41-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT:
A summary of long-term debt follows:
<TABLE>
Interest June 30,
--------------------------
Description Rate 1999 1998
--------------------------------------- -------- ---------- -----------
<S> <C> <C> <C>
Loan payable in monthly installments of
$6,944 plus interest through April
2001, collateralized by all assets of 1% over
the Company prime $ 152,778 $ 236,111
Loan payable in monthly installments of
principal and interest of $543 through
February 2000, collateralized by an
automobile 8.49% 4,214 10,100
---------- -----------
156,992 246,211
Less: Current maturities 87,547 89,219
---------- -----------
$ 69,445 $ 156,992
========== ===========
</TABLE>
Long-term debt at June 30, 1999 matures as follows:
<TABLE>
Year Ending June 30,
--------------------
<S> <C>
2000 $ 87,547
--------
2001 69,445
$156,992
========
</TABLE>
NOTE 6 - INCOME TAXES:
The components of income taxes are summarized as follows:
<TABLE>
Year Ended Two Months Ended Year Ended
June 30, June 30, April 30,
1999 1998 1998
----------- ---------- -----------
<S> <C> <C> <C>
Current:
Federal $ - $ - $ (45,390)
State and local - - 5,692
----------- ---------- -----------
- - (39,698)
----------- ---------- -----------
Deferred:
Federal - - (15,100)
State and local - - (7,700)
----------- ---------- -----------
- - (22,800)
----------- ---------- -----------
$ - $ - $ (62,498)
=========== ========== ===========
</TABLE>
F-12
-42-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
The Company recognizes deferred tax assets, net of applicable reserves,
related to net operating loss carryforwards and certain temporary
differences. The Company is required to recognize a future tax benefit to
the extent that realization of such benefit is more likely than not.
Otherwise a valuation allowance is applied. At June 30, 1999, the Company
believes that the "more likely than not" criteria have not been met, and
accordingly, a valuation allowance has been recognized.
The Company has available net operating loss carryforwards of
approximately $480,000 which expire through 2019. The Company's utilization
of it net operating loss carryforwards may be limited pursuant to Internal
Revenue Code Section 382 if cumulative changes in ownership are in excess of
50% within a three-year period.
A reconciliation of income tax benefit provided at the federal
statutory rate (34%) to income tax benefit is as follows:
<TABLE>
Year Ended Two Months Ended Year Ended
June 30, June 30, April 30,
1999 1998 1998
----------- ---------- -----------
<S> <C> <C> <C>
Income tax benefit computed at
federal statuary rate $ (151,087) $ (52,156) $ (95,792)
Permanent and other items (17,913) 17,156 20,294
Change in valuation allowance 169,000 35,000 13,000
----------- ---------- -----------
$ - $ - $ (62,498)
=========== ========== ===========
</TABLE>
Significant components of the Company's deferred tax assets are as
follows:
<TABLE>
June 30,
---------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards $193,000 $ 33,000
Accruals and reserves 24,000 15,000
-------- --------
217,000 48,000
Less: valuation allowance 217,000 48,000
-------- --------
Total deferred tax assets $ - $ -
======== ========
</TABLE>
F-13
-43-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY:
a) Merger:
Pursuant to an Agreement and Plan of Reorganization dated June 5,
1998, the stockholders of the Company exchanged all their shares of stock
owned for 1,650,000 shares (72%) of $.001 par value common stock of Seafoods
Plus, Ltd. ("SPL"), an inactive public company with nominal assets. Under
the agreement, the Company became a wholly-owned subsidiary of SPL, and then
merged with SPL in 1998. The merger was recorded as a recapitalization of
the Company and an issuance of shares to SPL's shareholders on June 5, 1998.
The Company will continue operating as Cadapult Graphic Systems, Inc.
All references to the Company's common stock in the 1998 balance
sheet, the 1998 statements of operations and notes to the financial
statements retroactively reflect Cadapult's operations and the
recapitalization.
b) Stock Compensation Plan:
The Company has an incentive stock option (the "1998 Plan"),
pursuant to which 500,000 of the Company's authorized but unissued shares of
common stock have been reserved for issuance of stock options. The stock
options (which may be "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended) entitle the holder to
purchase shares of the Company's common stock for up to ten years from the
date of grant (five years for persons owning more than 10 percent of the
total combined voting power of the Company) at a price not less than the fair
market value (110% of fair market value for persons owning more than 10% of
the combined voting power of the Company) of the common stock on the date of
grant. In general, any employee, director, officer or exclusive agent of,
advisor or consultant to, the Company or a related entity is eligible to
participate in the Plan. The stock options are nontransferable, except upon
death. Pursuant to the Plan, certain key employees, members of the Board of
Directors and the President were granted five and ten year incentive stock
options to purchase an aggregate total of 317,893 shares, net of forfeitures,
at a weighted average exercise price of $1.93 per share. A total of 174,443
shares with a weighted average exercise price of $1.69 are exercisable at
June 30, 1999.
The Company granted its President five year stock options to
purchase up to 500,000 shares which vest upon the Company attaining certain
specified milestones and are exercisable at $1.375 per share and expire in
June 2003.
The Company granted two employee's five year stock options to
purchase up to 100,000 shares which vest upon the Company attaching certain
specified milestones and are exercisable at $2.00 per share and expire in
March 2004.
F-14
-44-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
c) Private Placements:
In August 1998 the Company completed a private placement through
the sale of 524,000 shares of its common stock for net proceeds of
approximately $620,000, including conversion of a $50,000 note payable to a
related party.
In June 1999, the Company sold 67,750 shares of its common stock
for $2.00 per share for net proceeds of approximately $120,500.
d) Warrants:
In August 1998, and February 1999, the Company issued 105,000
warrants to purchase its common stock at between $4.00-$5.00 per share in
exchange for legal services. The warrants, which had a value of $20,510,
using the Black-Scholes pricing model, expire through February 15, 2004.
e) Amendments to Certificate of Incorporation:
In August 1999, the Company's Board of Directors amended the
certificate of incorporation reducing the number of authorized shares of
$.001 par value common stock to twenty million shares and authorized five
million shares of $.001 par value preferred stock.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
Leases - The Company leases its premises under lease agreements which
expire through 2002 and an automobile and equipment under operating leases
that expire in 2002. Future minimum lease payments are as follows:
Year Ending June 30,
--------------------
2000 $152,175
2001 108,639
2002 73,370
--------
$334,184
========
Rent expense amounted to $198,199, $31,755 and $176,463 for the year
ended June 30, 1999, the two months ended June 30, 1998 and the year ended
April 30, 1998, respectively.
Employment Agreements - On May 1, 1998, the Company entered into a five
year employment agreement with its President for a base salary of $130,000
per annum subject to certain adjustments and three year employment agreements
with three employees providing for aggregate compensation of $255,000 per
annum. In 1999, the Company entered into two year employment agreements with
three employees providing for aggregate compensation of $142,000 per annum.
F-15
-45-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Litigation - In August 1999, the Company's attorneys filed a civil
action in the Superior Court of New Jersey on behalf of the Company which
alleges that the supplier referred to in Note 9 improperly cancelled the
Company's participation in certain programs which provided the Company with
preferential pricing, business leads and various additional rebates and
incentives. In part, the action charges the supplier with alleged violation
of the New Jersey Antitrust Act, breach of contract and unfair competition.
NOTE 9 - MAJOR SUPPLIER:
Direct purchases from one supplier accounted for approximately 34% of
total purchases in 1999 and 50% in 1998. At June 30, 1999, this supplier
accounted for approximately 22% of the Company's accounts payable. If the
supplier fails to provide the required inventories, it may have a negative
impact on the Company. (See Note 8).
NOTE 10 - SUBSEQUENT EVENTS (Unaudited):
Private Offering - On August 19, 1999, the Company entered into a
letter of intent with a placement agent wherein the placement agent will, on a
best efforts basis, offer up to $5,000,000 of the Company's convertible
adjustable preferred stock to accredited investors. Each unit will be priced
at $10.00 and include one share of Series A Preferred Stock ("Series A") and
two warrants to purchase a total of two shares of common stock for $4.50.
Dividends on Series A stock will accrue at the rate of 11.50% per annum and
are payable quarterly. Each Series A share is convertible at the option of
the holder beginning 30 days after closing (no later than December 31, 1999)
at a rate of 3.077 shares of common stock for one share of Series A. The
conversion price shall adjust to 75% of the average bid price for the 90 days
preceding the 24th month anniversary of the closing of the offering and again
on the 48th month anniversary. Under no circumstances can a new conversion
price be below $2.00 per share.
The Series A stock will be callable by the Company at $15.00 per share
at any time Holders have the right to convert upon receipt of the call
notice.
The Company has agreed to register all of the shares of common stock
necessary for the conversion of the Series A stock and all shares of common
stock underlying warrants within 90 days of the closing of the offering.
F-16
-46-
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
The placement agent's fee will include a commission and a nonaccountable
expense allowance equal to 13% of the proceeds of the offering, five year
warrants to purchase up to 215,000 shares of the Company's common stock at
$1.65 per share and up to 500,000 shares of the Company's common stock at
$3.75 per share. The value of the warrants will be recognized as a cost of
issuance of the Series A shares.
Purchase of Business - On September 7, 1999 Media Sciences, Inc., a
newly formed wholly-owned subsidiary of the Company, entered into an Asset
Purchase Agreement ("Agreement") with ultraHue, Inc., a New Mexico
corporation. The Company has agreed to purchase certain assets and assume
certain liabilities of ultraHue for $3,500,000. The obligation of the
company to purchase the assets is contingent upon the Company obtaining
financing not less than $3,000,000 to fund the purchase. In the event the
Company does not obtain such financing by December 7, 1999, either party
shall have the option to terminate the Agreement.
F-17
-47-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSRE.
- -------------------------------------------------------------------------------
(a)(1) As previously reported on Form 8-K, on July 6, 1998, the
Company informed Mantyla, McReynolds & Associates that it has been dismissed
as the Company's principal accountants. The former principal accountants'
report on the financial statements for either of the past two years neither
contained an adverse opinion or disclaimer of opinion, nor was modified as to
uncertainty, audit scope, or accounting principles. The Company's decision
to change its principal accountant was recommended and approved by the
Company's Board of Directors. There were no disagreements with the former
accountants on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. The Company has
authorized the former accountants to respond fully to all inquires of the
successor accountant concerning any matter.
(a)(2) On July 6, 1998, the Company engaged Wiss & Company, LLP as its
principal accountants. Wiss & Company, LLP had been the principal
accountants for the Company's former New Jersey subsidiary, CGSI, since April
23, 1998. Pursuant to a reverse acquisition which was completed on June 18,
1998, CGSI became a wholly-owned subsidiary of the Company. The Board of
Directors of the Company had selected Wiss & Company to serve as the
Company's principal accountants. There were no disagreements with the
accountants on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
-48-
<PAGE>
- -------------------------------------------------------------------------------
PART III
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
- -------------------------------------------------------------------------------
Directors and Executive Officers
- --------------------------------
The following persons are the present directors and executive officers
of the Company.
Name Age Position
- ---- --- --------
Michael W. Levin 34 Chief Executive Officer, President and
Chairman of the Board
Frances Blanco 38 Vice President Marketing and Investor
Relations, Treasurer, Secretary and
Director
Duncan Huyler 38 Vice President Technical Services
Paul C. Baker 62 Director
Edwin Ruzinsky(1) 66 Director
(1) Became a director on August 27, 1999.
All directors of the Company are elected annually to serve for one year
and hold office until the next annual meeting of the shareholders and until
their successors are elected and qualified. The officers of the Company are
elected by the Board of Directors at the first meeting after each annual
meeting of the Company's shareholders, and hold office until their death,
resignation or removal from office.
Management Profiles
- -------------------
Michael W. Levin, Chief Executive Officer, President and Chairman of the Board:
- ------------------------------------------------------------------------------
Mr. Levin has served as Chief Executive Officer, President and Chairman of
the Board of the Company since June 18, 1998. Before June 1998, he had
served as President, Treasurer, Secretary and Chairman of Cadapult Graphic
Systems Inc., a New Jersey corporation ("CGSI") since 1987, when he founded
CGSI while attending Lehigh University. He is responsible for a senior
management team as well as merger and acquisition activity and corporate
finance. He earned a Bachelor of Science degree in Mechanical Engineering
from Lehigh University in 1987, graduating summa cum laude.
-49-
<PAGE>
Frances Blanco, Vice President of Marketing and Investor Relations, Treasurer,
- ------------------------------------------------------------------------------
Secretary and Director:
- ----------------------
Ms. Blanco has served as Vice President of Marketing and Investor Relations,
Treasurer, Secretary and a Director of the Company since June 18, 1998.
Before June 18, 1998, she had served as Vice President of Marketing and
Investor Relations, Treasurer, Secretary and a director of CGSI. Ms. Blanco
joined CGSI in 1993. Ms. Blanco manages all aspects of marketing, including
brand identity, demand creation and vendor relationships for the Company as
well as investor relations. From 1984 through 1989, Ms. Blanco was a
Reseller Account Manager at Lotus, where she designed and implemented
marketing programs. From August 1989 through June 1993, Ms. Blanco served as
a Business Development Manager at Tektronix, Inc., where she was responsible
for the development of long term and strategic customers. She earned a
Bachelor of Science degree in Marketing from Bentley College in 1982 and a
Masters of Business Administration degree from Boston College in 1985.
Duncan Huyler, Vice President of Technical Services:
- ---------------------------------------------------
Mr. Huyler has served as Vice President of Technical Services for the Company
since June 18, 1998. Prior to June 18, 1998, he served as Vice President of
Technical Services for CGSI, which he joined in 1993. Mr. Huyler manages all
the technical aspects of the Company, including running the business under
its own P/L, developing service plans, hiring staff, developing and
implementing training programs and obtaining service authorizations. From
May 1983 through October 1987, Mr. Huyler served in the U.S. Army. From
September 1988 through August 1993, Mr. Huyler worked for Lord & Taylor,
where his positions included Senior Financial Analyst and Director of
Systems. Mr. Huyler graduated from Cornell University in 1983 with a
Bachelor of Science degree in Business and earned a Masters of Business
Administration from the University of Louisville in 1987.
Paul C. Baker, Director:
- -----------------------
Mr. Baker has served as a Director of the Company since June 18, 1998. He is
the founder and President of Sherwood Partners, Inc., a venture capital and
management consulting company that focuses on developing companies with high
growth potential. Prior to founding Sherwood Partners, Inc. in 1986, Mr.
Baker held numerous positions during his twenty-five years of employment with
American Cyanamid Co. ("Cyanamid"). At Cyanamid, Mr. Baker held several
domestic and international management positions, including President of
Domestic Operations from April 1975 through October 1979, President of
Shulton Inc. from October 1977 through October 1979 and Group Vice President
of Cyanamid from October 1979 through December 1984. Mr. Baker graduated
from Lehigh University in 1959 with a Bachelor of Arts degree in Liberal
Arts, earned a B.S.I.E. degree in Engineering in 1960 from Lehigh University,
and received a Masters in Business Administration in 1963 from Fairleigh
Dickinson University.
-50-
<PAGE>
Edwin Ruzinsky, Director:
- ------------------------
Mr. Ruzinsky has served as a Director of the Company since August 27, 1999.
He is a Certified Public Accountant and a Certified Management Consultant.
Prior to his retirement as a Partner in Deloitte Consulting LLC, a wholly-
owned subsidiary of Deloitte & Touche LLP on June 1, 1996, he served for many
years as the firm's National Director-Media Industry Services. He previously
served Times Mirror Company (NYSE-TMC) as Vice President-Finance &
Administration/Book Publishing Group and Parents' Magazine Enterprises, Inc.
as Chief Accounting Officer. Mr. Ruzinsky continues serving as a member of
the Pace University/Dyson School of Liberal Arts & Sciences/Master of Science
in Publishing Advisory Board. He is currently a member of the Board of
Dowden Publishing Company, Inc., a provider of specialized publications and
customized communication products for healthcare professionals and consumers.
In addition, he has been a consultant to The CPA Journal, published by the
New York State Society of Certified Public Accountants, for the past twenty-
five years.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's common stock, to file with the SEC initial reports
of beneficial ownership and reports of changes in beneficial ownership of
common stock of the Company. Such persons are also required by SEC
regulations to furnish the Company with copies of all such Section 16(a)
forms they file. Based solely on a review of the copies of such reports
furnished to the Company, the Company is not aware of any delinquencies in
the filing of such reports.
-51-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION.
- -------------------------------------------------------------------------------
Executive Compensation
- ----------------------
The following table sets forth information concerning the annual and
long-term compensation during the Company's last three fiscal years of the
Company's Chief Executive Officer and other most highly compensated employees
and all other officers and directors of the Company:
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Annual Compensation Awards
----------------------------------------------- ------
Name and Other Securities
Principal Annual Underlying All Other
Position Year(1) Salary Bonus Compensation Options/SARS Compensation(2)
- -------------------------- ---------------------------------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Levin(3) 1999 $ 130,000 $ 0 $ 0 500,000 $ 2,379
Chief Executive Officer, 1998 $ 141,583 $ 0 $ 0 51,223 $ 2,727
President and Chairman
Of the Board
Frances Blanco(3) 1999 $ 80,000 $ 10,000 $ 0 100,000 $ 2,021
Vice President Marketing 1998 $ 75,000 $ 25,000 $ 0 7,714 $ 2,158
and Investor Relations,
Treasurer, Secretary and
Director
Duncan Huyler(3) 1999 $ 95,000 $ 0 $ 0 100,000 $ 4,630
Vice President Technical 1998 $ 91,000 $ 25,000 $ 0 9,265 $ 3,867
Services
Paul C. Baker 1999 $ 0 $ 0 $ 0 33,000 $ 0
Director 1998 $ 0 $ 0 $ 0 0 $ 0
Kathleen L. Morrison 1998(4) $ 0 $ 0 $ 1,250(5) 0 $ 0
Former President and 1997 $ 0 $ 0 $ 0 0 $ 0
Director
Jason Osborn 1998(4) $ 0 $ 0 $ 1,250(5) 0 $ 0
Former Vice President and 1997 $ 0 $ 0 $ 0 0 $ 0
Director
Terry Hardman 1998(5) $ 0 $ 0 $ 1,250(6) 0 $ 0
Former Secretary, 1997 $ 0 $ 0 $ 0 0 $ 0
Treasurer and Director
</TABLE>
-52-
<PAGE>
(1) In June 1998, each of Company and CGSI changed their fiscal year ends
from December 31 and April 30, respectively, to June 30, 1998. The
1998 fiscal year compensation includes the operations of CGSI, a
privately-held company at the time, for the period May 1, 1997 through
April 30, 1998.
(2) Includes the Company's matching contribution to the Company's 401(k)
profit sharing plan.
(3) Became officer and/or director on June 18, 1998.
(4) Resigned effective June 18, 1998 pursuant to the acquisition of CGSI.
(5) Received 1,000 shares of common stock pursuant to a Registration
Statement on Form S-8 filed on or about June 5, 1998, for which the
fair market value cannot be adequately determined. For purposes of
this calculation, the fair market value is arbitrarily determined to be
$1.25 per share, based upon the offering price of the Company's Common
Stock sold in a private placement conducted in June through August
1998.
The following table sets forth information concerning options granted
during the fiscal year ended June 30, 1999 to those persons named in the
preceding Summary Compensation Table:
<TABLE>
Option/SAR Grants in Last Fiscal Year
(Individual Grants)
Number of
Securities Percent of total
Underlying options/SARS granted Exercise or
Options/SARs to employees in base price Expiration
Name Granted (#) fiscal year(1) ($/Sh) Date
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael W. Levin 500,000(2) 47.7% $1.375 6-18-03
Michael W. Levin 51,223(3) 4.8% $1.375 6-18-03
Frances Blanco 100,000(2) 9.3% $2.00 3-05-04
Frances Blanco 7,714(3) 0.7% $1.25 6-18-08
Duncan Huyler 100,000(2) 9.3% $2.00 3-05-04
Duncan Huyler 9,265(3) 0.9% $1.25 6-18-08
Paul Baker 3,000(2) 0.3% $2.00 6-11-08
Paul Baker 30,000(2) 2.8% $3.31 4-06-09
</TABLE>
(1) Based on the aggregate total of options granted to officers, directors,
and employees, including options granted during the two month fiscal
year transition period from May 1 through June 30, 1998. As of June
30, 1999, a total of 1,069,632 options were granted, of which 51,739
options have expired.
(2) Options were granted pursuant to employment agreements and become
exercisable after the Company achieves certain defined corporate goals
based on earnings, as further described in the Long-Term Incentive Plan
table. No options have vested.
(3) Options were granted pursuant to the 1998 Stock Option Plan and are
presently exercisable. No options have been exercised.
-53-
<PAGE>
None of the options held by those individuals listed in the Summary
Compensation Table were exercised in fiscal year 1998. The following table
sets forth information concerning the value of unexercised stock options at
June 30, 1999 for those individuals named in the Summary Compensation Table.
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of securities
Shares underlying unexercised Value of unexercised
Acquired Value Options/SARs in-the-money options/SARs
on realized at FY-end (#) at FY-end ($)(a)
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Levin -- -- 51,223 500,000 $ 134,460 $ 1,312,500
Frances Blanco -- -- 7,714 100,000 $ 20,249 $ 262,500
Duncan Huyler -- -- 9,265 100,000 $ 24,321 $ 262,500
Paul Baker -- -- 33,000 0 $ 86,625 --
</TABLE>
(a) The dollar values were calculated by determining the difference between
the fair market value at fiscal year-end of the Common Stock underlying
the options and the exercise price of the options. The last sale price
of a share of the Company's Common Stock on June 30, 1999 as reported
by the OTC Bulletin Board was $2.625.
The following table sets forth information concerning long-term options
granted during the fiscal year ended June 30, 1999 to those persons named in
the preceding Summary Compensation Table. The Company has not adopted a
formal long-term incentive option plan. The options presented in the
following table were granted pursuant to employment agreements, as amended,
with the Company.
-54-
<PAGE>
<TABLE>
Long-Term Incentive Plans-Awards in Last Fiscal Year
Number Performance
of shares, or other units or
units or period until
other maturation or Estimated Future Payouts under
Name rights (#)(1) payout (2) Non-Stock Price-Based Plans(3)
- ------------------------------------------------------------------------------------------
Threshold Target Maximum
(#) (#) (#)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael W. Levin 500,000 5/98 - 4/01 125,000 125,000 500,000
Frances Blanco 100,000 5/99 - 4/01 25,000 25,000 100,000
Duncan Huyler 100,000 5/99 - 4/01 25,000 25,000 100,000
</TABLE>
(1) For purpose of this table, includes options granted during the two
month fiscal year transition period from May 1 through June 30, 1998.
(2) The 5-year options, exercisable into common stock at the fair market
value on the date of grant, were granted pursuant to employment
agreements, as amended. The performance period refers to the term of
the individual's employment term during which the options must vest.
(3) The long-term incentive options are contingent upon attainment of
certain corporate earnings milestones. These options will vest in
equal twenty five percent installments upon each of the following
events: (a) the first fiscal year end in which the Company's earnings
before interest, taxes, depreciation and amortization ("EBITDA")
exceeds $500,000; (b) the first fiscal year end in which the Company's
EBITDA exceeds $1,000,000; (c) the first fiscal year end in which the
Company's EBITDA exceeds $1,500,000; and (d) the first fiscal year end
in which the Company's EBITDA exceeds $2,000,000. These options are
cumulative and are subject to anti-dilution rights. The threshold
refers to the minimum number of options that may vest during the
performance period. The target refers to the number of options that
may vest in the 2000 fiscal year.
-55-
<PAGE>
Director Compensation
- ---------------------
The Company has recently established a compensation plan for its
independent directors. Outside directors will be paid $500 for attendance at
regular meeting and $1,000 for attendance at the annual meeting and will
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with their attendance at meetings of the Board of Directors and for other
expenses incurred in their capacity as directors of the Company. Outside
directors will be granted five year options to purchase 10,000 shares of
Common stock, exercisable at the fair market value on the date of appointment
to the Board, and will be granted, annually, additional options to purchase
5,000 shares of common stock on each July 1.
Previously, the Company did not have a defined compensation plan for
members of its Board of Directors. In fiscal year 1999, the Company granted
its sole non-employee director a total of 33,000 non-qualified options under
the Company's 1998 Incentive Plan to purchase the Common Stock of the
Company, exercisable at a price equal to the fair market value of the Common
Stock on the dates of grant.
Employment Agreements with Named Executive Officers
- ---------------------------------------------------
Michael W. Levin serves as Chief Executive Officer and President
pursuant to a five year employment agreement, commenced on May 1, 1998, as
amended, at an annual salary of $130,000, with cost-of-living adjustments
tied to the Consumer Price Index, or such greater annual salary as may be
established by the Company's Board of Directors. Commencing in the third
year of the employment agreement, Mr. Levin's base annual salary shall be
increased by an amount such that such increase shall be equal to at least one
percent of the Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA") in the most recent fiscal year. Mr. Levin has been
granted 5-year options to purchase up to 500,000 shares, proportioned to vest
only after the Company's achievement of certain corporate milestones,
exercisable at $1.375 per share. Mr. Levin may purchase 125,000 shares
following the first fiscal year that the Company's EBITDA exceeds each of
$500,000, $1,000,000, $1,500,000 and $2,000,000, respectively. These options
are cumulative and are subject to anti-dilution rights. Mr. Levin is also
entitled to death benefits of $100,000, a fifteen year (15-year) term life
insurance policy with a face amount of benefit of $1,000,000, a luxury
automobile, reimbursement for reasonable travel and other business related
expenses, and other bonuses to be determined by the Board of Directors. In
the event of a "change of control" of the Company, Mr. Levin is entitled to
receive a golden parachute payment equal to two hundred and ninety percent
(290%) of his "base amount", as defined in Section 280G(3) of the Internal
Revenue Code of 1986, as amended, and has the right to terminate the agreement.
"Change of control" is defined to be any of the following: (i) a change in
the ownership or management of the Company that would be required to be
reported in response to certain provisions of the Securities Exchange Act of
1934; (ii) an acquisition (other than directly from the Company) by a person
-56-
<PAGE>
or entity (excluding the Company) of 25% or more of the Company's common
stock or the Company's then outstanding voting securities; (iii) a change in
a majority of the current Board of Directors (the "Incumbent Board")
(excluding any persons approved by a vote of at least a majority of the
Incumbent Board other than in connection with an actual or threatened proxy
contest); (iv) consummation of a reorganization, merger, consolidation or
sale of all or substantially all of the Company's assets (collectively, a
"Transaction") other than a Transaction in which all or substantially all of
the shareholders of the Company prior to such transaction own, in the same
proportion, more than 50% of the voting power of the entity resulting from
the Transaction, at least a majority of the board of directors of the
resulting entity were members of the Incumbent Board, and after which no
person (other than the resulting entity and certain affiliates) beneficially
owns 25% or more of the voting power of the resulting entity, except to the
extent such ownership existed prior to the Transaction; or (v) the approval
by the Company's stockholders of a complete liquidation or dissolution of the
Company.
Frances Blanco serves as Vice President of Marketing and Investor
Relations, Treasurer and Secretary pursuant to a three year employment
agreement, commenced on May 1, 1998 and as amended on March 5, 1999, at an
annual salary of $80,000, plus financial bonuses to be determined by the
Board of Directors. Ms. Blanco has been granted 5-year options to purchase
up to 100,000 shares, proportioned to vest only after the Company's
achievement of certain corporate milestones, exercisable at $2.00 per share.
Ms. Blanco may purchase 25,000 shares following the first fiscal year that
the Company's EBITDA exceeds each of $500,000, $1,000,000, $1,500,000 and
$2,000,000, respectively. These options are cumulative and are subject to
anti-dilution rights.
Duncan Huyler serves as Vice President of Technical Services pursuant
to a three year employment agreement, commenced on May 1, 1998 and as amended
on March 5, 1999, at an annual salary of $95,000, plus financial bonuses to
be determined by the Board of Directors. Mr. Huyler has been granted 5-year
options to purchase up to 100,000 shares, proportioned to vest only after the
Company's achievement of certain corporate milestones, exercisable at $2.00
per share. Mr. Huyler may purchase 25,000 shares following the first fiscal
year that the Company's EBITDA exceeds each of $500,000, $1,000,000,
$1,500,000 and $2,000,000, respectively. These options are cumulative and
are subject to anti-dilution rights.
-57-
<PAGE>
Stock Option Plan
- -----------------
Pursuant to the Company's Incentive Stock Option Plan (the "1998 Stock
Option Plan"), which has been adopted the Board of Directors and approved by
its shareholders, 500,000 shares of the Company's authorized but unissued
Common Stock has been reserved for issuance pursuant to the 1998 Stock Option
Plan. The 1998 Stock Option Plan is administered by a person designated by
the Board of Directors (the "Administrator"), presently the Chairman of the
Board. Stock option (which may be "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")) entitles the holder to purchase shares of Common Stock during a
specified period at a purchase price of not less than the fair market value
of the Common Stock on the day the option is granted. The Company has filed
a Form S-8 to register the 500,000 shares underlying the stock options. The
Company granted certain employees 5-year and 10-year options to purchase up
to 295,381 shares of Common Stock, of which 88,229 options are presently
exercisable, at prices of $1.25 to $4.00 per share pursuant to the 1998 Stock
Option Plan, including its officers and directors, as follows: Michael W.
Levin, 5-year options to purchase 51,223 shares at $1.375; Frances Blanco,
10-year options to purchase 7,741 shares at $1.25; Duncan Huyler, 10-year
options to purchase 9,265 shares at $1.25; and Paul Baker, 10-year options to
purchase 3,000 shares at $2.00.
Employee Profit Sharing Plan
- ----------------------------
On January 1, 1994, the Company adopted a tax-qualified employee paired
profit sharing plan (the "401(k) Plan"), sponsored by Kemper Financial
Services, Inc., which covers all of the Company's employees that have been
employed for at least six months and meet other age and eligibility
requirements. Pursuant to the 401(k) Plan, employees may elect to reduce
their current compensation by up to 15% for the plan year and have the amount
of such reduction contributed to the 401(k) Plan. Under the 401(k) Plan, the
Company makes matching contributions, using a discretionary formula,
currently equal to twenty five percent of the employee's contribution. The
Company, in its sole discretion, may contribute an amount which it designates
as a qualified nonelective contribution to designated participants. The
401(k) Plan is intended to qualify under Section 401 of the Code, so that
contributions by employees or by the Company to the 401(k) Plan, and so that
contributions by the Company, if any, will be deductible by the Company. The
Trustee under the 401(k) Plan, at the direction of each participant, invests
the assets of the 401(k) Plan in any of a number of investment options. All
employee contributions to the 401(k) Plan are fully vested at all times, and
the Company's contributions, if any, vest 25% after two years and at the rate
of 25% a year thereafter until fully vested.
-58-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------------
(a) Security Ownership
------------------
The following table sets forth, as of June 30, 1999, the shares of
Common Stock of the Company beneficially owned by each person known to
management to be the beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock, by each officer and director, and by all
officers and directors of the Company as a group. All persons named in the
table have the sole voting and dispositive power with respect to Common Stock
beneficially owned.
Name and Address Amount and Nature Percent of
of Beneficial Owner(1) of Beneficial Owner Class(2)
- ---------------------- ------------------- ----------
Michael W. Levin 1,589,673 (3) 51.1%
Frances Blanco 48,516 (4) 1.6%
Duncan Huyler 50,040 (5) 1.6%
Paul Baker 100,500 (6) 3.3%
All officers and directors 1,788,729 (3)-(6) 56.6%
as a group (4 persons)
(1) Unless otherwise indicated, the address of each of these persons is
Cadapult Graphic Systems, Inc., 110 Commerce Drive, Allendale, New
Jersey 07401.
(2) Based upon 3,058,307 shares of common stock outstanding on June 30,
1999, and with respect to each holder of options exercisable within 60
days, the shares represented by such options.
(3) Includes 52,000 shares owned by Mr. Levin's minor children and
exercisable 5-year options to acquire 51,223 shares of Common Stock.
Excludes 5-year options, subject to future vesting, to acquire 500,000
shares of Common Stock.
(4) Includes exercisable 10-year options to acquire 7,741 shares of Common
Stock. Excludes 5-year options, subject to future vesting, to acquire
100,000 shares of Common Stock.
(5) Includes exercisable 10-year options to acquire 9,265 shares of Common
Stock. Excludes 5-year options, subject to future vesting, to acquire
100,000 shares of Common Stock.
(6) Includes exercisable 10-year options to acquire 33,000 shares of Common
Stock.
(b) Changes in Control
------------------
There are no arrangements which may result in a change in control of
the Company.
-59-
<PAGE>
- -------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------------------------------------------------------------------------------
In June 1998, the Company filed a registration statement on Form S-8
for 66,068 shares of Common Stock. The Company issued the shares to four
individuals, including its officers and directors, pursuant to written
compensation agreements as follows: Leonard W. Burningham, 63,068 shares;
Kathleen L. Morrison, 1,000 shares; Jason Osborn, 1,000 shares; and Terry
Hardman, 1,000 shares. Kathleen L. Morrison, Jason Osborn, and Terry Hardman
resigned as directors and officers of the Company effectively as of June 18,
1998.
On June 18, 1998, the Company completed the acquisition of Cadapult
Graphic Systems Inc., a privately-held New Jersey corporation formed on or
about May 1, 1987 ("CGSI"), in a transactions viewed as a reverse
acquisition. Pursuant to an Agreement and Plan or Reorganization dated June
5, 1998, between the Company, CGSI, all of the shareholders of CGSI, Jenson
Services, Inc., a Utah corporation, Duane S. Jenson and Jeffrey D. Jenson,
the Company issued 1,650,000 shares of common stock to the shareholders of
CGSI in exchange for all of the outstanding common stock of CSGI. Pursuant
to the reorganization, the shareholders of CSGI became the controlling
shareholders of the Company, the officers and directors of the Company
resigned and elected the CSGI nominees in their places, and CSGI became a
wholly-owned subsidiary of the Company. Michael W. Levin acquired 300
shares, no par value, of CGSI on May 1, 1987 for $300. Frances Blanco acquired
7.90 shares, no par value, of CSGI on June 3, 1997 for $15,000, paid
by a promissory note due in June 1998. Duncan Huyler acquired 7.90 shares,
no par value, of CSGI on June 3, 1997 for $15,000, paid by a promissory note
due in June 1998. Duncan Yates acquired 3.8748 shares, no par value, of CGSI
on April 20, 1998 for $15,000, paid by a promissory note due in June 1998.
In May 1998, Mr. Levin made a gift of 3.1 shares to each of their two minor
children. Pursuant to the reorganization, Mr. Levin and his children, Ms.
Blanco, Mr. Huyler and Mr. Yates, representing all the issued and outstanding
shares of CGSI, exchanged their shares of CGSI proportionally for 1,650,000
shares of the Company pursuant to the Company's acquisition of CGSI. Michael
W. Levin currently serves as the Company's Chief Executive Officer, President
and Chairman of the Board. Frances Blanco currently serves as the Company's
Vice President, Secretary, Treasurer and a Director. Duncan Huyler currently
serves as the Company's Vice President and a Director.
The Company granted Mr. Levin 5-year stock options to purchase up to
500,000 shares of Common Stock (no options are presently exercisable) to vest
upon the Company attaining certain specified corporate milestones based upon
corporate earnings, exercisable at $1.375. The Company granted to each of
Ms. Blanco and Mr. Huyler 5-year stock options to purchase up to 100,000
shares of Common Stock each (no options are presently exercisable) to vest
upon the Company attaining certain specified corporate milestones based upon
corporate earnings, exercisable at $2.00.
-60-
<PAGE>
In August 1998, the Company filed a registration statement on Form S-8
for its 1998 Stock Option Plan. The Company has granted certain employees,
5-year and 10-year incentive stock options to purchase 295,381 shares, of
which 88,229 options are presently exercisable, at prices of $1.25 to $4.00
per share. Executive officers and directors have been granted the following
options pursuant to the 1998 Stock Option Plan: Michael W. Levin, 5-year
options to purchase 51,223 shares at $1.375; Frances Blanco, 10-year options
to purchase 7,741 shares at $1.25; Duncan Huyler, 10-year options to purchase
9,265 shares at $1.25; and Paul Baker, 10-year options to purchase 3,000
shares at $2.00 and 30,000 shares at $3.31. Pursuant to the 1998 Stock
Option Plan, the Company has reserved 500,000 authorized and unissued shares
of Common Stock for issuance upon the exercise of the incentive stock
options.
- -------------------------------------------------------------------------------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
- -------------------------------------------------------------------------------
(a) Exhibits
Exhibits required to be filed by Item 601 of Regulation SB are included in
Exhibits to this Report as follows:
Exhibit Description
- ------- -----------
2.1 Agreement and Plan or Reorganization between Seafoods Plus, Ltd.
and Cadapult Graphic Systems, Inc., a New Jersey corporation,
dated June 5, 1998.
2.2 Agreement and Plan of Merger between Cadapult Graphic Systems, Inc.
and Seafoods Plus, Ltd.(1)
2.3 Agreement and Plan of Merger Cadapult Graphic Systems Inc., a New
Jersey corporation, and Cadapult Graphic Systems, Inc., a Delaware
corporation(2)
2.4 Asset Purchase Agreement between Cadapult Graphic Systems, Inc. and
BBG Technologies, Inc.
2.5 Asset Purchase Agreement between Cadapult Graphic Systems, Inc. and
Tartan Technical, Inc. dated December 17, 1998(3)
2.6 Asset Purchase Agreement between Cadapult Graphic Systems, Inc. and
WEB Associates, Inc. dated June 7, 1999(4)
3(i)(1) Certificate of Incorporation of Cadapult Graphic Systems, Inc., a
Delaware corporation(5)
3(i)(2) Certificate of Merger of Seafoods Plus, Ltd. into Cadapult
Graphic Systems, Inc.. a Delaware corporation(6)
3(i)(3) Certificate of Merger of Domestic and Foreign Corporations into
Cadapult Graphic Systems, Inc.(7)
3(i)(4) Certificate of Ownership and Merger Merging Cadapult Graphic
Systems Inc. into Cadapult Graphic Systems, Inc.(8)
3(i)(5) Certificate of Amendment of Certificate of Incorporation of
Cadapult Graphic Systems, Inc.
-61-
<PAGE>
3(i)(6) Certificate of Incorporation of Media Sciences, Inc.
3(ii) By-Laws(9)
4.1 1998 Incentive Plan (Stock Option Plan)
4.2 Form of Option Agreement for Management
4.3 Form of Option Agreement for Employees
4.4 Form of Warrant Certificate
10.1 Form of Employment Agreement of Michael W. Levin dated May 1, 1998
10.2 Employment Agreement of Frances Blanco dated May 1, 1998
10.3 Employment Agreement of Duncan Huyler dated May 1, 1998
10.4 Amended Employment Agreement of Michael W. Levin dated as of
September 1, 1998
10.5 Amended Employment Agreement of Duncan Huyler(10)
10.6 Amended Employment Agreement of Frances Blanco(11)
10.7 Credit and Security Agreement(12)
10.8 Lease
11 Statement Concerning Computation of Per Share Earnings is hereby
incorporated by reference to "Financial Statements" of Part II -
Item 7, contained in this Form 10-KSB.
16 Letter on change in certifying accountant
21 Subsidiaries of the Registrant
27 Financial Data Schedule
______
(1) Incorporated by reference to Exhibit 2.1 of Quarterly Report on Form
10QSB/A filed on or about September 1, 1998
(2) Incorporated by reference to Exhibit 2.2 of Quarterly Report on Form
10QSB/A filed on or about September 1, 1998
(3) List of schedules to Asset Purchase Agreement omitted herein Exhibit
A-Property and Equipment; Exhibit B-Bank Debt; Exhibit C-Gross Profit
Definition; Exhibit D-Incentive Gross Profit Schedule; Exhibit E-
Allocation of Purchase Price; Exhibit F-Form of Employment Agreement;
Exhibit G-Lease; Exhibit H-Promissory Note; Exhibit I-Restrictive
Covenant; Exhibit J-Adjustments; Escrow Agreement; and Indemnification
Agreement. Exhibits B, E and I, although referenced in the Asset
Purchase Agreement, were not made incorporated as schedules into the
definitive Asset Purchase Agreement. Exhibit B relates to two loans of
Tartan totaling $648,953.43 that were assumed and paid in full by the
Company. Exhibit I became moot upon the execution of employment
agreements by key personnel of Tartan.
(4) List of schedules to Asset Purchase Agreement omitted herein: Exhibit
A-Property and Equipment; Exhibit B-NOT USED; Exhibit C-Gross Profit
Definition; Exhibit D-Incentive Gross Profit Schedule; Exhibit E-
Allocation of Purchase Price; Exhibit F-Form of Employment Agreement;
Exhibit G-Lease; Exhibit H-NOT USED; Exhibit I-Restrictive Covenant;
Exhibit J-Adjustments; and Exhibit K-Restrictive Legend. The Asset
Purchase Agreement does not refer to and does not include Exhibits B
and H.
(5) Incorporated by reference to Exhibit 3.1 of Quarterly Report on Form
10QSB/A filed on or about September 1, 1998
-62-
<PAGE>
(6) Incorporated by reference to Exhibit 3.1 of Quarterly Report on Form
10QSB filed on or about November 9, 1998.
(7) Incorporated by reference to Exhibit 3.2 of Quarterly Report on Form
10QSB filed on or about November 9, 1998.
(8) Incorporated by reference to Exhibit 3.3 of Quarterly Report on Form
10QSB filed on or about November 9, 1998.
(9) Incorporated by reference to Exhibit 3.2 of Quarterly Report on Form
10QSB/A filed on or about September 1, 1998
(10) Incorporated by reference to Exhibit 3.2 of Quarterly Report on Form
10QSB filed on or about May 4, 1999
(11) Incorporated by reference to Exhibit 3.3 of Quarterly Report on Form
10QSB filed on or about May 4, 1999
(12) Incorporated by reference to Exhibit 3.1 of Quarterly Report on Form
10QSB filed on or about May 4, 1999
The Company will furnish supplementally a copy of any omitted or summarized
schedule of the Asset Purchase Agreement to the Commission upon request.
(b) Report on Form 8-K
------------------
On June 8, 1999, the Company filed a report on Form 8-K dated June 8,
1999 reporting under Item 5 Other Events: (a) Asset purchase agreement for
the acquisition of certain assets and liabilities of WEB Associates, Inc.;
and (b) Non-binding letter of intent for the purchase of certain assets and
liabilities of ultraHue, Inc.
On September 22, 1999, the Company filed a report on Form 8-K reporting
under Item 2 that Media Sciences entered into an asset purchase agreement
with ultraHue, Inc., and under Item 5 that the Company commenced a legal
proceeding against Tektronix, Inc.
-63-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CADAPULT GRAPHIC SYSTEMS, INC.
By: /s/ Michael W. Levin
-------------------------------------
Michael W. Levin
Chief Executive Officer and President
Dated: September 27, 1999
In accordance with the Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated:
<TABLE>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Michael W. Levin Chairman of the Board, President September 27, 1999
- ---------------------- and Chief Executive Officer
Michael W. Levin
/s/ Frances Blanco Vice President, Secretary, September 27, 1999
- ---------------------- Treasurer and Director
Frances Blanco
/s/ Duncan Huyler Vice President September 27, 1999
- ----------------------
Duncan Huyler
/s/ Paul C. Baker Director September 27, 1999
- ----------------------
Paul C. Baker
</TABLE>
-64-
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT (the "Plan") effective as of the 5th day of June,
1998, between Seafoods Plus, Ltd., a Utah corporation ("Seafoods"); Jenson
Services, Inc., a Utah corporation ("Jenson Services"), Duane S. Jenson and
Jeffrey D. Jenson, principal stockholders of Seafoods and Jenson Services
(collectively referred to herein as "Jenson"); Cadapult Graphic Systems, Inc., a
New Jersey corporation ("Cadapult"); and all of the stockholders of Cadapult
(the "Cadapult Stockholders");
W I T N E S S E T H :
Seafoods wishes to acquire and the Cadapult Stockholders wish to
exchange all of the outstanding common stock of Cadapult for common stock of
Seafoods in a transaction qualifying as a tax-free exchange pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended; and
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, IT IS AGREED:
Section 1
Exchange of Stock
-----------------
1.1 Number of Shares. The Cadapult Stockholders agree to transfer
to Seafoods at the closing (the "Closing") 100% of the outstanding securities of
Cadapult, which are listed in Exhibit A hereof attached hereto and incorporated
herein by reference (the "Cadapult Shares"), in exchange for 1,650,000 shares of
the one mill ($0.001) par value "unregistered" and "restricted" common voting
stock of Seafoods.
1.2 Delivery of Certificates by Cadapult Stockholders. The
transfer of the Cadapult Shares by the Cadapult Stockholders shall be effected
by the delivery to Seafoods at the Closing of stock certificates representing
the transferred shares duly endorsed in blank or accompanied by stock powers
executed in blank, with all signatures witnessed or guaranteed to the
satisfaction of Seafoods and with all necessary transfer taxes and other revenue
stamps affixed and acquired at the Cadapult Stockholders' expense.
1.3 Further Assurances. At the Closing and from time to time
thereafter, the Cadapult Stockholders shall execute such additional instruments
<PAGE>
and take such other action as Seafoods may request in order to exchange and
transfer clear title and ownership in the Cadapult Shares to Seafoods.
1.4 Resignation of Present Directors and Executive Officers and
Designation of New Directors and Executive Officers. On Closing, the present
directors and executive officers of Seafoods, Kathleen L. Morrison, Jason
Osborne and Terry Hardman, shall resign, in seriatim, and designate the
directors and executive officers nominated by Cadapult to serve in their place
and stead, until the next respective annual meetings of the stockholders and
Board of Directors of Seafoods, and until their respective successors shall be
elected and qualified or until their respective prior resignations or
terminations.
1.5 Name Change. As soon as practicable following the Closing, the
Certificate of Incorporation of Seafoods shall be amended to change the name of
Seafoods to "Cadapult Graphic Systems, Inc." There shall be no other shares,
options, warrants or rights of any kind to Seafoods shares outstanding prior to
closing.
1.6 Change of Domicile. Seafoods shall change its domicile to New
Jersey or Delaware, as selected by Cadapult and the Cadapult Stockholders,
subject, however, to the approval of persons owning the required number of
shares of the outstanding voting securities of Seafoods in accordance with the
Utah Revised Business Corporation Act.
1.7 Assets and Liabilities of Seafoods at Closing. Seafoods shall have
no material assets and no liabilities at Closing, and Jenson shall indemnify and
hold Cadapult and the Cadapult Stockholders harmless from any past liabilities
that may be discovered. A Letter of Indemnification is attached hereto as
Exhibit B and incorporated herein by reference.
Section 2
Closing
-------
The Closing contemplated by Section 1.1 shall be held at the offices
of Fischbein Badillo Wagner Harding, 909 3rd Avenue, 18th Floor, New York, New
York 10022, on or before June 18, 1998, unless another place or time is agreed
upon in writing by the parties. The Closing may be accomplished by wire, express
mail or other courier service, conference telephone communications or as
otherwise agreed by the respective parties or their duly authorized
representatives.
<PAGE>
Section 3
Representations and Warranties of Seafoods and Jenson
-----------------------------------------------------
Seafoods and Jenson represent and warrant to, and covenant with, the
Cadapult Stockholders and Cadapult as follows:
3.1 Corporate Status. Seafoods is a corporation duly organized,
validly existing and in good standing under the laws of the State of Utah and is
licensed or qualified as a foreign corporation in all states in which the nature
of its business or the character or ownership of its properties makes such
licensing or qualification necessary (Utah only.) Seafoods is a publicly held
company, having previously and lawfully offered and sold a portion of its
securities in accordance with applicable federal and state securities laws,
rules and regulations. Seafoods is a "reporting issuer," as that term is defined
under the Securities Exchange Act of 1934 (the "1934 Act"), as amended, and the
rules and regulations promulgated thereunder by the Securities and Exchange
Commission; Seafoods is "current" in the filing of all reports required to be
filed by it under the 1934 Act; and such reports are true and correct in every
material respect. There is presently no public market for these or any other
securities of Seafoods; however, its common stock is listed on the OTC Bulletin
Board of the National Association of Securities Dealers, Inc. (the "NASD") under
the symbol "SEUS."
3.2 Capitalization. The authorized capital stock of Seafoods consists
of 50,000,000 shares of one mill ($0.001) par value common voting stock, of
which 637,500 shares are issued and outstanding, all fully paid and
non-assessable. There are no outstanding options, warrants or calls pursuant to
which any person has the right to purchase any authorized and unissued common
stock of Seafoods.
3.3 Financial Statements. The financial statements of Seafoods
furnished to the Cadapult Stockholders and Cadapult, consisting of audited
financial statements for the periods ended December 31, 1997 and 1996, attached
hereto as Exhibit C and incorporated herein by reference, and unaudited
financial statements for the period ended March 31, 1998, attached hereto as
Exhibit C-1 and incorporated herein by reference, are correct and fairly present
the financial condition of Seafoods at such dates and for the periods involved;
such statements were prepared in accordance with generally accepted accounting
principles consistently applied, and no material change has occurred in the
matters disclosed therein, except as indicated in Exhibit D, which is attached
hereto and incorporated herein by reference. Such financial statements do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading. Seafoods has had no operations, as
shown therein, and, as of this date has, and as of the date of closing shall
have, no debts or other obligations, including, but not limited to, taxes,
<PAGE>
transfer agent fees, attorney's fees, accounting fees, rent, wages, printing or
mailing costs, insurance or any other claims or liabilities, whether disclosed
or undisclosed.
3.4 Undisclosed Liabilities. Seafoods has no liabilities of any
nature. None are reflected or reserved against in its balance sheets, whether
accrued, absolute, contingent or otherwise, including, without limitation, tax
liabilities and interest due or to become due. Jenson shall indemnify and hold
Seafoods, the Cadapult Stockholders and Cadapult harmless from and against such
liabilities in accordance with Exhibit B hereto.
3.5 Interim Changes. Since the date of its balance sheets, there have
been no (1) changes in financial condition, assets, liabilities or business of
Seafoods; (2) damages, destruction or losses of or to property of Seafoods,
payments of any dividend or other distribution in respect of any class of stock
of Seafoods, or any direct or indirect redemption, purchase or other acquisition
of any class of any such stock; or (3) obligations of any kind incurred as to
anyone, including, but not limited to compensation, retirement benefits or other
commitments to employees.
3.6 Title to Property. Seafoods has good and marketable title to all
properties and assets, real and personal, reflected in its balance sheets, and
the properties and assets of Seafoods are subject to no mortgage, pledge, lien
or encumbrance, and no default exists.
3.7 Litigation. There is no litigation or proceeding pending, or to
the knowledge of Seafoods, threatened, against or relating to Seafoods, its
properties or business. Further, no officer, director or person who may be
deemed to be an affiliate of Seafoods is party to any material legal proceeding
which could have an adverse affect on Seafoods (financial or otherwise), and
none is party to any action or proceeding wherein any has an interest adverse to
Seafoods.
3.8 Books and Records. From the date of this Plan to the Closing,
Seafoods will (1) give to the Cadapult Stockholders and Cadapult or their
respective representatives full access during normal business hours to all of
its offices, books, records, contracts and other corporate documents and
properties so that the Cadapult Stockholders and Cadapult or their respective
representatives may inspect and audit them; and (2) furnish such information
concerning the properties and affairs of Seafoods as the Cadapult Stockholders
and Cadapult or their respective representatives may reasonably request.
3.9 Tax Returns. Seafoods has filed all federal and state income or
franchise tax returns required to be filed or has received currently effective
extensions of the required filing dates.
3.10 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Seafoods and its representatives will keep confidential any
<PAGE>
information which they obtain from the Cadapult Stockholders or from Cadapult
concerning the properties, assets and business of Cadapult. If the transactions
contemplated by this Plan are not consummated by June 18, 1998, Seafoods will
return to Cadapult all written matter with respect to Cadapult obtained by
Seafoods in connection with the negotiation or consummation of this Plan.
3.11 Investment Intent. Seafoods is acquiring the Cadapult Shares to
be transferred to it under this Plan for investment and not with a view to the
sale or distribution thereof, and Seafoods has no commitment or present
intention to liquidate Cadapult or to sell or otherwise dispose of the Cadapult
Shares.
3.12 Corporate Authority. Seafoods has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder and
will deliver to the Cadapult Stockholders and Cadapult or their respective
representatives at the Closing a certified copy of resolutions of its Board of
Directors authorizing execution of this Plan by its officers and performance
thereunder, and the sole director adopting and delivering such resolutions is
the duly elected and incumbent director of Seafoods.
3.13 Due Authorization. Execution of this Plan and performance by
Seafoods hereunder have been duly authorized by all requisite corporate action
on the part of Seafoods, and this Plan constitutes a valid and binding
obligation of Seafoods and performance hereunder will not violate any provision
of the Articles of Incorporation, Bylaws, agreements, mortgages or other
commitments of Seafoods.
3.14 Environmental Matters. Seafoods has no knowledge of any assertion
by any governmental agency or other regulatory authority of any environmental
lien, action or proceeding, or of any cause for any such lien, action or
proceeding related to the business operations of Seafoods. In addition, to the
best knowledge of Seafoods, there are no substances or conditions which may
support a claim or cause of action against Seafoods or any of its current or
former officers, directors, agents or employees, whether by a governmental
agency or body, private party or individual, under any Hazardous Materials
Regulations. "Hazardous Materials" means any oil or petrochemical products,
PCB's, asbestos, urea formaldehyde, flammable explosives, radioactive materials,
solid or hazardous wastes, chemicals, toxic substances or related materials,
including, without limitation, any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
or "toxic substances" under any applicable federal or state laws or regulations.
"Hazardous Materials Regulations" means any regulations governing the use,
generation, handling, storage, treatment, disposal or release of hazardous
materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act and the Federal Water Pollution Control Act.
<PAGE>
3.15 Access to Information Regarding Cadapult. Seafoods acknowledges
that it has been delivered copies of documents Seafoods has requested from
Cadapult, which Cadapult believes to be sufficient material information
respecting Cadapult and its present and contemplated business operations,
potential acquisitions, management and other factors; Seafoods further
acknowledges that it has had a reasonable opportunity to review such
documentation and discuss it, to the extent desired, with its legal counsel,
directors anestions of and receive responses from the directors and executive
officers of Cadapult, and with the legal and accounting firms of Cadapult, with
respect to such documentation; and that to the extent requested, all questions
raised have been answered and documents requested have been provided to Seafoods
to its complete satisfaction.
Section 4
Representations, Warranties and Covenants of Cadapult
-----------------------------------------------------
Cadapult represents and warrants to, and covenants with, Seafoods as
follows:
4.1 Cadapult Shares. The Cadapult Stockholders are the record and
beneficial owners of all of the Cadapult Shares listed in Exhibit A, free and
clear of adverse claims of third parties; and Exhibit A correctly sets forth the
names, addresses and the number of Cadapult Shares owned by the Cadapult
Stockholders.
4.2 Corporate Status. Cadapult is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey
and is licensed or qualified as a foreign corporation in all states in which the
nature of its business or the character or ownership of its properties makes
such licensing or qualification necessary.
4.3 Capitalization. The authorized capital stock of Cadapult consists
of 2,500 shares of common voting stock, no par value, of which 319.6748 shares
are issued and outstanding, all fully paid and non-assessable. There are no
outstanding options, warrants or calls pursuant to which any person has the
right to purchase any authorized and unissued capital stock of Cadapult.
4.4 Financial Statements. The financial statements of Cadapult
furnished to Seafoods, consisting of unaudited financial statements for the
periods ended April 30, 1997 and 1996, attached hereto as Exhibit E, and
incorporated herein by reference, are correct and fairly present the financial
condition of Cadapult as of these dates and for the periods involved, and such
statements were prepared in accordance with generally accepted accounting
principles consistently applied. To the best of Cadapult's knowledge, these
financial statements do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
<PAGE>
4.5 Undisclosed Liabilities. Cadapult knows of no material liabilities
of any nature except to the extent reflected or reserved against in the balance
sheets, whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities and interest due or to become due, except as set
forth in Exhibit F attached hereto and incorporated herein by reference.
4.6 Interim Changes. To the best of Cadapult's knowledge, except for
expected changes previously communicated to Seafoods due to negatively affect
Cadapult's recent fiscal quarter, since the date of these balance sheets, except
as set forth in Exhibit F, there have been no (1) changes in the financial
condition, assets, liabilities or business of Cadapult, in the aggregate, have
been materially adverse; (2) damages, destruction or loss of or to the property
of Cadapult, payment of any dividend or other distribution in respect of the
capital stock of Cadapult, or any direct or indirect redemption, purchase or
other acquisition of any such stock; or (3) increases paid or agreed to in the
compensation, retirement benefits or other commitments to its employees.
4.7 Title to Property. Cadapult has good and marketable title to all
properties and assets, real and personal, proprietary or otherwise, reflected in
these balance sheets, and the properties and assets of Cadapult are subject to
no mortgage, pledge, lien or encumbrance, except as reflected in the balance
sheet or in Exhibit F, with respect to which no default exists.
4.8 Litigation. There is no litigation or proceeding pending, or to
the knowledge of Cadapult, threatened, against or relating to Cadapult or its
properties or business, except as set forth in Exhibit F. Further, no officer,
director or person who may be deemed to be an affiliate of Cadapult is party to
any material legal proceeding which could have an adverse effect on Cadapult
(financial or otherwise), and none is party to any action or proceeding wherein
any has an interest adverse to Cadapult.
4.9 Books and Records. From the date of this Plan to the Closing,
Cadapult will (1) give to Seafoods and its representatives full access during
normal business hours to all of its offices, books, records, contracts and other
corporate documents and properties so that Seafoods may inspect and audit them;
and (2) furnish such information concerning the properties and affairs of
Cadapult as Seafoods may reasonably request.
4.10 Tax Returns. Cadapult has filed all federal and state income or
franchise tax returns required to be filed or has received currently effective
extensions of the required filing dates.
4.11 Confidentiality. Until the Closing (and continuously if there is
no Closing), Cadapult, the Cadapult Stockholders and their representatives will
keep confidential any information which they obtain from Seafoods concerning its
properties, assets and business. If the transactions contemplated by this Plan
<PAGE>
are not consummated by June 18, 1998, Cadapult and the Cadapult Stockholders
will return to Seafoods all written matter with respect to Seafoods obtained by
them in connection with the negotiation or consummation of this Plan.
4.12 Investment Intent. The Cadapult Stockholders are acquiring the
shares to be exchanged and delivered to them under this Plan for investment and
not with a view to the sale or distribution thereof, and the Cadapult
Stockholders have no commitment or present intention to liquidate the Company or
to sell or otherwise dispose of the Seafoods shares. The Cadapult Stockholders
shall execute and deliver to Seafoods on the Closing an Investment Letter
attached hereto as and incorporated herein by reference, acknowledging
the "unregistered" and "restricted" nature of the shares of Seafoods being
received under the Plan in exchange for the Cadapult Shares, and receipt of
certain material information regarding Seafoods.
4.13 Corporate Authority. Cadapult has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder and
will deliver to Seafoods or its representative at the Closing a certified copy
of resolutions of its Board of Directors authorizing execution of this Plan by
its officers and performance thereunder.
4.14 Due Authorization. Execution of this Plan and performance by
Cadapult hereunder have been duly authorized by all requisite corporate action
on the part of Cadapult, and this Plan constitutes a valid and binding
obligation of Cadapult and performance hereunder will not violate any provision
of the Articles of Incorporation, Bylaws, agreements, mortgages or other
commitments of Cadapult.
4.15 Environmental Matters. Cadapult has no knowledge of any assertion
by any governmental agency or other regulatory authority of any environmental
lien, action or proceeding, or of any cause for any such lien, action or
proceeding related to the business operations of Cadapult or its predecessors.
In addition, to the best knowledge of Cadapult, there are no substances or
conditions which may support a claim or cause of action against Cadapult or any
of its current or former officers, directors, agents, employees or predecessors,
whether by a governmental agency or body, private party or individual, under any
Hazardous Materials Regulations. "Hazardous Materials" means any oil or
petrochemical products, PCB's, asbestos, urea formaldehyde, flammable
explosives, radioactive materials, solid or hazardous wastes, chemicals, toxic
substances or related materials, including, without limitation, any substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," or "toxic substances" under any applicable
federal or state laws or regulations. "Hazardous Materials Regulations" means
any regulations governing the use, generation, handling, storage, treatment,
disposal or release of hazardous materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act and the Federal Water Pollution Control
Act.
<PAGE>
4.16 Access to Information Regarding Seafoods. Cadapult and the
Cadapult Stockholders acknowledge that they have been delivered copies of what
has been represented to be documentation containing all material information
respecting Seafoods and its present and contemplated business operations,
potential acquisitions, management and other factors; that they have had a
reasonable opportunity to review such documentation and discuss it, to the
extent desired, with their legal counsel,tunity to ask questions of and receive
responses from the directors and executive officers of Seafoods, and with the
legal and accounting firms of Seafoods, with respect to such documentation; and
that to the extent requested, all questions raised have been answered to their
complete satisfaction.
Section 5
Conditions Precedent to Obligations of Cadapult and the Cadapult Stockholders
-----------------------------------------------------------------------------
All obligations of Cadapult and the Cadapult Stockholders under this
Plan are subject, at their option, to the fulfillment, before or at the Closing,
of each of the following conditions:
5.1 Representations and Warranties True at Closing. The
representations and warranties of Seafoods and Jenson contained in this Plan
shall be deemed to have been made again at and as of the Closing and shall then
be true in all material respects and shall survive the Closing.
5.2 Due Performance. Seafoods and Jenson shall have performed and
complied with all of the terms and conditions required by this Plan to be
performed or complied with by it before the Closing.
5.3 Officers' and Jenson's Certificate. Cadapult and the Cadapult
Stockholders shall have been furnished with a certificate signed by the
President of Seafoods and Jenson, attached hereto as Exhibit H and incorporated
herein by reference, dated as of the Closing, certifying (1) that all
representations and warranties of Seafoods and Jenson contained herein are true
and correct; and (2) that since the date of the financial statements (Exhibits C
and C-1 hereto), there has been no material adverse change in the financial
condition, business or properties of Seafoods, taken as a whole.
5.4 Opinion of Counsel of Seafoods. Cadapult and the Cadapult
Stockholders shall have received an opinion of counsel for Seafoods, dated as of
the Closing, to the effect that (1) the representations of Sections 3.1, 3.2 and
3.12 are correct; (2) except as specified in the opinion, counsel knows of no
inaccuracy in the representations in 3.5, 3.6 or 3.7; and (3) the shares of
Seafoods to be issued to the Cadapult Stockholders under this Plan will, when so
issued, be validly issued, fully paid and non-assessable.
<PAGE>
5.5 Assets and Liabilities of Seafoods. Seafoods shall have no
material assets and no liabilities at Closing, and all costs, expenses and fees
incident to the Plan shall have been paid, and Jenson shall have executed and
delivered Exhibit B hereto in favor of Seafoods, Cadapult and the Cadapult
Stockholders.
5.6 Resignation of Directors and Executive Officers and Designation of
New Directors and Executive Officers. The present directors and executive
officers of Seafoods shall resign, and shall have designated nominees of
Cadapult as directors and executive officers of Seafoods to serve in their place
and stead, until the next respective annual meetings of the stockholders and
Board of Directors of Seafoods, and until their respective successors shall be
elected and qualified or until their respective prior resignations or
terminations.
5.7 Reverse Split and Name Change of Seafoods. The requirements of
Section 1.5 hereof shall have been fully satisfied at Closing.
5.8 Change of Domicile. Seafoods shall change its domicile from the
State of Utah to such state as selected by Cadapult and the Cadapult
Stockholders.
Section 6
Conditions Precedent to Obligations of Seafoods
-----------------------------------------------
All obligations of Seafoods under this Plan are subject, at its
option, to the fulfillment, before or at the Closing, of each of the following
conditions:
6.1 Representations and Warranties True at Closing. The
representations and warranties of Cadapult and the Cadapult Stockholders
contained in this Plan shall be deemed to have been made again at and as of the
Closing and shall then be true in all material respects and shall survive the
Closing.
6.2 Due Performance. Cadapult and the Cadapult Stockholders shall have
performed and complied with all of the terms and conditions required by this
Plan to be performed or complied with by them before the Closing.
6.3 Officers' and Stockholders' Certificate. Seafoods shall have been
furnished with a certificate signed by the President of Cadapult, attached
hereto as Exhibit I and incorporated herein by reference, dated as of the
Closing, certifying (1) that all representations and warranties of Cadapult and
the Cadapult Stockholders contained herein are true and correct; and (2) that
since the date of the financial statements (Exhibits D and D-1), there has been
no material adverse change in the financial condition, business or properties of
Cadapult, taken as a whole.
<PAGE>
6.4 Opinion of Counsel of Cadapult. Seafoods shall have received an
opinion of counsel for Cadapult, dated as of the Closing, to the effect that (1)
the representations of Sections 4.2, 4.3 and 4.13 are correct; (2) except as
specified in the opinion, counsel knows of no inaccuracy in the representations
in 4.7 or 4.8; (3) the Cadapult Shares to be delivered to Seafoods under this
Plan will, when so delivered, have been validly issued, fully paid and
non-assessable.
6.5 Books and Records. The Cadapult Stockholders or the Board of
Directors of Cadapult shall have caused Cadapult to make available all books and
records of Cadapult, including minute books and stock transfer records;
provided, however, only to the extent requested in writing by Seafoods at
Closing.
6.6 Acceptance by Cadapult Stockholders. The terms of this Plan shall
have been accepted by the Cadapult Stockholders by execution and delivery of a
copy of the Plan and related instruments.
Section 7
Termination
-----------
Prior to Closing, this Plan may be terminated (1) by mutual consent in
writing; (2) by either the sole director of Seafoods or Cadapult and the
Cadapult Stockholders if there has been a material misrepresentation or material
breach of any warranty or covenant by the other party; or (3) by either the
directors of Seafoods or Cadapult and the Cadapult Stockholders if the Closing
shall not have taken place, unless adjourned to a later date by mutual consent
in writing, by the date fixed in Section 2.
Section 8
General Provisions
------------------
8.1 Further Assurances. At any time, and from time to time, after the
Closing, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Plan.
8.2 Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
8.3 Brokers. Each party represents to the other parties hereunder that
no broker or finder has acted for it in connection with this Plan, and Seafoods
and Jenson agree to indemnify and hold harmless Cadapult and the Cadapult
<PAGE>
Stockholders against any fee, loss or expense arising out of claims by brokers
or finders employed or alleged to have been employed by Seafoods and/or Jenson.
8.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first-class registered or certified mail, return receipt requested,
as follows:
If to Seafoods: 5525 South 900 East, #110
Salt Lake City, Utah 84117
With a copy to: Leonard W. Burningham, Esq.
455 East 500 South, #205
Salt Lake City, Utah 84111
If to Jenson: 5525 South 900 East, #110
Salt Lake City, Utah 84117
If to Cadapult: 110 Commerce Drive
Allendale, New Jersey 07401
With a copy to: Dan Brecher, Esq., Counsel
Fischbein Badillo Wagner Harding
909 3rd Avenue, 18th Floor
New York, New York 10022
If to the Cadapult To the Address listed in Exhibit A Stockholders:
8.5 Entire Agreement. This Plan constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
8.6 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Plan.
8.7 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of New York, except to the
extent preempted by federal law, in which event (and to that extent only),
federal law shall govern.
8.8 Assignment. This Plan shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided
<PAGE>
however, that any assignment by any party of its rights under this Plan without
the prior written consent of the other parties shall be void.
8.9 Counterparts. This Plan may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Reorganization effective the day and year first above written.
SEAFOODS PLUS, LTD.
Date: 6-9-98. By /s/ Kathleen L. Morrison
Kathleen L. Morrison, President
JENSON SERVICES, INC.
Date: 6-9-98. By /s/ Duane S. Jenson
Duane S. Jenson, President
Date: 6-9-98. /s/ Duane S. Jenson
Duane S. Jenson
Date: 6-9-98. /s/ Jeffrey D. Jenson
Jeffrey D. Jenson
CADAPULT GRAPHIC SYSTEMS, INC.
Date: 6/15/98. By /s/ Michael W. Levin
Michael W. Levin, President
CADAPULT STOCKHOLDERS
<PAGE>
Date: 6/15/98. /s/ Michael W. Levin
Michael W. Levin
Date: 6/16/98. /s/ Frances Blanco
Frances Blanco
Date: 6/15/98. /s/ Duncan Huyler
Duncan Huyler
Date: 6/15/98. /s/ Duncan Yates
Duncan Yates
Date: 6/15/98. /s/ Michael W. Levin
Michael W. Levin,
c/f Nathan M. Levin
Date: 6/15/98. /s/ Michael W. Levin
Michael W. Levin,
c/f Tyler W. Levin
<PAGE>
EXHIBIT A
Number of Shares of
Number of Shares Seafoods
Owned of to be
Name and Address Cadapult Received in Exchange
Michael W. Levin 293.80 1,516,450
8 Meadow Lane
Allendale, New Jersey 07401
Frances Blanco 7.90 40,775
1128 Park Avenue
Hoboken, New Jersey 07030
Duncan Huyler 7.90 40,775
551 Lattintown Rd.
Marlboro, New York 12542
Duncan Yates 3.8748 20,000
651 Wyndemere Avenue
Ridgewood, New Jersey 07450
Nathan M. Levin 3.10 16,000
8 Meadow Lane
Allendale, New Jersey 07401
Tyler W. Levin 3.10 16,000
8 Meadow Lane
Allendale, New Jersey 07401
319.6748 1,650,000
<PAGE>
EXHIBIT B
Letter of Indemnification
Cadapult Graphic Systems, Inc.
110 Commerce Drive
Allendale, New Jersey 07401
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Seafoods Plus, Ltd., a Utah corporation (the "Company"),
Agreement and Plan of Reorganization (the "Plan") with
Cadapult Graphic Systems, Inc., a New Jersey corporation
("Cadapult"), and all of the stockholders of Cadapult (the
"Cadapult Stockholders")
Dear Ladies and Gentlemen:
In further consideration of the completion of the Plan and to satisfy
one of the conditions pursuant to which Cadapult and the Cadapult Stockholders
have agreed to their respective obligations under the Plan, Jenson Services,
Inc., Duane S. Jenson and Jeffrey D. Jenson (collectively referred to as
"Jenson"), principal stockholders of the Company and Jenson Services, Inc., do
hereby (i) compromise any outstanding liabilities of the Company owed to them
for advances or otherwise prior to the closing (the "Closing") of the Plan
(excluding any benefits Jenson may receive under the Plan); (ii) agree to pay
all other outstanding liabilities which were incurred prior to the Closing;
(iii) represent and warrant that to their knowledge, there are no other
outstanding liabilities of the Company which are not set forth in the financial
statements of the Company which are appended to the Plan as Exhibits C and C-1;
and (iv) agree to indemnify and hold the Company, Cadapult and the Cadapult
Stockholders harmless from and against any and all other liabilities of the
Company existing prior the Closing. It is specifically represented, understood
and agreed that Cadapult and the Cadapult Stockholders are not and shall not be
responsible for any costs, claims or obligations of any type or nature that in
any way exists, existed or may exist, wherever, as asserted, for or to the
extent related to any act or occurrence prior to the date of completion of the
Plan.
This Letter of Indemnification and all obligations of any type or
nature hereunder shall expire six years from the date hereof.
JENSON SERVICES, INC.
<PAGE>
Dated: 6-9-98. By /s/ Duane S. Jenson
------------------------------
Duane S. Jenson, President
Dated: 6-9-98. /s/ Duane S. Jenson
--------------------------------
Duane S. Jenson
Dated: 6-9-98. /s/ Jeffrey D. Jenson
--------------------------------
Jeffrey D. Jenson
<PAGE>
EXHIBIT C
SEAFOODS PLUS, LTD.
AUDITED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED
DECEMBER 31, 1997 AND 1996 (AUDITED)
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
Independent Auditors' Report
and
Financial Statements
December 31, 1997 and 1996
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
Table of Contents
Page
----
Independent Auditors' Report............................................1
Balance Sheets - December 31, 1997 and 1996.............................2
Statements of Stockholders' Equity/(Deficit) for the Period from
Reactivation [December 31, 1994] through December 31, 1997..............3
Statements of Operations for the Years Ended December 31, 1997
and December 31, 1996, and for the Period from Reactivation
[December 31, 1994] through December 31, 1997...........................4
Statements of Cash Flows for the Years Ended December 31, 1997
and December 31, 1996, and for the Period from Reactivation
[December 31, 1994] through December 31, 1997...........................5
Notes to Financial Statements.......................................6 - 7
<PAGE>
MANTYLA, McREYNOLDS
AND ASSOCIATES, C.P.A's
A Professional Corporation
Board of Directors and Stockholders
Seafoods Plus, LTD.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Seafoods Plus, LTD. [a
development stage, Utah corporation] as of December 31, 1997 and December 31,
1996, and the related statements of stockholders' equity/(deficit), operations,
and cash flows for the years then ended and for the period from reactivation
[December 31, 1994] through December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements me free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the mounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Seafoods Plus, LTD. as of
December 31, 1997, and December 31, 1996, and the results of its operations and
its cash flows for the years then ended and for the period from reactivation
[December 31, 1994] through December 31, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that Seafoods
Plus, LTD. will continue as a going concern. As discussed in Note D to the
financial statements, the Company has accumulated losses from inception totaling
$47,022 and presently has no prospects for commencing operations or generating
revenue. These issues raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note D. The financial statements do not include any adjustment that might
result front the outcome of this uncertainty.
/s/ Mantyla McReynolds & Assoc.
-------------------------------
Mantyla McReynolds & Associates
February 27, 1998
Salt Lake City, Utah
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
Balance Sheets
December 31, 1997 and 1996
1997 1996
ASSETS
Current Assets $ 583 $ 653
Cash - Note B
Total Current Assets 583 653
TOTAL ASSETS $ 583 $ 653
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current Liabilities
Accounts Payable $ 401 $ 401
Shareholder Loan - Note F 7,777 4,236
Income Taxes Payable - Notes A & C 100 100
Total Current Liabilities 8,278 4,737
TOTAL LIABILITIES 8,278 4,737
----- -----
STOCKHOLDERS' DEFICIT
Capital Stock - 50,000,000 shares authorized
at $0.001 par; 2,000,012 post-split shares
issued and outstanding 2,000 2,000
Additional paid-in capital 37,327 37,327
Deficit accumulated during development stage (47,022) (43,411)
TOTAL STOCKHOLDERS' DEFICIT (7,695) (4,084)
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 583 $ 653
======== ========
See accompanying notes to financial statements
2
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
Statements of Stockholders' Equity/(Deficit)
For the Period from Reactivation [December 31, 1994] through December 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Number Common Paid-in Development Stockholders'
of Shares Stock Capital Stage Equity/(Deficit)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 350,012 $ 350 $ 28,977 $ (30,030) $ (703)
Issued 1,650,000 shares for 1,650,000 1,650 8,350 10,000
cash
Net loss for the year ended (8,577) (8,577)
December 31, 1995
---------------------------------------------------------------------------------------------
Balance, December 31, 1995 2,000,012 2,000 37,327 (38,607) 720
Net loss for the year ended (4,084) (4,084)
December 31, 1996
---------------------------------------------------------------------------------------------
Balance, December 31, 1996 2,000,012 2,000 37,327 (43,411) (4,084)
Net loss for the year ended
December 31, 1997 (3,611) (3,611)
---------------------------------------------------------------------------------------------
Balance, December 31, 1997 2,000,012 $ 2,000 $ 37,327 $ (47,022) $ (7,695)
=============================================================================================
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
Statements of Operations
For the years Ended December 31, 1997 and 1996,
and for the Period from Reactivation [December 31, 1994]
through December 31, 1997
For the Period
From
For the Year Ended For the Year Ended Reactivation to
December 31, 1997 December 31, 1996 December 31, 1997
----------------- ----------------- -----------------
Revenues $ -0- $ -0- $ -0-
Expenses 3,511 4,704 16,692
----- ----- ------
Loss Before Income (3,511) (4,704) (16,692)
Tax
Income taxes - Note 100 100 300
--- --- ---
A & C
Net Loss $ (3,611) $ (4,804) $ (16,992)
============ ============== ==============
Net Loss Per Share $ (.01) $ (.01) $ (.01)
============= ============== ==============
Weighted Average 2,000,012 2,000,012 1,505,765
=========== ============= ==============
Shares Outstanding
See accompanying notes to financial statements
4
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996,
and for the Period from Reactivation [December 31, 1994]
through December 31, 1997
<TABLE>
<CAPTION>
For the Period
For the Year Ended For the Year Ended from Reactiviation to
December 31, 1996 December 31, 1996 December 31, 1997
------------------ ------------------ ---------------------
<S> <C> <C> <C>
Cash Flows Used for Operating Activities
Net Loss $ (3,611) $ (4,804) $ (16,992)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Increase/(decrease) in:
accounts payable 0 0 401
Income taxes payable 0 0 (603)
Shareholder loan 3,541 4,236 7,777
Net Cash Used for Operating Activities (70) (568) (9,417)
Cash Flows Provided in Financing Activities
Issuance of Common Stock -0- -0- 10,000
Net Cash Provided by Financing Activities -0- -0- 10,000
Net Increase In Cash (70) (568) 583
Beginning Cash Balance 653 1,221 -0-
Ending Cash Balance $ 583 $ 653 $ 583
Supplemental Disclosure of Cash Flow Information:
Cash paid for the period for interest $ -0- $ -0- -0-
Cash paid for the period for income taxes $ -0- $ 100 890
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
SEAFOODS PLUS, LTD.
Notes to Financial Statements
December 31, 1997
NOTE A Summary of Significant Accounting Policies
Company Background
The Company originally incorporated under the laws of the
State of Utah on August 11, 1983 using name Communitra Energy,
Inc., with a stated principal business activity of inviting in
oil, gas and mineral leases, and/or products. By agreement of
the shareholders of the Company on July 16, 1985, the name of
the Company officially changed to Seafoods Plus, LTD. and
expanded the purpose of the Company to include the processing
and canning of sea foods.
Seafoods Plus, LTD., a development stage company, has yet to
commence its planned principal operations and has been in an
essentially dormant status for the last nine years.
lncome Taxes
In February 1992, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard
(SFAS) No. 109, "Accounting For Income Taxes," which is
effective for fiscal years beginning after December 15, 1992.
SFAS No. 109 requires the asset and liability method of
accounting for income taxes. The asset and liability method
requires that the current or deferred tax consequences of all
events recognized in the financial statements are measured by
applying the provisions of enacted tax laws to determine the
mount of taxes payable or refundable currently or in future
years. The Company adopted SFAS No. 109 for financial
reporting purposes in 1993. See Note C below.
Net Loss Per Common Share
Net loss per common share is based on the weighted average
number of shares outstanding.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
NOTE B Cash
Cash is comprised of cash on deposit in the trust account of
the corporate attorney.
NOTE C Change in Accounting Principle--Accounting for Income Taxes
During 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes,"
The cumulative effect of this change in accounting for
income taxes as of January 1,
<PAGE>
SEAFOODS PLUS, LTD.
Notes to Financial Statements
December 31, 1997
1993 is $0, due to operating losses carried forward from prior
years and unlikely nature of future earnings. For the years
ended December 31, 1997 and 1996, the Company had no
significant income tax expenses due to operating losses during
those periods. Any deferred tax benefit arising from the
operating losses carried forward would be offset entirely by a
valuation allowance since it is not likely that the Company
will be sufficiently profitable in the future m take advantage
of the losses carried forward. The Company has no timing
differences.
The amount shown on the balance sheet for income taxes payable
represents the annual minimum amount due to the State of Utah.
NOTE D Liquidity
The Company has accumulated losses from inception totaling
$47,022, nominal assets and no operations at December 31,
1997. Financing for the Company's limited activities to date
has been primarily provided by borrowing from shareholders and
the issuance of common stock. The Company's ability to achieve
a level of profitable operations and/or additional financing
impacts the Company's ability to continue as it is presently
organized. Management is currently seeking a well-capitalized
merger candidate in order to recommence its operations. Should
management be unsuccessful in its merger activities, it will
have a material adverse effect on the Company.
NOTE E Reverse Stock Split
The Company filed Articles of Amendment to the Articles of
Incorporation of Seafoods Plus, LTD. the State of Utah,
Department of Commerce on October 5, 1995 which included
provisions for a reverse split of the outstanding shares of
common stock at the ratio of one new share for every 16.17
shares issued and outstanding as of September 5, 1995, [the
date of adoption by the stockholders at a meeting held on that
same date] reducing the outstanding shares to 350,000,
provided that no stockholder's holdings shall be reduced to
less than one share as result of the reverse split, with all
fractional shares being rounded to the nearest whole share.
The rounding resulted in 350,012 shares of stock outstanding
after the reverse split. All disclosures in the financial
statements, with respect to the number of shares outstanding,
are presented in post-split denominations.
NOTE F Stockholder Loan
A stockholder has paid expenses on behalf of the Company in
the amount of $3,541 during the year ended December 31, 1997
and $4,236 during the, year ended December 31, 1996. The
Company has recorded a liability for these expenses to the
stockholder. The unsecured loan bears no interest and is due
on demand.
7
<PAGE>
EXHIBIT C-1
SEAFOODS PLUS, LTD.
UNAUDITED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 1998
<PAGE>
SEAFOODS PLUS, LTD.
[A Development Stage Company]
BALANCE SHEETS
March 31, 1998 and December 31, 1997
3/31/98 12/31/97
(Undaudited)
ASSETS
Total Current Assets $ 583 $ 583
--------------- -----------
TOTAL ASSETS $ 583 $ 583
=============== ===========
LIABILITIES & EQUITY
LIABILITIES
Current Liabilities
Loans for Stockholders $ 7,909 $ 7,777
Accounts Payable 401 401
Income Taxes Payable 100 100
--------------- -----------
Total Current Liabilities 8,410 8,278
TOTAL LIABILITIES 8,410 8,278
EQUITY
Common Stock - 50,000,000 shares
authorized at par; 2,000 2,000
2,000,012 post-split shares
issued and outstanding
Paid-in Capital 37,327 37,327
Accumulated Deficit (47,154) (47,022)
--------------- -----------
TOTAL EQUITY (7,827) (7,695)
--------------- -----------
TOTAL LIABILITIES & EQUITY $ 583 $ 583
============== ================
NOTE TO FINANCIAL STATEMENTS. Intermin financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the periods. The December 31, 1997 balance sheet
has been derived from the audited financial statements. These interim financial
statements conform with the requirements for interim financial statements and
consequently do not include all the disclosures normally required by
<PAGE>
SEAFOOD PLUS, LTD.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
For the Three-Month Periods Ended March 31, 1998 and
1997 and for the Period from Reactivation [December 31,
1994] through March 32, 1998
<TABLE>
<CAPTION>
Three Months Three Months For the Period
Ended Ended from Reactivation to
3/31/98 3/31/97 3/31/98
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUE
Income $ 0 $ 0 $ 0
OPERATING EXPENSES 132 1,442 16,824
TOTAL OPERATING 132 1,442 16,824
EXPENSES
INCOME / FRANCHISE TAX 0 100 300
NET (LOSS) $ (132) $ (1,542) $ (17,124)
=========== =========== ===================
NET LOSS PER SHARE $ (0.01) $ (0.01) $ (0.01)
=========== =========== ===================
WEIGHTED AVERAGE NUMBER 200,012 200,012 1,543,784
=========== =========== ===================
OF SHARES OUTSTANDING
</TABLE>
<PAGE>
SEAFOOD PLUS, LTD.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
For the Three-Month Periods Ended March 31, 1998 and
1997, and for the Period from Reactivation [December 31,
1994] through March 31, 1998
<TABLE>
<CAPTION>
Three Months Three Months For the Period
Ended Ended from Reactivation to
3/31/98 3/31/97 3/31/98
------- ------- -------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash Flows Used for Operating Activities
Net Loss $ (132) $ (1,442) $ (17,124)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase/(Decrease) in franchise
taxes payable 0 (100) (603)
Increase/(Decrease) in accounts
payable 0 0 401
Increase/(Decrease) in shareholder
loan 132 1,540 7,909
Net Cash Used for Operating $ 0 $ (2) $ (9,417)
=========== =========== ==================
Activities
Cash Flows Provided in Financing
Activities
Issuance of Common Stock 0 0 10,000
Net Cash Provided by Financing Activities 0 0 10,000
Net Increase In Cash 0 (2) 651
Beginning Cash Balance 583 653 0
Ending Cash Balance $ 583 $ 651 $ 651
============ =========== ===================
Supplemental Disclosure of Cash Flow
Information:
Cash paid for the period for interest $ 0 $ 0 $ 0
Cash paid for the period for income taxes $ 0 $ 100 $ 890
</TABLE>
<PAGE>
EXHIBIT D
None.
<PAGE>
EXHIBIT E
CADAPULT GRAPHIC SYSTEMS, INC.
AUDITED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED
APRIL 30, 1997 AND 1996
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
FINANCIAL STATEMENTS
APRIL 30, 1997
ROBERT N. NEVITT CPA, P.C.
<PAGE>
ROBERT N. NEVITT CPA, P.C.
225 WEST 34TH STREET SUITE 1900
NEW YORK, NEW YORK 10122
TEL (212) 239-8017 / FAX (212) 268-6968
To the Shareholder of
Cadapult Graphic Systems, Inc.
Allendale, New Jersey
I have audited the accompanying balance sheet of Cadapult Graphic Systems, Inc.
as of April 30, 1997, and the related statements of operations and retained
earnings, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
Except as explained in the following paragraph, I conducted my audit in
accordance with generally accepted auditing standards. Those standards require
that I plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial presentation. I believe that my audit provides
a reasonable basis for my opinion,
I did not physically observe the inventory as of April 30, 1996, since that date
was prior to my engagement as the auditor. Accordingly, the scope of my work was
not sufficient to enable me to express, and I do not express, an opinion on the
statements of operations arid retained earnings, and cash flows for the year
ended April 30, 1997. In my opinion, the balance sheet referred to in the first
paragraph presents fairly, in all material respects, the financial position of
Cadapult Graphic Systems, Inc. as of April 30, 1997, in conformity with
generally accepted accounting principles. The April 30, 1996 financial
statements were reviewed by me, and my report thereon, dated July 9. 1996,
stated that I was not aware of any material modifications that should made to
those statements for them to be in conformity with generally accepted accounting
principles. However, a review is substantially less in scope than an audit and
does not provide a basis for the expression of an opinion on the financial
statements taken as a whole.
July 24, 1997
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
BALANCE SHEETS
APRIL 30,
Assets 1997 1996
---------- -------
Current Assets
Cash (Note 5) $30,444 $67,323
Accounts receivable, net of allowance for
doubtful accounts of $22,500 in both 1997
and 1996 (Note 5) 1,091,890 1,142,257
Inventory (Note 1) 724,846 590,232
Prepaid expenses 4,128 8,100
----- -----
Total Current Assets 1,851,308 1,807,912
Property and equipment, net of accumulated
depreciation (Notes 1 and 2) 204,203 152,013
Deposits 26,491 21,606
------ ------
Total Assets $2,082,002 $1,981,531
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued expenses $697,588 $961,140
Loans payable (Note 3) 560,173 244,415
Income taxes payable (Notes 1 and 4) 45,977 6,164
Deferred revenue (Note 1) 122,866 -
Obligation under capitalized lease 14,309
Payroll and sales taxes payable 34,888 19,606
Customer deposits 7,160 390
----- -----
Total Current Liabilities 1,468,652 1,246,024
Deferred income taxes payable (Notes 1 and 4) 32,800 72,300
Subordinated loan payable, officer 50,000 50,000
Loans payable (Note 3) 11,007 390
------------- ----------
Total Liabilities 1,562,459 1,518,661
Commitments (Note 6)
Shareholders Equity
Capital stock, no par value, 2,500 shares
authorized, 300 shares issued and outstanding 300 150,337
<PAGE>
Retained earnings 519,243 462,870
------------ -----------
Total Shareholders' Equity 519,543 462,870
Total Liabilities and Shareholders' Equity $ 2,082,002 $1,981,531
========= =========
See accompanying notes and accountant's report.
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED APRIL 30,
1997 1996
-------------- ---------
Sales $ 8,594,082 $ 8,393,455
------------ ------------
Cost of sales:
Inventory, beginning (Note 1) 590,232 608,607
Purchases 6,603,127 6,582,453
------------ ------------
7,193,359 7,191,060
Less: Inventory, ending (Note 1) 590,232 724,846
------------ ------------
Total cost of sales 6,468,513 6,600,828
------------ ------------
Gross profit 2,125,569 1,792,627
------------ ------------
Operating expenses:
Payroll, staff 678,132 656,782
Payroll, officer 228,200 114,000
Payroll taxes 80,307 71,429
Advertising 52,670 59,178
Postage and shipping 52,233 59,803
Depreciation (Note 1) 91,308 96,551
Office 42,185 41,319
Travel, meals and entertainment 54,286 43,444
Insurance 17,112 21,039
Consulting fees 8,279 14,567
Rent and utilities (Note 6) 155,007 141,668
Commissions 229,038 156,381
Interest expense (Note 3) 78,175 60,263
Telephone 55,503 58,843
Repairs and maintenance 7,439 8,809
Employee benefits 60,700 44,693
Equipment rentals 11,489 5,238
Automobile 45,060 43,789
Software 15,282 5,677
Professional fees 45,035 22,897
Other 42,956 25,495
--------- -----------
Total operating expenses 2,050,396 1,751,865
--------- -----------
Income before income taxes 75,173 40,762
Provision for income taxes (Notes 1 and 4) 18,500 13,000
Net income 56,673 27,762
Retained earnings, beginning 462,570 434,808
<PAGE>
Retained earnings, ending $ 519,243 $ 462,570
=========== ========
See accompanying notes and accountant's report.
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30,
<TABLE>
<CAPTION>
1997 1996
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 56,673 $ 27,762
---------- -------------
Adjustments to reconcile net income to
net cash: 96,551
Depreciation 91,308
Changes to operating assets and liabilities:
Accounts receivable 50,367 (224,505)
Inventory (134,614) 18,375
Prepaid expenses 3,972 279
Refundable income taxes - 34,992
Accounts payable and accrued expenses (263,552) 212,550
Income taxes payable 39,813 6,164
Deferred income 122,866 -
Deferred income taxes payable (39,500) (26,300)
Payroll and sales taxes payable 15,282 (1,262)
---------- ---------
Customer deposits 6,770 (27,360)
Total adjustments (107,288) 89,484
Net cash provided by (used in operations) 117,246 (50,615)
---------- ---------
Cash flows from financing activities:
(Increase) in property and equipment (143,498) (43,949)
(Increase) decrease in deposits (4,885) 9,900
------------ ---------
Net cash (used in) investing activities (148,383) 34,049
---------- ---------
Cash flows from financing activities
Borrowings 730,000 222,000
Repayments (553,592) (286,237)
(286,237)
Obligation under capitalized lease (14,309) ( 18,319)
---------- ---------
Net cash provided by (used in) financing
activities 162,119 (82,556)
---------- ---------
Net increase (decrease) in cash (36,879) 641
Cash, beginning 67,323 66,682
---------- ---------
Cash, ending $ 30,444 $ 67,323
========== ==========
Supplemental disclosures
Interest paid $ 78,175 $ 60,263
========== ==========
Income taxes paid $ 18,187 $ 421
========== ==========
</TABLE>
See accompanying notes and accountant's report.
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30,
Note 1 -Significant Accounting Policies
Inventory
---------
Inventory is submitted by management and is valued at the lower of actual
cost or market. Cost is determined by specific identification.
Depreciation
------------
Depreciation is calculated by use of the straight-line method over the
following useful lives:
Equipment 5 years
Furniture 4 and 7 years
Transportation equipment 5 years
Income taxes
------------
As a result of a change in accounting method used to calculate income for
tax purposes, effective May 1, 1993, the Company is required to add certain
amounts to its taxable income over a six year period. Deferred income taxes
represent the income tax effect of such requirement.
Revenue Recognition
-------------------
Revenue from the sale of hardware systems and supplies is recognized when
the items are shipped. Effective May 1, 1996, revenue and related direct
costs from the sale of service and support contracts are deferred and
recognized over the duration of the contract, generally one year.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates-
Note 2 - Property and Equipment
Property and equipment consists of:
1997 1996
----------- ------------
Equipment $ 525,173 $ 403,603
Furniture 111,717 89,789
Transportation equipment 65,379 65,379
----------- ------------
<PAGE>
702,269 558,771
Less: Accumulated
depreciation 498,066 406,758
-----------
$ 204,203 $ 152,013
=========== ===========
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30,
Note 3 - Loans Payable 1996 1997
------ -----
Loans payable consists of:
Revolving credit facility. maximum
amount $750,000, ending September 30,
1997, interest calculated at 1 3/4% above
the bank's floating base, collateralized by
a lien on corporate assets $ 550,000 $ -
Term loan, due March 1998, payable in
monthly installments of principal and
interest of $419 collateralized by an
automobile 4,855 9,361
Term lean, due February 5,2000, payable
in monthly payments of principal and
interest of $543 collateralized by a vehicle 16,325 21,224
Term loan, due November 1, 1999, payable
in monthly principal payments
of $4,167 plus interest calculated at 1 1/2%
above the bank's prime rate, collateralized
by a blanket lien on corporate assets - 179,167
Line of credit, maximum mount of
$150,000, (maximum under prior line of
credit was $350,000 as of April 30, 1995)
ending September 30. 1996. interest
calculated at 1% above the bank's prime
rate, collateralized by a blanket lie, on
corporate assets - 150,000
Demand loan payable - 35,000
----------- ----------
571,180 394,752
Less: current portion 560,173 244,415
----------- ----------
$ 11,007 $ 150,337
=========== ==========
<PAGE>
Maturities of loans payable as follows:
Year ended
----------
April 30, 1998 $ 560,173
April 30, 1999 5,801
April 30, 2000 5,206
---------
$ 571,180
=========
<PAGE>
CADAPULT GRAPHICS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30,
Note 4 - Income Taxes.
The components of provision for income taxes
are as follows: 1997 1996
-------- ---------
Current $ 58,000 38,200
Deferred (39,500) (26,000)
---------- ---------
$ 18,500 $ 13,000
========= =========
Note 5 -Information about Financial Instruments with Off-Balance Sheet Risk and
and Financial Instruments with Concentrations on Credit Risk
The Company maintains substantially all of its cash balances in one
financial institution. The balance is insured by the Federal Deposit
Insurance Corporation up to $100,000. At April 30, 1997 and 1996, none of
the Company's cash balances exceeded $100,000. The Company sells computer
graphic systems and grants credit to customers, substantially all of whom
are major U.S. corporations, none of which account for more than 10% of
sales.
The Company purchases hardware, software and supplies from several vendors,
two of which amounted to 48% and 56% of total purchases in 1997 and 1996,
respectively.
Note 6 - Commitments
The minimum rent due under non-cancellable leases is as follows:
Year ended Office space Equipment
---------- ------------ ---------
April 30, 1998 $ 175,792 $ 18,816
April 30, 1999 144,110 16,884
April 30, 2000 39,380 15,504
April 30, 2001 6,616 9,044
---------- ----------
$ 365,898 $ 60,248
========== ==========
In July 1997, the Company entered into a lease for office space. This lease is
included in the proceeding schedule.
<PAGE>
EXHIBIT F
None.
<PAGE>
EXHIBIT G
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Exchange of shares of Cadapult Graphic Systems, Inc., a New
Jersey corporation ("Cadapult"), for shares of Seafoods Plus,
Ltd., a Utah corporation ("Seafoods" or the "Company")
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Reorganization (the
"Plan") between the undersigned, Cadapult, the other stockholders of Cadapult
and Seafoods, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of Incorporation,
Bylaws, minutes of meetings of directors and stockholders, financial statements
and reports filed with the Securities and Exchange Commission during the past
twelve months. I represent and warrant that I have sufficient knowledge and
experience to understand the nature of the exchange and am fully capable of
bearing the economic risk of the loss of my entire cost basis.
I further understand that immediately prior to the completion of the
Plan, Seafoods had no assets and no liabilities, of any measurable value, and
that in actuality, the completion of the Plan and the exchange of my shares of
Cadapult for shares of Seafoods results in a decrease in the actual percentage
of ownership that my shares of Cadapult represented in Cadapult prior to the
completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, options or warrants, and that I have been encouraged to
review the information and ask any questions I may have concerning the
information of any director or officer of the Company or of the legal and
accounting firms for the Company. I understand that the accountant for the
Company is Mantyla, McReynolds & Associates, 5872 South 900 East, #250, Salt
Lake City, Utah 84121, Telephone (801) 269-1818; and that legal counsel for
Seafoods is Leonard W. Burningham, Esq., 455 East 500 South, #205, Salt Lake
City, Utah 84111, Telephone (801) 363-7411. I further understand that, upon the
completion of the Plan, no accountant, attorney, employee or consultant will
have any claim of any kind against the Company for any event or occurrence on or
prior to the completion of the Plan.
<PAGE>
I also understand that I must bear the economic risk of ownership of
any of the Seafoods shares for a long period of time, the minimum of which will
be one (1) year, as these shares are "unregistered" shares and may not be sold
unless any subsequent offer or sale is registered with the United States
Securities and Exchange Commission or otherwise exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), or other
applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein and
those in the personal questionnaire (if applicable) I provided to Cadapult for
use by Seafoods as they are made to induce you to issue me the shares of
Seafoods under the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives), and agree as
follows, to-wit:
1. That the shares being acquired are being received for investment
purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase "for
investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and know
that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection with
the shares being acquired shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless it can be made in
accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company shall
reflect that I have requested the Company not to effect any transfer of any
stock certificate representing any of the shares being acquired unless I shall
first have obtained an opinion of legal counsel to the effect that the shares
may be sold in accordance with applicable laws, rules and regulations, and I
understand that any opinion must be from legal counsel satisfactory to the
Company and, regardless of any opinion, I understand that the exemption covered
by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign, hypothecate
or make any other disposition of any interest in the shares, options or warrants
being acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged for
shares of the Company are "risk capital," and I am fully capable of bearing the
economic risks attendant to this investment, without qualification; and
<PAGE>
8. I also understand that without approval of counsel for Seafoods,
all shares of Seafoods to be issued and delivered to me in exchange for my
shares of Cadapult shall be represented by one certificate only and which such
certificate shall be imprinted with the following legend or a reasonable
facsimile thereof on the front and reverse sides thereof:
The shares, options or warrants of stock
represented by this certificate have not been
registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise
transferred unless compliance with the
registration provisions of such Act has been made
or unless availability of an exemption from such
registration provisions has been established, or
unless sold pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be accompanied by
a letter signed by the requesting stockholder setting forth all relevant facts
relating to the request. Seafoods will attempt to accommodate any stockholders'
request where Seafoods views the request is made for valid business or personal
reasons so long as in the sole discretion of Seafoods, the granting of the
request will not facilitate a "public" distribution of unregistered shares of
Seafoods.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
MICHAEL W. LEVIN 1,516,450
(Name(s) and Number of Shares)
8 Meadow Lane
(Address)
Allendale, NJ 07401
(City, State and Zip Code)
If joint tenancy with full rights of survivorship is desired,
put the initials JTRS after your names.
Dated this 15 day of June, 1998.
Very truly yours,
/s/ Michael W. Levin
<PAGE>
EXHIBIT G
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Exchange of shares of Cadapult Graphic Systems, Inc., a New
Jersey corporation ("Cadapult"), for shares of Seafoods Plus,
Ltd., a Utah corporation ("Seafoods" or the "Company")
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Reorganization (the
"Plan") between the undersigned, Cadapult, the other stockholders of Cadapult
and Seafoods, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of Incorporation,
Bylaws, minutes of meetings of directors and stockholders, financial statements
and reports filed with the Securities and Exchange Commission during the past
twelve months. I represent and warrant that I have sufficient knowledge and
experience to understand the nature of the exchange and am fully capable of
bearing the economic risk of the loss of my entire cost basis.
I further understand that immediately prior to the completion of the
Plan, Seafoods had no assets and no liabilities, of any measurable value, and
that in actuality, the completion of the Plan and the exchange of my shares of
Cadapult for shares of Seafoods results in a decrease in the actual percentage
of ownership that my shares of Cadapult represented in Cadapult prior to the
completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, options or warrants, and that I have been encouraged to
review the information and ask any questions I may have concerning the
information of any director or officer of the Company or of the legal and
accounting firms for the Company. I understand that the accountant for the
Company is Mantyla, McReynolds & Associates, 5872 South 900 East, #250, Salt
Lake City, Utah 84121, Telephone (801) 269-1818; and that legal counsel for
Seafoods is Leonard W. Burningham, Esq., 455 East 500 South, #205, Salt Lake
City, Utah 84111, Telephone (801) 363-7411. I further understand that, upon the
completion of the Plan, no accountant, attorney, employee or consultant will
have any claim of any kind against the Company for any event or occurrence on or
prior to the completion of the Plan.
<PAGE>
I also understand that I must bear the economic risk of ownership of
any of the Seafoods shares for a long period of time, the minimum of which will
be one (1) year, as these shares are "unregistered" shares and may not be sold
unless any subsequent offer or sale is registered with the United States
Securities and Exchange Commission or otherwise exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), or other
applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein and
those in the personal questionnaire (if applicable) I provided to Cadapult for
use by Seafoods as they are made to induce you to issue me the shares of
Seafoods under the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives), and agree as
follows, to-wit:
1. That the shares being acquired are being received for investment
purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase "for
investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and know
that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection with
the shares being acquired shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless it can be made in
accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company shall
reflect that I have requested the Company not to effect any transfer of any
stock certificate representing any of the shares being acquired unless I shall
first have obtained an opinion of legal counsel to the effect that the shares
may be sold in accordance with applicable laws, rules and regulations, and I
understand that any opinion must be from legal counsel satisfactory to the
Company and, regardless of any opinion, I understand that the exemption covered
by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign, hypothecate
or make any other disposition of any interest in the shares, options or warrants
being acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged for
shares of the Company are "risk capital," and I am fully capable of bearing the
economic risks attendant to this investment, without qualification; and
<PAGE>
8. I also understand that without approval of counsel for Seafoods,
all shares of Seafoods to be issued and delivered to me in exchange for my
shares of Cadapult shall be represented by one certificate only and which such
certificate shall be imprinted with the following legend or a reasonable
facsimile thereof on the front and reverse sides thereof:
The shares, options or warrants of stock
represented by this certificate have not been
registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise
transferred unless compliance with the
registration provisions of such Act has been made
or unless availability of an exemption from such
registration provisions has been established, or
unless sold pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be accompanied by
a letter signed by the requesting stockholder setting forth all relevant facts
relating to the request. Seafoods will attempt to accommodate any stockholders'
request where Seafoods views the request is made for valid business or personal
reasons so long as in the sole discretion of Seafoods, the granting of the
request will not facilitate a "public" distribution of unregistered shares of
Seafoods.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
Nathan Levin 16,000
------------------------------
(Name(s) and Number of Shares)
8 Meadow Lane
------------------------------
(Address)
Allendale, NJ 07401
------------------------------
(City, State and Zip Code)
If joint tenancy with full rights of
survivorship is desired, put the initials
JTRS after your names.
Dated this 15 day of June, 1998.
Very truly yours,
/s/ Michael W. Levin c/f Nathan Levin
--------------------------------------
<PAGE>
EXHIBIT G
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Exchange of shares of Cadapult Graphic Systems, Inc., a New
Jersey corporation ("Cadapult"), for shares of Seafoods Plus,
Ltd., a Utah corporation ("Seafoods" or the "Company")
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Reorganization (the
"Plan") between the undersigned, Cadapult, the other stockholders of Cadapult
and Seafoods, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of Incorporation,
Bylaws, minutes of meetings of directors and stockholders, financial statements
and reports filed with the Securities and Exchange Commission during the past
twelve months. I represent and warrant that I have sufficient knowledge and
experience to understand the nature of the exchange and am fully capable of
bearing the economic risk of the loss of my entire cost basis.
I further understand that immediately prior to the completion of the
Plan, Seafoods had no assets and no liabilities, of any measurable value, and
that in actuality, the completion of the Plan and the exchange of my shares of
Cadapult for shares of Seafoods results in a decrease in the actual percentage
of ownership that my shares of Cadapult represented in Cadapult prior to the
completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, options or warrants, and that I have been encouraged to
review the information and ask any questions I may have concerning the
information of any director or officer of the Company or of the legal and
accounting firms for the Company. I understand that the accountant for the
Company is Mantyla, McReynolds & Associates, 5872 South 900 East, #250, Salt
Lake City, Utah 84121, Telephone (801) 269-1818; and that legal counsel for
Seafoods is Leonard W. Burningham, Esq., 455 East 500 South, #205, Salt Lake
City, Utah 84111, Telephone (801) 363-7411. I further understand that, upon the
completion of the Plan, no accountant, attorney, employee or consultant will
have any claim of any kind against the Company for any event or occurrence on or
prior to the completion of the Plan.
<PAGE>
I also understand that I must bear the economic risk of ownership of
any of the Seafoods shares for a long period of time, the minimum of which will
be one (1) year, as these shares are "unregistered" shares and may not be sold
unless any subsequent offer or sale is registered with the United States
Securities and Exchange Commission or otherwise exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), or other
applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein and
those in the personal questionnaire (if applicable) I provided to Cadapult for
use by Seafoods as they are made to induce you to issue me the shares of
Seafoods under the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives), and agree as
follows, to-wit:
1. That the shares being acquired are being received for investment
purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase "for
investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and know
that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection with
the shares being acquired shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless it can be made in
accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company shall
reflect that I have requested the Company not to effect any transfer of any
stock certificate representing any of the shares being acquired unless I shall
first have obtained an opinion of legal counsel to the effect that the shares
may be sold in accordance with applicable laws, rules and regulations, and I
understand that any opinion must be from legal counsel satisfactory to the
Company and, regardless of any opinion, I understand that the exemption covered
by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign, hypothecate
or make any other disposition of any interest in the shares, options or warrants
being acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged for
shares of the Company are "risk capital," and I am fully capable of bearing the
economic risks attendant to this investment, without qualification; and
<PAGE>
8. I also understand that without approval of counsel for Seafoods,
all shares of Seafoods to be issued and delivered to me in exchange for my
shares of Cadapult shall be represented by one certificate only and which such
certificate shall be imprinted with the following legend or a reasonable
facsimile thereof on the front and reverse sides thereof:
The shares, options or warrants of stock
represented by this certificate have not been
registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise
transferred unless compliance with the
registration provisions of such Act has been made
or unless availability of an exemption from such
registration provisions has been established, or
unless sold pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be accompanied by
a letter signed by the requesting stockholder setting forth all relevant facts
relating to the request. Seafoods will attempt to accommodate any stockholders'
request where Seafoods views the request is made for valid business or personal
reasons so long as in the sole discretion of Seafoods, the granting of the
request will not facilitate a "public" distribution of unregistered shares of
Seafoods.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
Tyler Levin 16,000
------------------------------
(Name(s) and Number of Shares)
8 Meadow Lane
-------------
(Address)
Allendale, NJ 07401
--------------------
(City, State and Zip Code)
If joint tenancy with full rights of
survivorship is desired, put the
initials JTRS after your names.
Dated this 15 day of June, 1998.
Very truly yours,
/s/ Michael W. Levin c/f Tyler Levin
-------------------------------------
<PAGE>
EXHIBIT G
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Exchange of shares of Cadapult Graphic Systems, Inc., a New
Jersey corporation ("Cadapult"), for shares of Seafoods Plus,
Ltd., a Utah corporation ("Seafoods" or the "Company")
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Reorganization (the
"Plan") between the undersigned, Cadapult, the other stockholders of Cadapult
and Seafoods, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of Incorporation,
Bylaws, minutes of meetings of directors and stockholders, financial statements
and reports filed with the Securities and Exchange Commission during the past
twelve months. I represent and warrant that I have sufficient knowledge and
experience to understand the nature of the exchange and am fully capable of
bearing the economic risk of the loss of my entire cost basis.
I further understand that immediately prior to the completion of the
Plan, Seafoods had no assets and no liabilities, of any measurable value, and
that in actuality, the completion of the Plan and the exchange of my shares of
Cadapult for shares of Seafoods results in a decrease in the actual percentage
of ownership that my shares of Cadapult represented in Cadapult prior to the
completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, options or warrants, and that I have been encouraged to
review the information and ask any questions I may have concerning the
information of any director or officer of the Company or of the legal and
accounting firms for the Company. I understand that the accountant for the
Company is Mantyla, McReynolds & Associates, 5872 South 900 East, #250, Salt
Lake City, Utah 84121, Telephone (801) 269-1818; and that legal counsel for
Seafoods is Leonard W. Burningham, Esq., 455 East 500 South, #205, Salt Lake
City, Utah 84111, Telephone (801) 363-7411. I further understand that, upon the
completion of the Plan, no accountant, attorney, employee or consultant will
have any claim of any kind against the Company for any event or occurrence on or
prior to the completion of the Plan.
<PAGE>
I also understand that I must bear the economic risk of ownership of
any of the Seafoods shares for a long period of time, the minimum of which will
be one (1) year, as these shares are "unregistered" shares and may not be sold
unless any subsequent offer or sale is registered with the United States
Securities and Exchange Commission or otherwise exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), or other
applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein and
those in the personal questionnaire (if applicable) I provided to Cadapult for
use by Seafoods as they are made to induce you to issue me the shares of
Seafoods under the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives), and agree as
follows, to-wit:
1. That the shares being acquired are being received for investment
purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase "for
investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and know
that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection with
the shares being acquired shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless it can be made in
accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company shall
reflect that I have requested the Company not to effect any transfer of any
stock certificate representing any of the shares being acquired unless I shall
first have obtained an opinion of legal counsel to the effect that the shares
may be sold in accordance with applicable laws, rules and regulations, and I
understand that any opinion must be from legal counsel satisfactory to the
Company and, regardless of any opinion, I understand that the exemption covered
by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign, hypothecate
or make any other disposition of any interest in the shares, options or warrants
being acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged for
shares of the Company are "risk capital," and I am fully capable of bearing the
economic risks attendant to this investment, without qualification; and
<PAGE>
8. I also understand that without approval of counsel for Seafoods,
all shares of Seafoods to be issued and delivered to me in exchange for my
shares of Cadapult shall be represented by one certificate only and which such
certificate shall be imprinted with the following legend or a reasonable
facsimile thereof on the front and reverse sides thereof:
The shares, options or warrants of stock
represented by this certificate have not been
registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise
transferred unless compliance with the
registration provisions of such Act has been made
or unless availability of an exemption from such
registration provisions has been established, or
unless sold pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be accompanied by
a letter signed by the requesting stockholder setting forth all relevant facts
relating to the request. Seafoods will attempt to accommodate any stockholders'
request where Seafoods views the request is made for valid business or personal
reasons so long as in the sole discretion of Seafoods, the granting of the
request will not facilitate a "public" distribution of unregistered shares of
Seafoods.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
Duncan S. Yates 20,000
------------------------
(Name(s) and Number of Shares)
651 Wyndemere Avenue
--------------------
(Address)
Ridgewood, NJ 07450
--------------------
(City, State and Zip Code)
If joint tenancy with full rights of survivorship is desired,
put the initials JTRS after your names.
Dated this 15th day of June, 1998.
Very truly yours,
/s/ Duncan S. Yates
-------------------
<PAGE>
EXHIBIT G
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Exchange of shares of Cadapult Graphic Systems, Inc., a New
Jersey corporation ("Cadapult"), for shares of Seafoods Plus,
Ltd., a Utah corporation ("Seafoods" or the "Company")
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Reorganization (the
"Plan") between the undersigned, Cadapult, the other stockholders of Cadapult
and Seafoods, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of Incorporation,
Bylaws, minutes of meetings of directors and stockholders, financial statements
and reports filed with the Securities and Exchange Commission during the past
twelve months. I represent and warrant that I have sufficient knowledge and
experience to understand the nature of the exchange and am fully capable of
bearing the economic risk of the loss of my entire cost basis.
I further understand that immediately prior to the completion of the
Plan, Seafoods had no assets and no liabilities, of any measurable value, and
that in actuality, the completion of the Plan and the exchange of my shares of
Cadapult for shares of Seafoods results in a decrease in the actual percentage
of ownership that my shares of Cadapult represented in Cadapult prior to the
completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, options or warrants, and that I have been encouraged to
review the information and ask any questions I may have concerning the
information of any director or officer of the Company or of the legal and
accounting firms for the Company. I understand that the accountant for the
Company is Mantyla, McReynolds & Associates, 5872 South 900 East, #250, Salt
Lake City, Utah 84121, Telephone (801) 269-1818; and that legal counsel for
Seafoods is Leonard W. Burningham, Esq., 455 East 500 South, #205, Salt Lake
City, Utah 84111, Telephone (801) 363-7411. I further understand that, upon the
completion of the Plan, no accountant, attorney, employee or consultant will
have any claim of any kind against the Company for any event or occurrence on or
prior to the completion of the Plan.
<PAGE>
I also understand that I must bear the economic risk of ownership of
any of the Seafoods shares for a long period of time, the minimum of which will
be one (1) year, as these shares are "unregistered" shares and may not be sold
unless any subsequent offer or sale is registered with the United States
Securities and Exchange Commission or otherwise exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), or other
applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein and
those in the personal questionnaire (if applicable) I provided to Cadapult for
use by Seafoods as they are made to induce you to issue me the shares of
Seafoods under the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives), and agree as
follows, to-wit:
1. That the shares being acquired are being received for investment
purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase "for
investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and know
that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection with
the shares being acquired shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless it can be made in
accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company shall
reflect that I have requested the Company not to effect any transfer of any
stock certificate representing any of the shares being acquired unless I shall
first have obtained an opinion of legal counsel to the effect that the shares
may be sold in accordance with applicable laws, rules and regulations, and I
understand that any opinion must be from legal counsel satisfactory to the
Company and, regardless of any opinion, I understand that the exemption covered
by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign, hypothecate
or make any other disposition of any interest in the shares, options or warrants
being acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged for
shares of the Company are "risk capital," and I am fully capable of bearing the
economic risks attendant to this investment, without qualification; and
<PAGE>
8. I also understand that without approval of counsel for Seafoods,
all shares of Seafoods to be issued and delivered to me in exchange for my
shares of Cadapult shall be represented by one certificate only and which such
certificate shall be imprinted with the following legend or a reasonable
facsimile thereof on the front and reverse sides thereof:
The shares, options or warrants of stock
represented by this certificate have not been
registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise
transferred unless compliance with the
registration provisions of such Act has been made
or unless availability of an exemption from such
registration provisions has been established, or
unless sold pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be accompanied by
a letter signed by the requesting stockholder setting forth all relevant facts
relating to the request. Seafoods will attempt to accommodate any stockholders'
request where Seafoods views the request is made for valid business or personal
reasons so long as in the sole discretion of Seafoods, the granting of the
request will not facilitate a "public" distribution of unregistered shares of
Seafoods.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
Duncan D. Huyler 40,775
------------------------------
(Name(s) and Number of Shares)
551 Lattintown Rd.
------------------
(Address)
Marlboro, NY 12550
-------------------
(City, State and Zip Code)
If joint tenancy with full rights of survivorship is desired,
put the initials JTRS after your names.
Dated this 15th day of June, 1998.
Very truly yours,
/s/ Duncan D. Huyler
<PAGE>
EXHIBIT G
Seafoods Plus, Ltd.
5525 South 900 East, #110
Salt Lake City, Utah 84117
Re: Exchange of shares of Cadapult Graphic Systems, Inc., a New
Jersey corporation ("Cadapult"), for shares of Seafoods Plus,
Ltd., a Utah corporation ("Seafoods" or the "Company")
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Reorganization (the
"Plan") between the undersigned, Cadapult, the other stockholders of Cadapult
and Seafoods, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of Incorporation,
Bylaws, minutes of meetings of directors and stockholders, financial statements
and reports filed with the Securities and Exchange Commission during the past
twelve months. I represent and warrant that I have sufficient knowledge and
experience to understand the nature of the exchange and am fully capable of
bearing the economic risk of the loss of my entire cost basis.
I further understand that immediately prior to the completion of the
Plan, Seafoods had no assets and no liabilities, of any measurable value, and
that in actuality, the completion of the Plan and the exchange of my shares of
Cadapult for shares of Seafoods results in a decrease in the actual percentage
of ownership that my shares of Cadapult represented in Cadapult prior to the
completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, options or warrants, and that I have been encouraged to
review the information and ask any questions I may have concerning the
information of any director or officer of the Company or of the legal and
accounting firms for the Company. I understand that the accountant for the
Company is Mantyla, McReynolds & Associates, 5872 South 900 East, #250, Salt
Lake City, Utah 84121, Telephone (801) 269-1818; and that legal counsel for
Seafoods is Leonard W. Burningham, Esq., 455 East 500 South, #205, Salt Lake
City, Utah 84111, Telephone (801) 363-7411. I further understand that, upon the
completion of the Plan, no accountant, attorney, employee or consultant will
have any claim of any kind against the Company for any event or occurrence on or
prior to the completion of the Plan.
<PAGE>
I also understand that I must bear the economic risk of ownership of
any of the Seafoods shares for a long period of time, the minimum of which will
be one (1) year, as these shares are "unregistered" shares and may not be sold
unless any subsequent offer or sale is registered with the United States
Securities and Exchange Commission or otherwise exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), or other
applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein and
those in the personal questionnaire (if applicable) I provided to Cadapult for
use by Seafoods as they are made to induce you to issue me the shares of
Seafoods under the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives), and agree as
follows, to-wit:
1. That the shares being acquired are being received for investment
purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase "for
investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and know
that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection with
the shares being acquired shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless it can be made in
accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company shall
reflect that I have requested the Company not to effect any transfer of any
stock certificate representing any of the shares being acquired unless I shall
first have obtained an opinion of legal counsel to the effect that the shares
may be sold in accordance with applicable laws, rules and regulations, and I
understand that any opinion must be from legal counsel satisfactory to the
Company and, regardless of any opinion, I understand that the exemption covered
by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign, hypothecate
or make any other disposition of any interest in the shares, options or warrants
being acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged for
shares of the Company are "risk capital," and I am fully capable of bearing the
economic risks attendant to this investment, without qualification; and
<PAGE>
8. I also understand that without approval of counsel for Seafoods,
all shares of Seafoods to be issued and delivered to me in exchange for my
shares of Cadapult shall be represented by one certificate only and which such
certificate shall be imprinted with the following legend or a reasonable
facsimile thereof on the front and reverse sides thereof:
The shares, options or warrants of stock
represented by this certificate have not been
registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise
transferred unless compliance with the
registration provisions of such Act has been made
or unless availability of an exemption from such
registration provisions has been established, or
unless sold pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be accompanied by
a letter signed by the requesting stockholder setting forth all relevant facts
relating to the request. Seafoods will attempt to accommodate any stockholders'
request where Seafoods views the request is made for valid business or personal
reasons so long as in the sole discretion of Seafoods, the granting of the
request will not facilitate a "public" distribution of unregistered shares of
Seafoods.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
Frances Blanco 40,775
------------------------------
(Name(s) and Number of Shares)
1128 Park Avenue
----------------
(Address)
Hoboken, New Jersey 07030
--------------------------
(City, State and Zip Code)
If joint tenancy with full rights of
survivorship is desired, put the
initials JTRS after your names.
Dated this 16 day of June, 1998.
Very truly yours,
/s/ Frances Blanco
------------------
<PAGE>
EXHIBIT H
CERTIFICATE OF OFFICER AND PRINCIPAL STOCKHOLDERS PURSUANT TO
AGREEMENT AND PLAN OF REORGANIZATION
The undersigned, the President of Seafoods Plus, Ltd., a Utah
corporation ("Seafoods"), and Jenson Services, Inc., a Utah corporation, Duane
S. Jenson and Jeffrey D. Jenson, the principal stockholders of Seafoods,
represent and warrant the following as required by the Agreement and Plan of
Reorganization (the "Plan") between Seafoods and Cadapult, a New Jersey
corporation ("Cadapult"), and the Cadapult Stockholders, to-wit:
1. That the undersigned, Kathleen L. Morrison, is the President of
Seafoods and has been authorized and empowered by its Board of Directors to
execute and deliver this Certificate to Cadapult and the Cadapult Stockholders;
2. Based upon the personal knowledge, information and belief of the
undersigned and opinions of counsel for Seafoods regarding the Plan:
(i) All representations and warranties of Seafoods contained
within the Plan are true and correct;
(ii) Seafoods has complied with all terms and provisions required
of it pursuant to the Plan; and
(iii)There have been no material adverse changes in the
financial position of Seafoods as set forth in its financial
statements for the periods ended December 31, 1997 and 1996,
and March 31, 1998, except as set forth in Exhibit D to the
Plan.
SEAFOODS PLUS, LTD.
By /s/ Kathleen L. Morrison
-------------------------
Kathleen L. Morrison, President
JENSON SERVICES, INC.
By /s/ Duane S. Jenson
--------------------
Duane S. Jenson, President
/s/ Duane S. Jenson
--------------------
Duane S. Jenson
/s/ Jeffrey D. Jenson
----------------------
Jeffrey D. Jenson
<PAGE>
EXHIBIT I
CERTIFICATE OF OFFICER PURSUANT TO
AGREEMENT AND PLAN OF REORGANIZATION
The undersigned, the President of Cadapult Systems, Inc., a New Jersey
corporation ("Cadapult"), represents and warrants the following as required by
the Agreement and Plan of Reorganization (the "Plan") between Cadapult, the
Cadapult Stockholders and Seafoods Plus, Ltd., a Utah corporation ("Seafoods"),
to-wit:
1. That he is the President of Cadapult and has been authorized and
empowered by its Board of Directors to execute and deliver this Certificate to
Seafoods;
2. Based on his personal knowledge, information, belief:
(i) All representations and warranties of Cadapult contained
within the Plan are true and correct;
(ii) Cadapult has complied with all terms and provisions required
of it pursuant to the Plan; and
(iii)There have been no material adverse changes in the
financial position of Cadapult as set forth in its financial
statements for the periods April 30, 1997 and 1996, except
as set forth in Exhibit F to the Plan.
CADAPULT GRAPHIC SYSTEMS, INC.
By /s/ Michael W. Levin, President
--------------------------------
Michael W. Levin, President
EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made this 5th day of March 1998;
Between: Cadapult Graphic Systems, Inc., a New Jersey corporation
with offices located at 110 Commerce Drive, Allendale,
New Jersey 07401, hereinafter referred to alternatively as
"Cadapult" or "Purchaser";
And: BBG Technologies, Inc., a Massachusetts corporation with
offices located at 92 Montvale Avenue, Stoneham,
Massachusetts 02180, hereinafter referred to alternatively
as "BBG" or "Seller".
Whereas, both Purchaser and Seller are engaged in the sale and servicing of
Tektronix printers. and,
Whereas, Purchaser is desirous of purchasing the Assets of Seller, and Seller
is desirous of selling said Assets, for the consideration and upon the terms
and conditions set forth hereinafter.
Now Therefore, in consideration of the mutual covenants, promises and
conditions set forth herein, the parties hereto do hereby agree as follows:
1. Purchase and Sale. Seller agrees to sell to Purchaser and Purchaser
agrees to purchase from Seller all of the Assets owned and used by Seller in
the operation of its business, including but not limited to the following:
A. Accounts Receivable
B. Inventory of supplies and printers
C. Customer lists and all files relating thereto
D. Use of the name "BBG Technologies" for a period of eighteen (18)
months from date of Closing
E. Sales, service and Vendor contracts
F. Existing telephone numbers (718)-994-7750 and (718)-994-7756
G. Databases
H. BBG Electronic art, and Tektronix Co-op.
The Assets of the business, including those set forth hereinabove, shall
hereinafter be collectively referred to as "Assets".
2. Purchase Price and Terms of Sale.
A. Determination of Purchase Price. The Purchase Price shall be
determined by adding the sum of $400,000,the total amount, as of the Closing,
of Account Receivables less than 180 days old, the Tektronix rebate and the
book value of inventory and supplies and then subtracting therefrom the total
amount of the Tektronix account payable as of said Closing date. A graphic
of said formula would be as follows:
Base Purchase Price: $400,000
+ Accounts Receivable as of Closing
+ Amount of Tektronix Rebate
+ Book value of inventory and supplies
- Tektronix account payable
- Agreed upon trade payables _______________
Purchase Price
The trade payables to be assumed by Purchaser will not exceed fifteen (15%)
percent of the total purchase price and will be set forth by Vendor and
amount owed in Exhibit D to be executed at closing and annexed to the closing
statement.
By way of example and illustration, based upon Seller's statement of assets
and liabilities as of December 31, 1997, as previously furnished to
Purchaser, if the closing had occurred on that date, the Purchase Price due
at closing would have been $539,123,15. Seller shall retain the cash shown
on the balance sheet dated December 31, 1997, and Seller shall be responsible
for paying the payables which are not characterized as accounts payable.
The Purchase Price shall be paid at Closing in full by bank, certified or
attorneys trust account check, subject to the following:
B. Escrow. At Closing, the sum of One Hundred Thousand ($100,000)
Dollars shall be segregated from the Purchase Price and paid over to
Purchaser's and Seller's Attorneys, as Joint Escrow Agents, which monies
shall be held in escrow thereby ("Escrowed Funds") to secure collection by
Purchaser of the Account Receivables conveyed at Closing pursuant to the
within Agreement.
Purchaser shall use its best efforts to collect all of said Account
Receivables, provided however, that any Account Receivables which remain
uncollected after 180 days from the date of Closing shall be considered to be
"uncollectable". After 180 days from the date of Closing, all such
"uncollectable" Account Receivables shall revert to the Seller, who shall
then have the right to attempt to collect same for its own account, and an
amount equivalent to the total of such "uncollectable" Account Receivables
shall be paid from the Escrowed Funds to the Purchaser. Alternatively, the
difference between $100,000 and the amount paid to the Purchaser to reimburse
it for uncollected Account Receivables shall be paid to the Seller.
In the event that, prior to the expiration of 180 days from the date of
Closing, payments are made against outstanding Account Receivables so as to
reduce the total amount thereof below $100,000, the difference between the
amount of the Escrowed Funds, or $100,000, and the total of the remaining
uncollected Account Receivables shall be paid to the Seller at that time.
For example, if, after four months, the total of outstanding Account
Receivables is $85,000, then $15,000 shall at that time be paid from the
Escrowed Funds to the Seller. If at the end of five months, this amount is
further reduced to $60,000, then an additional $25,000 shall be paid to
Seller.
The Escrowed Funds shall be held in an interest bearing account, with the
interest allocated, after deducting a fee of $500.00 to be paid to the Escrow
Agent for his services in relation thereto, among the Purchaser and Seller in
proportion to the amount of Escrowed Funds distributed to each.
For example, if the total interest earned on the Escrowed Funds is $2,500,
and $20,000 is paid to the Purchaser and $80,000 is paid to the Seller, then
$400 of the interest earned shall be paid to the Purchaser, $1,600 shall be
paid to the Seller and $500 shall be paid to the Escrow Agent. An Escrow
Agreement, in the form annexed hereto as Exhibit A, shall be executed at
Closing memorializing the aforesaid Escrow.
C. Deposit. Simultaneously upon the execution of the within
Agreement, Purchaser shall forward a check to George Perry, Esq., Attorney
Trust Account in the sum of $25,000.00 constituting an earnest money deposit,
which monies shall be held In escrow by the aforesaid. At Closing, the
earnest money deposit shall be paid over to Seller and set off against the
balance of the Purchase Price due thereto. In the event a Closing does not
occur as a consequence of the failure of any conditions precedent to the
Contract or Seller's breach, the within earnest money deposit shall be
refunded to the Purchaser, without any deduction or set off whatsoever within
forty-eight (48) hours of demand therefore.
3. Allocation of Purchase Price.
A. The base purchase price of Four Hundred Thousand ($400,000) shall
be allocated as follows:
Goodwill $200,000
Customer Lists $100,000
Name and Telephone Numbers $ 50,000
Covenants Not to Compete $ 50,000
B. The balance of the Purchase Price shall be allocated among the
various assets referenced in Paragraph 2A hereinabove, at their book value as
of the date of closing as reasonably determined by Seller's accountants,
applying standard accounting principals.
4. Covenant Not to Compete. At Closing, Seller and Sellers shareholders,
Daniel McCartney and Joseph Nicholson shall each execute and deliver to
Purchaser a Covenant Not to Compete in the form annexed and made a part
hereof as Exhibit B. Cathy Rogers shall also be required to execute a
Covenant Not to Compete at the time of Closing but in a somewhat modified
form as annexed to and made a part hereof as Exhibit C. Execution of said
Covenants Not to Compete constitute a material part of the consideration for
Purchaser acquiring the Assets of the Seller pursuant to the within
Agreement.
5. Closing. The Closing shall occur on or about March 13, 1998 at
Seller's offices or Purchaser's lender, should same be required thereby
(hereinafter "Closing"). All monies due and payable at Closing shall be paid
in the form of a bank, certified or attorneys trust account check.
6. Financing Contingency. Purchasers obligation to purchase the Assets
pursuant to the within Agreement is expressly conditioned upon Purchaser
obtaining a loan commitment from Summit Bank in a sum equivalent to the
Purchase Price, as determined pursuant to Paragraph 2A hereinabove. In the
event Purchaser is unable to secure a loan commitment from Summit Bank in the
aforesaid amount upon terms satisfactory to Purchaser within 10 days of the
date hereof, either Purchaser or Seller shall have the right to terminate the
within Agreement upon service of written notice of said election upon the
other in which event this Agreement shall be deemed null, void and of no
further effect and neither party shall have any further obligation or
liability to the other. Further, If for any reason, Summit Bank withdraws
said commitment prior to Closing, again, the within Financing Contingency
shall be deemed to be an unsatisfied condition precedent in which event the
within Agreement shall be deemed terminated as a consequence of a failure of
a material condition precedent and neither party shall have any further
obligation or liability to the other.
7. Seller's Payables Not Assumed By Purchaser. Except for the Tektronix
trade payable and agreed upon trade payables, as referenced in Paragraph 2A
hereinabove, payment of which will be assumed by the Purchaser as provided in
Paragraph 2A hereinabove, all other liabilities of Seller, including, but not
limited to federal, state and local taxes, payroll taxes, transfer fees, and
any other taxes, if any, unpaid salaries or accrued vacation or sick pay,
shall be paid prior to or at the Closing so that all of the Assets which are
the subject of the within sale shall remain the responsibility of Seller and
shall be conveyed free and clear of any and all liens or encumbrances,
statutory or otherwise, except as otherwise provided in Paragraph 2A
hereinabove. At Closing, from the Closing Proceeds, Seller shall cause the
outstanding balance due to Medford Savings Bank to be paid thereby enabling
Seller to obtain Termination Statements for the UCC Filings on record at the
office of the Secretary of State and the office of the Stoneham Town Hall.
At or prior to Closing, Seller shall provide Purchaser with a payoff
statement issued by Medford Savings Bank setting forth the balance due
thereto. At Closing, Purchaser shall cause a check to be issued to Medford
Savings Bank in the amount set forth in the pay off statement, which funds
shall be either forwarded by overnight mail or delivered to Medford Savings
by Purchaser's attorney. The remaining funds shall be paid to Seller, or on
its behalf pursuant to the within Asset Purchase Agreement. All checks,
including the check made payable to Medford Savings Bank, shall be in the
form as set forth in Paragraph 5 hereinabove.
8. Seller's Representations. Seller represents and warrants to Purchaser
as follows:
A. Title to Assets. Seller shall, as of the date of Closing, hold
good and marketable title to the Assets, free and clear of restrictions on or
conditions to transfer or assignment as well as any and all liens, pledges,
charges, or encumbrances. At Closing, Seller shall convey all such Assets,
with the exception of the Tektronix payable and other trade payables, as
referenced in Paragraph 2A hereinabove (said conveyance evidenced by Bill of
Sale exchanged at Closing), free and clear of any liens or encumbrances.
B. Indemnification. Seller, and Sellers shareholders, do hereby
jointly and severally agree to protect, indemnify, and hold the Purchaser
harmless from and against any loss, damage or expense, as well as reasonable
counsel fees and costs, if incurred, resulting from any breach of the
warranties set forth In Subparagraph A of this Paragraph 8. Specifically, the
within Indemnification shall include any claim made against Purchaser for any
unpaid liability of Seller. Should any claim for indemnification arise
during the pendency of the Escrow as referenced in Paragraph 2B hereinabove,
the Purchaser shall have the right to request that any funds being held on
behalf of the Seller continue to be held pending resolution of such claim
and, further to pay the amount of such claim from said Escrowed Funds, should
same remain unsatisfied.
C. Transfer Not Subject to Encumbrances or Third-Party Approval. The
execution and delivery of this Agreement by Seller, and the consummation of
the within contemplated transaction, will not result in the creation or
imposition of any valid lien, charge, or encumbrance on any of the Assets,
and will not require the authorization, consent, or approval of any third
party, including any lender or governmental or regulatory agency.
D. Corporate Existence. Seller is now, and on the Closing Date will
be, a corporation duly organized and validly existing and In good standing
under the laws of the State of Massachusetts. At Closing, Seller shall
provide a copy of a Certificate of Good Standing issued by the Commonwealth
of Massachusetts.
E. Authorization. The execution, delivery, and performance of this
Agreement has been duly authorized and approved by the Board of Directors and
shareholders of Seller having a majority of the issued and outstanding Common
Stock thereof, and this Agreement constitutes a valid and binding Agreement
of Seller in accordance with its terms.
F. Noncancelable Contracts. At the time of Closing, there will be no
leases, employment contracts, contracts for services or maintenance, or other
similar contracts existing or relating to or connected with the operation of
Seller's business not cancelable at Closing or within 30 days thereof.
G. Continued Operations. Seller will continue to conduct its business
up to the date of Closing in essentially the same manner as it has been
conducted in the past, and in accordance with all applicable laws and
regulations. Until Closing, Seller shall maintain all of its Assets in their
present condition. Seller shall use its best efforts to preserve, for
Purchaser, the goodwill of vendors, suppliers, customers and others having
business relations with ft. Prior to Closing, Seller will not sell or
transfer any of the Assets which are the subject of this Agreement. Seller
has no knowledge of a business termination of a material customer, vendor or
supplier.
H. Withholding Taxes. Seller has paid in full, or will arrange for
the payment in full, in a timely manner, of all federal and Commonwealth of
Massachusetts taxes incurred by Seller, including, but not limited to income,
withholding, social security, unemployment insurance, and sales taxes due
through the Date of Closing, and shall hold Purchaser harmless therefrom.
I. Financial Records. Seller makes no warranties or representations
regarding future sales or profits in connection with the Assets purchased by
Purchaser pursuant to this Agreement, such sales and profits being dependent
on Purchaser's efforts, skill, and conduct of its business. Financial
records and other documents delivered by Seller to Purchaser in connection
with the within transaction, including profit and lose statements and balance
sheets, contracts, and other books and records, accurately reflect the
financial condition of Seller. To the best of Seller's knowledge, Seller is
in compliance with all laws and regulations affecting its business.
J. Employee Benefits. Seller does not maintain any retirement or
deferred compensation plan, savings, incentive, stock option or stock
purchase plan, unemployment compensation plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance or hospitalization program or any
other fringe benefit arrangement for any employee, consultant or agent of the
Seller, whether pursuant to contract, arrangement, custom or informal
understanding, which constitute an "Employee Benefit Plan" (as defined in
Section 3(3) of ERISA), for which the Seller may have any ongoing material
liability after Closing. The Seller does not maintain, nor has it ever
contributed to, any Multi-employer Plan as defined by Section 3(37) of ERISA.
The Seller does not currently maintain any Employee Pension Benefit Plan
subject to Title IV of ERISA. There have been no "prohibited transactions"
(as described in Section 406 of ERISA or Section 4975 of the Code) with
respect to an Employee Pension Benefit Plan or Employee Welfare Benefit
party. Seller has no employee benefits plans or written contracts with
employees. Seller shall be responsible for paying, prior to Closing, all
accrued vacation or sick pay entitlements.
K.. Accuracy of Representations and Warranties. None of the
representations or warranties of Seller contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading.
Seller knows of no fact or circumstance that has resulted, or that in the
reasonable judgment of Seller will result, in a material change in the
business, operations, or assets of Seller that has not been previously
disclosed or set forth in this Agreement.
9 Indemnification. Purchaser and Seller agree to protect, indemnify, and
hold the other harmless against, and with respect to, any loss, damage or
expense occasioned by any breach or alleged breach, falsity, or failure of
any of the representations, covenants, warranties or agreements of any such
party contained herein or contained in any document exchanged between
Purchaser and Seller in connection with this transaction. This
Indemnification shall survive the Closing.
10. Miscellaneous.
A. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written
agreement signed by all of the parties hereto.
B. Notices. All notices, requests, consents, approvals or other
communications under this Agreement shall be in writing and mailed by
certified mail, return receipt requested, postage prepaid, or delivered by a
nationally recognized overnight courier service which obtains delivery
receipts (e.g., Federal Express), addressed:
Daniel McCartney
92 Montvale Avenue
Stoneham, Massachusetts 02180
George Perry, Esq.
Suite 200
255 Washington Street
Newton, Massachusetts 02158
Purchaser:
Cadapult Graphics Systems, Inc.
110 Commerce Drive
Allendale, New Jersey 07401
Bruce M. Meisel, Esq.
263 Center Avenue
Westwood, New Jersey 07675
Either party may, by notice given as aforesaid, change its address for all
subsequent notices. All notices hereunder shall be effective upon receipt of
same.
C. No Broker The Seller and Purchaser represent and warrant, each to
the other, that neither has engaged or in any way dealt with a broker,
finder, agent, or anyone in a similar capacity, in relation to the
transaction contemplated by the within Agreement. To this extent, Seller and
Purchaser do each hereby agree to indemnify, defend and hold the s from and
against any and all loss, expense, Including but not limited to reasonable
counsel fees and costs, damage or liability resulting from any claim or
claims arising from an alleged rendering of any services to the indemnifying
party in breach of the within warranty.
D. Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor affect the interpretation of this Agreement. All pronouns and
any variation thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or persons may
require.
E. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understanding and
agreements among them respecting the subject matter of this Agreement. Any
amendments to this Agreement must be in writing and signed by the party
against whom enforcement of that amendment is sought.
F. Presumption. This Agreement, or any Section thereof, shall not be
construed against any part due to the fact that said Agreement or any Section
thereof was drafted by said party.
G. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forebear from all such action
as may be necessary or appropriate to achieve the purpose of the Agreement.
H. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on
all the parties hereto even though all the parties are not signatories to the
original or the same counterpart.
I. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid. The remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid, shall not be affected thereby.
Executed as of the dates set forth below, in several counterparts, each of
which shall be deemed an original, but all constituting only one agreement.
Purchaser:
Cadapult Grapic Systems, Inc.
Date: 3/4/98 By: /s/ Michael W. Levin, President
------------------------------------
Seller
BBG Technologies, Inc.
Date: By: /s/ Daniel McCartney
------------------------------------
Daniel McCartney, Pres.
As to the provisions of Paragraphs As to the provisions of Paragraph
4 and BB: 4 as same pertains to the
undersigned.
Seller's Shareholders: /s/Catherine T. Rogers
--------------------------------
CATHY ROGERS
/s/ Daniel McCartney
- ----------------------------
Daniel McCartney
/s/ Joseph Nicholson
- ----------------------------
Joseph Nicholson
EXHIBIT 2.5
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made this 17th day of December, 1998;
Between: Cadapult Graphic Systems, Inc., a Delaware corporation
with offices located at 110 Commerce Drive, Allendale,
New Jersey 07401, hereinafter referred to alternatively as
"Cadapult" or "Purchaser";
And: Tartan Technical, Inc., a Massachusetts corporation with
offices located at 24 Westech Drive, Tyngsboro, Massachusetts
01879, hereinafter referred to alternatively as "Tartan" or
"Seller".
Whereas, both Purchaser and Seller are engaged in the sale and servicing of
computer graphics and imaging equipment and supplies; and,
Whereas, Purchaser is desirous of purchasing the Assets of Seller, as defined
hereinafter, and Seller is desirous of selling said Assets, for the
consideration and upon the terms and conditions set forth hereinafter.
Now Therefore, in consideration of the mutual covenants, promises and conditions
set forth herein, the parties hereto do hereby agree as follows:
1. Purchase and Sale.
1.01 Seller agrees to sell to Purchasers and Purchaser agrees to
purchase from Seller all of the Assets owned and used by Seller in the operation
of its business, including but not limited to the following:
A. Accounts Receivable, less allowances;
B. Inventory at lower of cost or fair market value;
C. Property and Equipment as listed on Exhibit A annexed to and made a
part hereof;
D. Use of the name "Tartan Technical";
E. Customer lists and all files relating thereto;
F. Sales, service and vendor contracts and security deposits;
G. Existing telephone numbers (978) 649-8947, (978) 649-8940, 800-869-
0507;
H. Databases
I. Rights to www.tartantechnical.com URL
J. Trade Show deposits, health insurance premiums and other prepaid
commitments as listed on Exhibit J for which there shall be an
adjustment at Closing.
The Assets which are the subject of the within sale, including those set forth
hereinabove, shall hereinafter be collectively referred to as "Assets".
1.02 In conjunction with purchase by Cadapult of the Assets, as defined
herein, Cadapult has agreed to assume the following Liabilities of Seller:
A. Trade payables as of the date of Closing;
B. Customer deposits payable as of the date of Closing;
C. Bank debt listed on Exhibit B.
Purchaser shall indemnify Seller against any and all losses, liabilities,
deficiencies or damages suffered or incurred by Seller, or its shareholders,
Thomas and Kathleen McLeod, resulting from any failure of Purchaser to discharge
the Liabilities referenced herein.
Cadapult has not agreed to assume any other liabilities other than those set
forth hereinabove. Liabilities specifically EXCLUDED from assumption by
Cadapult include the following: (a) any monies due any governmental agency,
including any federal, state and/or local taxes; (b) any contingent liabilities
resulting from any claim or threatened claim against Seller which may not, as of
this date or date of Closing, have matured into a debt; (c) any obligations
arising out of any claim by Seller's personnel, including any unpaid salaries,
commissions, pension or other benefits, accrued vacation or sick pay arising
prior to the date of Closing, and, (d) any other undisclosed liabilities.
2. Purchase Price and Terms of Sale.
2.01 Cadapult does hereby agree to assume the Liabilities referenced in
Subparagraphs A,B and C of Paragraph 1.02 hereinabove (hereinafter referred to
as "Liabilities") and to purchase the Assets referenced in Subparagraphs A
though I of Paragraph 1.01 hereinabove. It is anticipated that the dollar value
of the Liabilities assumed will exceed the Assets purchased, as determined by
standard accounting principals, by One Hundred Fourteen Thousand ($114,000.00)
Dollars. In such event, Cadapult shall then be obligated to tender to Seller
One Hundred Eighty Five Thousand Seven Hundred (185,700) shares of unregistered
and restricted Cadapult common stock which shall constitute the purchase price.
A. In the event the dollar value of the Liabilities, as defined
hereinabove, assumed at Closing by Cadapult, as also defined hereinabove, exceed
the Assets by more than $114,000, at Closing, the Seller shall execute a
Promissory Note in favor of Cadapult whereby the principal of the Note shall be
an amount equivalent to the difference between the dollar value of the
Liabilities assumed, less the Assets purchased and $114,000. The form of the
Promissory Note to be executed at Closing is annexed hereto and made a part
hereof as Exhibit H.
B. In the alternative, in the event the dollar value of the
Liabilities assumed by Cadapult at Closing exceed the Assets purchased by less
than $114,000, then Cadapult will be obligated to issue additional unregistered
and restricted common stock to Seller, over and above the 185,700 shares
referenced in Paragraph 2.01 hereinabove, the number of shares of which shall be
determined by dividing the dollar difference between the Liabilities assumed,
less the Assets purchased, and $114,000 by $3.50 which, for the purpose of this
Paragraph 2.01B, shall be deemed to be the trading price of Cadapult's common
stock irrespective of the actual trading price as of the date of Closing. For
example, if the dollar value of Liabilities assumed, less the Assets purchased
and is $112,000, then an additional 571 shares of unregistered and restricted
common stock shall be issued by Cadapult to Seller (the number of shares to be
issued shall be rounded off to the nearest whole number). Any differential due
Seller pursuant to this Subparagraph B shall be issued within 30 days of the
Closing.
2.02 In order to provide the Seller with certain Gross Profit incentives
as well as protection against a reduction in the trading price of Cadapult's
common stock, the parties have further agreed as follows:
A. The following shall apply to 75% of the shares of Cadapult
common stock issued at Closing. At the close of business on the last day of
Twelfth month from the Closing, the average trading price of Cadapult's common
stock (for the purposes of this Subparagraph A defined as the price "asked" and
not "bid") for that month shall be determined. If the average trading Price, as
defined herein, as same applies to 75% of the Cadapult common stock issued as
Closing is less than $3.50, Cadapult shall then be required to issue additional
unregistered and restricted common stock to Seller; provided however, that there
shall be an artificial "floor" in the per share value of $2.33 so that when
issuing such shares in no event shall a price of less than $2.33 be applied to
the above calculation. By way of example, if 185,700 shares are issued at
Closing and the average daily price during the eleventh month from the date of
Closing is $3.00, then Cadapult will be obligated to issue an additional 23,212
unregistered and restricted shares to the Seller as determined in the following
manner: 185,700x75%=139,275x$3.50=$487,462.5/$3.00=$162,487.50-139,275=23,212.
Any such additional shares issued pursuant to this Subparagraph 2.02A shall be
subject to the escrow as set forth in Paragraph 3 hereinafter
B. The same formula as referenced in Subparagraph 2.02A
hereinabove shall apply to the remaining 25% of the Cadapult common stock issued
to Seller at Closing, which calculation shall be made on the last day of the
twenty fourth month from the Closing. Again, if any stock is issued to Seller,
it shall be subject to the escrow provisions of Paragraph 3 hereinafter.
C. Further, again, at the end of the close of business on the
last day of the twelfth month from the Closing, a determination shall be made if
Gross Profits for the prior twelve months attained by Seller exceeded $901,600
as set forth in Exhibit C annexed hereto and made a part hereof. If Gross
Profits for such period exceeded $901,600 AND the average trading price of
Cadapult common stock (again, the price "asked") during the twelfth month from
the Closing was less than $1.83 per share, then the monetary consideration due
Seller from Cadapult in relation to the within Asset Purchase would be increased
by $50,000, with said sum paid to Seller within thirty (30) days of such
determination.
D. In the event there is a dispute between the parties as to the
calculations to be made pursuant to Subparagraphs A, B and C of this Paragraph
2.02, then the parties shall agree upon a neutral third party, who shall be a
Certified Public Accountant in the Commonwealth of Massachusetts to render a
determination as to the calculation. If the parties cannot agree upon one
neutral C.P.A., then each shall select its own C.P.A., and the two C.P.A.'s so
selected shall select a third C.P.A., and the three C.P.A.'s shall then render a
determination by agreement of at least two of the three. Any such decision
shall be final in the absence of fraud. The cost of any neutral accountant
shall be borne equally by the parties.
3. Escrow and Post Closing Adjustments. At Closing, fifty (50%) percent of
the common stock of Cadapult due Seller thereat, or 92,850 shares (hereinafter
"Escrowed Shares"), shall be endorsed in blank and delivered to the Joint Escrow
Agents designated herein, after which Escrowed Shares shall be held in escrow
pending attainment of specified Gross Profit objectives in the first 12 and
second 12 months from the date of Closing. For the purposes of this Paragraph
3, Gross Profit shall be defined in the manner set forth in Exhibit C annexed to
and made a part hereof.
It is the intent of the parties hereto that if Seller attains, or exceeds,
certain Gross Profit Targets, as defined hereafter, during the first twelve (12)
months following the closing, 50% of the Escrowed Shares will be released to
Seller from the Escrow plus additional unregistered and restricted shares may be
issued to Seller by Cadapult pursuant to the schedule of Gross Profit Targets
annexed to and made a part hereof as Exhibit D. In the alternative, failure to
attain Gross Profit Targets resulting in less than 50% of the Escrowed Shares
being issued to Seller at the end of the first twelve month period shall result
in those shares being returned to Cadapult.
By way of example, if the Gross Profits achieved during the first twelve month
period from the date of Closing is $700,000, then 46,425 Escrowed Shares shall
be released to Seller and 11,607 Escrowed Shares shall be returned to Purchaser.
The same process shall be repeated in the second twelve month period from the
date of the Closing.
Any additional shares of Cadapult common stock issued pursuant to this Paragraph
3 shall be subject to adjustments on the twelfth and twenty-fourth month from
the date of Closing as set forth in Paragraphs 2.02 A and B hereinabove.
The aforesaid shall be set forth in a separate Escrow Agreement to be executed
at Closing. The Joint Escrow Agents shall be one attorney designated by Seller
and another attorney designated by Cadapult. The Joint Escrow Agents shall
receive an agreed upon fee, as set forth in the Escrow Agreement, for services
rendered by them as Joint Escrow Agents.
4. Deposit. Simultaneously upon the execution of the within Agreement,
Purchaser shall forward a check in the sum of $50,000.00 payable to the attorney
trust account of Seller's attorney who shall be an attorney admitted to the Bar
of the State of Massachusetts designated by Seller in the sum of $50,000.00
constituting an earnest money deposit, which monies shall be held in escrow by
the aforesaid. Since it is anticipated that at Closing no cash payment will be
due Seller, the within Deposit of $50,000.00 shall at that time be refunded to
Purchaser, without any deduction or set off unless otherwise provided in this
Asset Purchase Agreement. In the event a Closing does not occur as a
consequence of the failure of any conditions precedent to the Contract or
Seller's breach, the within earnest money deposit shall be refunded to the
Purchaser, without any deduction or set off whatsoever, within forty-eight (48)
hours of demand therefore.
5. Allocation of Purchase Price. The total purchase price shall be allocated
amongst the various Assets and agreements to be executed at Closing in the
manner set forth in Exhibit E annexed to and made a part hereof.
6. Employment Agreements. A condition precedent to Cadapult's obligation to
Close shall be (1) Seller's shareholders, Thomas and Kathleen McLeod, execution
of Employment Agreements in the form annexed to and made a part hereof as
Exhibit F for a term of not less than two (2) years from Closing; and (2) Seller
obtaining from one of its key employees, namely, Susan M. Gardner, either an
agreement to become an employee of Cadapult, as evidenced by execution by her of
an Employment Agreement in the form annexed hereto as Exhibit F for a term of
not less than two (2) years from Closing, or, in the alternative, a written
undertaking on the part of Susan M. Gardner that she shall be restricted from
contacting or soliciting any of Seller's customers for a period of not less than
two years from the date of Closing, said Restrictive covenant to be in the form
annexed hereto and made a part hereof as Exhibit I. Execution and delivery of
the Agreements referenced in this Paragraph 6 shall be deemed to satisfy the
obligation of Seller as created hereunder.
7. Closing. The Closing shall occur on or about January 5, 1999 at Seller's
offices or the offices of Seller's attorneys provided same are located within 15
miles of Boston, Massachusetts (hereinbefore referred to as "Closing Date").
All monies due and payable at Closing shall be paid in the form of a bank,
certified or attorneys trust account check.
8. Conditions Precedent.
A. Purchaser agrees to accept an assignment of Seller's lease for its
current location. A true copy of said Lease is annexed hereto and made a part
hereof as Exhibit G. On or before the Closing, Seller shall obtain its
Landlord's consent to an assignment of said Lease to Cadapult..
B. Purchaser's satisfactory review of aspects of Seller's business,
including but not limited to not less than audited financial statements,
including Statements of Profits and Losses and Balance Sheets, for all of 1997
and for at least the first 9 months of 1998. Said review shall be completed
within 45 days of the date hereof.
C. Execution at Closing of the Employment Agreements referenced in
Paragraph 6 hereinabove.
9. Seller's Representations. Seller represents and warrants to Purchaser as
follows:
A. Title to Assets. Seller shall, as of the date of Closing, hold good
and marketable title to the Assets, free and clear of restrictions on or
conditions to transfer or assignment as well as any and all liens, pledges,
charges, or encumbrances. At Closing, Seller shall convey all such Assets.
B. Indemnification. Seller, and Seller's shareholders, do hereby
jointly and severally agree to protect, indemnify, and hold the Purchaser
harmless from and against any loss, damage or expense, as well as reasonable
counsel fees and costs, if incurred, resulting from any breach of the warranties
set forth in Subparagraph A of this Paragraph 9. Specifically, the within
Indemnification shall include any claim made against Purchaser for any unpaid
liability of Seller. Should any claim for indemnification arise during the
pendency of the Escrow as referenced in Paragraph 3 hereinabove, the Purchaser
shall have the right to request that any funds being held on behalf of the
Seller continue to be held pending resolution of such claim and, further to pay
the amount of such claim upon adjudication thereof from said Escrowed Funds,
should same remain unsatisfied.
C. Transfer Not Subject to Encumbrances or Third-Party Approval. The
execution and delivery of this Agreement by Seller, and the consummation of the
within contemplated transaction, will not result in the creation or imposition
of any valid lien, charge, or encumbrance on any of the Assets, and will not
require the authorization, consent, or approval of any third party, including
any lender or governmental or regulatory agency.
D. Corporate Existence. Seller is now, and on the Closing Date will
be, a corporation duly organized and validly existing and in good standing under
the laws of the State of Massachusetts. At Closing, Seller shall provide a copy
of a Certificate of Good Standing issued by the Commonwealth of Massachusetts
and Massachusetts Department of Revenue. In addition, Seller shall comply with
all applicable governmental and legal requirements in relation to the bulk sales
of its Assets.
E. Authorization. The execution, delivery, and performance of this
Agreement has been duly authorized and approved by the Board of Directors and
shareholders of Seller having a majority of the issued and outstanding Common
Stock thereof, and this Agreement constitutes a valid and binding Agreement of
Seller in accordance with its terms.
F. Noncancelable Contracts. At the time of Closing, there will be no
leases, employment contracts, contracts for services or maintenance, or other
similar material contracts existing or relating to or connected with the
operation of Seller's business not cancelable at Closing or within 30 days
thereof.
G. Continued Operations. Seller will continue to conduct its business
up to the date of Closing in essentially the same manner as it has been
conducted in the past, and in accordance with all applicable laws and
regulations. Until Closing, Seller shall maintain all of its Assets in their
present condition. Seller shall use its best efforts to preserve, for
Purchaser, the goodwill of vendors, suppliers, customers and others having
business relations with it. Prior to Closing, Seller will not sell or transfer
any of the Assets which are the subject of this Agreement. Seller has no
knowledge of a business termination of a material customer, vendor or supplier.
H. Withholding Taxes. Seller has paid in full, or will arrange for the
payment in full, in a timely manner, of all federal and Commonwealth of
Massachusetts taxes incurred by Seller, including, but not limited to income,
withholding, social security, unemployment insurance, and sales taxes due
through the Date of Closing, and shall hold Purchaser harmless therefrom.
I. Financial Records. Seller will deliver two year audited financial
statement prepared by Seller's accountant within within 45 days of Closing, at
Seller's expense. Seller must be in agreement with audited data. Seller makes
no warranties or representations regarding future sales or profits in connection
with the Assets purchased by Purchaser pursuant to this Agreement, such sales
and profits being dependent on Purchaser's efforts, skill, and conduct of its
business. Financial records and other documents delivered by Seller to
Purchaser in connection with the within transaction, including profit and loss
statements and balance sheets, contracts, and other books and records,
accurately reflect the financial condition of Seller. To the best of Seller's
knowledge, Seller is in compliance with all laws and regulations affecting its
business.
J. Employee Benefits. Seller does not maintain any retirement or
deferred compensation plan, savings, incentive, stock option or stock purchase
plan, unemployment compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or any other fringe
benefit arrangement for any employee, consultant or agent of the Seller, whether
pursuant to contract, arrangement, custom or informal understanding, which
constitute an "Employee Benefit Plan" (as defined in Section 3(3) of ERISA), for
which the Seller may have any ongoing material liability after Closing. The
Seller does not maintain, nor has it ever contributed to, any Multi-employer
Plan as defined by Section 3(37) of ERISA. The Seller does not currently
maintain any Employee Pension Benefit Plan subject to Title IV of ERISA. There
have been no "prohibited transactions" (as described in Section 406 of ERISA or
Section 4975 of the Code) with respect to an Employee Pension Benefit Plan or
Employee Welfare Benefit party. Seller has no employee benefits plans or
written contracts with employees. Seller shall be responsible for paying, prior
to Closing, all accrued vacation or sick pay entitlements.
K. Accuracy of Representations and Warranties. None of the
representations or warranties of Seller contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading. Seller
knows of no fact or circumstance that has resulted, or that in the reasonable
judgment of Seller will result, in a material change in the business,
operations, or assets of Seller that has not been previously disclosed or set
forth in this Agreement.
L. Seller's Agreement to Restriction on Sale of Seller's Stock Conveyed
Pursuant to the Within Agreement. The Sellers agree that, for a period
commencing 45 business days preceding the one year anniversary of the Closing
Date of this Agreement and ending the day following the one year anniversary of
the Closing Date of this Agreement, the Sellers will not offer to sell, sell,
transfer, assign, give, bequeath, hypothecate, otherwise dispose of or otherwise
in any manner alienate any of the securities of the Corporation, whether now
owned or hereafter acquired by the Sellers (the "Securities"), or any right or
interest therein, whether voluntarily or by operation of law. Any purported
transfer in violation of any provision of this Agreement shall be void and
ineffective, and shall not operate to transfer any interest or title to the
purported transferee and the Corporation shall not recognize such transfer. The
Sellers agree that any sale or other disposition of the Securities after the one
year anniversary of the Closing Date shall be a bona fide transaction in
accordance with Rule 144, as promulgated under the Securities Act of 1933 as
amended, conducted through a major brokerage firm or such other firm as is
mutually agreed by the parties in writing, and shall be sold in a manner not to
cause any adverse effect on the market for the Corporation's common stock. Any
such sale shall be made without "hitting" the bid price for the Corporation's
common stock. These representations by the Sellers are material to the
Purchaser's decision to enter into this Agreement and, Seller's agree that any
violation hereof would entitle the Purchaser to injunctive relief to preclude
Securities sales activity by the Sellers in contravention of these
representations.
10. Purchaser's Representations. Purchaser represents and warrants to Seller
as follows:
A. Buyer is a DELAWARE corporation, duly organized, validly existing
and in good standing under the laws of the state of Delaware and has the power
and authority to carry on its business, as now conducted, to own and operate its
properties and assets, to execute the Agreement and other agreements and
instruments refereed to therein and delivering and carrying out the transactions
contemplated.
B. Execution and delivery of the Agreement and other Agreements and
instruments referred to have been duly authorized by the board of directors and
shareholders of Cadapult Graphic Systems, Inc. and constitute legal, valid,
binding and enforceable agreements and instruments.
C. Neither the execution, delivery or performance of the Agreement or
any other agreement or instrument executed and delivered by or on behalf of
Cadapult Graphic Systems, Inc., nor the consummation of the transactions nor
compliance with the terms and provisions of the Agreement contravenes the
Certificate of Incorporation, Articles of Incorporation, or bylaws or any
provision of law, statute, rule, regulation or order of any court or
governmental authority to which Cadapult Graphic Systems, Inc., is subject, or
any judgment, decree, franchise, order or permit applicable to it, or conflicts
or inconsistent with, or will result in any breach of or constitute a default
under, any contract, commitment, agreement, understanding, arrangement or
instrument, or result in the creation of or imposition of, or the obligation to
create or impose any lien, encumbrance or liability upon, any of the property or
assets of it, or will increase any such lien, encumbrance, or liability.
D. Purchaser shall indemnify Seller against any and all loss,
liability, deficiency, or damage suffered or incurred by Tartan, or its
shareholders, resulting from any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Cadapult Graphic System, Inc.
contained in the Agreement or in any certificate, document, or instrument
delivered to Tartan in connection with the within transaction.
E. Purchaser agrees to hire current employees of Seller, not otherwise
referenced herein, specifically, Michael Ryan, David Yetman and Scott Englund.
In the event said employees are terminated by Purchaser, any sums due said
employees resulting from Purchaser's termination shall be the sole
responsibility of Purchaser.
11. Indemnification. Purchaser and Seller agree to protect, indemnify, and
hold the other harmless against, and with respect to, any loss, damage or
expense occasioned by any breach or alleged breach, falsity, or failure of any
of the representations, covenants, warranties or agreements of any such party
contained herein or contained in any document exchanged between Purchaser and
Seller in connection with this transaction. This Indemnification shall survive
the Closing.
12. Default. In the event of a material breach, the non-breaching party shall
have the right, in addition to seeking damages, to choose to compel the breach
party to perform under the terms of this Agreement (specific performance).
Irrespective of the aforesaid, and in addition thereto, in the event of a
material breach by Purchaser, Seller shall have the right to retain the Deposit
irrespective of whether Seller is able to establish damages, seeks to compel
specific performance, or ultimately obtains a judgment for damages in excess of
the Deposit provided however that in the event of the latter, the amount of the
Deposit shall be deducted from any damage award.
13. Miscellaneous.
A. Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by a written agreement signed by
all of the parties hereto.
B. Notices. All notices, requests, consents, approvals or other
communications under this Agreement shall be in writing and mailed by certified
mail, return receipt requested, postage prepaid, or delivered by a nationally
recognized overnight courier service which obtains delivery receipts (e.g.,
Federal Express), addressed:
Seller:
Thomas H. McLeod & Kathleen C. McLeod
31 Babicz Road
Tewksbury, Massachusetts 01876
Thomas Anzuoni, Esq.
60 Chelmsford Street
Chelmsford, Massachusetts 01824
Purchaser:
Cadapult Graphic Systems, Inc.
110 Commerce Drive
Allendale, New Jersey 07401
Bruce M. Meisel, Esq.
263 Center Avenue
Westwood, New Jersey 07675
Either party may, by notice given as aforesaid, change its address for all
subsequent notices. All notices hereunder shall be effective upon receipt of
same.
C. Legal Fees in the Event of Dispute. In the event a dispute arises
between the parties in relation to the interpretation and/or implementation of
the within Agreement resulting in the filing of a legal proceeding in a court of
competent jurisdiction, the non-prevailing party shall reimburse the prevailing
party to the extent of reasonable counsel fees and costs incurred by the latter.
D. No Broker. The Seller and Purchaser represent and warrant, each to
the other, that neither has engaged or in any way dealt with a broker, finder,
agent, or anyone in a similar capacity, in relation to the transaction
contemplated by the within Agreement. To this extent, Seller and Purchaser do
each hereby agree to indemnify, defend and hold the other harmless from and
against any and all loss, expense, including but not limited to reasonable
counsel fees and costs, damage or liability resulting from any claim or claims
arising from an alleged rendering of any services to the indemnifying party in
breach of the within warranty.
E. Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor affect the interpretation of this Agreement. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the person or persons may require.
F. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understanding and
agreements among them respecting the subject matter of this Agreement. Any
amendments to this Agreement must be in writing and signed by the party against
whom enforcement of that amendment is sought.
G. Presumption. This Agreement, or any Section thereof, shall not be
construed against any part due to the fact that said Agreement or any Section
thereof was drafted by said party.
H. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forebear from all such action as
may be necessary or appropriate to achieve the purpose of the Agreement.
I. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
the parties hereto even though all the parties are not signatories to the
original or the same counterpart.
J. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid. The remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Executed as of the dates set forth below, in several counterparts, each of which
shall be deemed an original, but all constituting only one agreement.
Purchaser:
Cadapult Grapic Systems, Inc.
Date: 12/17/98 By:/s/ Michael Levin
----------------------------
Michael Levin, President
Seller
Tartan Technical, Inc.
Date: 12/17/98 By:/s/ Thomas McLeod
----------------------------
Thomas McLeod, Pres.
Solely as to the provisions of Paragraph
6 as same pertains to the undersigned and
as to no other provision contained herein.
/s/ Thomas McLeod
-----------------------
Thomas McLeod
/s/ Kathleen C. McLeod 12-17-98
-----------------------
Kathleen McLeod
Include stock option form
Include warrants
EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made this 7th day of June, 1999;
Between: Cadapult Graphic Systems, Inc., a Delaware corporation
with offices located at 110 Commerce Drive, Allendale,
New Jersey 07401, hereinafter referred to alternatively as
"Cadapult" or "Purchaser";
And: WEB Associates, Inc., a Pennsylvania corporation with
offices located at 2551 Industry Lane, Norristown,
Pennsylvania 19403, hereinafter referred to alternatively
as "WEB" or "Seller".
Whereas, both Purchaser and Seller are engaged in the sale and servicing of
computer graphics and imaging equipment and supplies; and,
Whereas, Purchaser is desirous of purchasing the Assets of Seller, as defined
hereinafter, and Seller is desirous of selling said Assets, for the
consideration and upon the terms and conditions set forth hereinafter.
Now Therefore, in consideration of the mutual covenants, promises and conditions
set forth herein, the parties hereto do hereby agree as follows:
1. Purchase and Sale.
1.01 Seller agrees to sell to Purchaser and Purchaser agrees to purchase
from Seller all of the Assets owned and used by Seller in the operation of its
business, including but not limited to the following:
A. Accounts Receivable, less allowances;
B. Inventory at lower of cost or fair market value;
C. Property and Equipment as listed on Exhibit A annexed to and
made a part hereof;
D. Use of the name "WEB Associates";
E. Customer lists and all files relating thereto;
F. Sales, service and vendor contracts and security deposits;
G. Existing telephone numbers (610) 630-8999, (610) 630-4332,
(610) 630-4234, (610) 630-6770;
H. Databases;
I. Other prepaid commitments as listed on Exhibit J for which
there shall be an adjustment at Closing.
The Assets which are the subject of the within sale, including those set forth
hereinabove, shall hereinafter be collectively referred to as "Assets".
1.02 In conjunction with purchase by Cadapult of the Assets, as defined
herein, Cadapult has agreed to assume the following Liabilities of Seller:
A. Trade payables as of the date of Closing;
B. Customer deposits payable as of the date of Closing;
Cadapult has not agreed to assume any other liabilities other than those set
forth hereinabove. Liabilities specifically EXCLUDED from assumption by
Cadapult include the following: (a) any monies due any governmental agency,
including any federal, state and/or local taxes; (b) any contingent
liabilities resulting from any claim or threatened claim against Seller which
may not, as of this date or date of Closing, have matured into a debt; (c)
any obligations arising out of any claim by Seller's personnel, including any
unpaid salaries, commissions, pension or other benefits, accrued vacation or
sick pay arising prior to the date of Closing, and, (d) any other undisclosed
liabilities.
2. Purchase Price and Terms of Sale.
2.01 Cadapult does hereby agree to assume the Liabilities referenced
in Subparagraphs A and B of Paragraph 1.02 hereinabove (hereinafter referred
to as "Liabilities") and to purchase the Assets referenced in Subparagraphs A
though J of Paragraph 1.01 hereinabove. It is anticipated that the dollar
value of the Assets purchased will exceed the Liabilities assumed, as
determined by generally accepted accounting principles (hereinafter referred
to as "Net Asset Value"), by Three Hundred, Ninety Thousand ($390,000.00)
Dollars. In such event, Cadapult shall then be obligated to tender to Seller
$300,000 in cash at Closing plus, in accordance with Paragraph 9L, that
number of Cadapult unregistered and restricted common shares equal to
$500,000 divided by the average Stock Price of Cadapult common stock for the
thirty (30) days prior to Closing, where the Stock Price is the average of
the high 'bid' and low 'ask' at the close of the trading day. The sum of
such $300,000 in cash plus such Cadapult common shares (subject to adjustment
as set forth in 2.01A and 2.01B below) shall be hereinafter referred to as
the "Initial Purchase Price."
A. In the event the Net Asset Value, as defined hereinabove, is
greater than $390,000, at Closing, Cadapult shall tender additional shares of
Cadapult unregistered and restricted common stock, the number of additional
shares being determined by dividing the Net Asset Value, less $390,000, by
the average aforesaid Stock Price of Cadapult common stock for the thirty
(30) days prior to Closing.
B. In the alternative, in the event the Net Asset Value is less
than $390,000, but greater than $90,000, then the difference between $390,000
and the Net Asset Value will reduce the cash tendered to the Seller by such
amount. In the event the Net Asset Value is less than $90,000, then no cash
will be tendered to the Seller and the number of shares of Cadapult common
stock will be reduced by the difference between the Net Asset Value and
$90,000, divided by the average aforesaid Stock Price of Cadapult common
stock for the thirty (30) days prior to Closing.
3. Escrow and Post Closing Adjustments. At Closing, fifty (50%) percent of
the common stock of Cadapult due Seller thereat, (hereinafter "Escrowed
Shares"), shall be endorsed in blank and delivered to the Joint Escrow Agents
designated herein, after which the Escrowed Shares shall be held in escrow
pending attainment of specified Gross Profit objectives in the first 12 and
second 12 months from the date of Closing. For the purposes of this
Paragraph 3, Gross Profit shall be defined in the manner set forth in Exhibit
C annexed to and made a part hereof.
If Seller attains, or exceeds, certain Gross Profit Targets, as defined
hereafter, during the first twelve (12) months following the Closing, 50% of
the Escrowed Shares will be released to Seller from the Escrow plus
additional unregistered and restricted shares as shall be issued to Seller by
Cadapult pursuant to the schedule of Gross Profit Targets annexed to and made
a part hereof as Exhibit D. (Such additional shares shall hereinafter be
referred to as "Additional Purchase Price.") In the alternative, failure to
attain Gross Profit Targets resulting in less than 50% of the Escrowed Shares
being issued to Seller at the end of the first twelve month period shall
result in those shares being returned to Cadapult and Seller forfeiting any
rights thereto.
The same process shall be repeated in the second twelve month period from the
date of the Closing.
The aforesaid shall be set forth in a separate Escrow Agreement to be
executed at Closing. The Joint Escrow Agents shall be one attorney
designated by Seller and another attorney designated by Purchaser. The Joint
Escrow Agents shall receive an agreed upon fee, as set forth in the Escrow
Agreement, for services rendered by them as Joint Escrow Agents.
4. Deposit. Simultaneously upon the execution of this Agreement,
Purchaser shall forward a check to Seller's attorney in the sum of
$50,000.00. This check shall be deposited into the attorney's trust account
of Seller's attorney, who shall be an attorney admitted to the Bar of the
State of Pennsylvania, and shall be held in escrow thereby pursuant to the
provisions of Paragraph 12 hereinunder. In the event a Closing does not
occur as a consequence of the failure of any conditions precedent to this
Agreement or Seller's breach, the within earnest money Deposit shall be
refunded to the Purchaser without any deduction or set off whatsoever within
forty-eight (48) hours of demand therefore.
5. Allocation of Purchase Price. The Purchase Price shall be allocated
amongst the various Assets in the manner set forth in Exhibit E annexed to
and made a part hereof. The Purchase Price shall equal the sum of the
Initial Purchase Price plus the Additional Purchase Price.
6. Employment Agreements. A condition precedent to Cadapult's obligation
to Close shall be : (1) Seller's shareholders, Wayne M. Breisch and Barbara
O'Brien executing Employment Agreements in the form annexed to and made a
part hereof as Exhibit F, for a term of not less than two (2) and one (1)
years from Closing respectively; and (2) Seller obtaining from another
shareholder, Elizabeth Breisch, a written undertaking on the part of
Elizabeth Breisch that she shall be restricted from competing with, or
contacting or soliciting, any of Seller's customers for a period of not less
than three years from the date of Closing, said Restrictive covenant to be in
the form annexed hereto and made a part hereof as Exhibit I.
7. Closing. The Closing shall occur on or before July 1, 1999 at Seller's
offices or the offices of Seller's attorneys provided same are located within
15 miles of Philadelphia, Pennsylvania (hereinbefore referred to as "Closing
Date"). All monies due and payable at Closing shall be paid in the form of a
bank, certified or attorneys trust account check.
8. Conditions Precedent.
A. Purchaser agrees to accept an assignment of Seller's lease for its
current location. A true copy of said Lease is annexed hereto and made a
part hereof as Exhibit G. On or before the Closing, Seller shall obtain its
Landlord's consent to an assignment of said Lease to Cadapult.
B. Purchaser's satisfactory review of aspects of Seller's business,
including but not limited to, financial statements, Statements of Profits and
Losses and Balance Sheets for all of 1998 and at least the first 3 months of
1999. Management prepared financial statements for the three months of 1999
will be accepted for the purposes of Purchaser's review. Said review shall
be completed within 30 days of the date hereof at which time Purchaser shall
notify Seller in writing that it either (i) is willing to proceed to closing
based upon its review of the Seller's business or (ii) is unwilling to
proceed to closing based upon such review. Purchaser shall have the right to
make either of the aforesaid elections at its sole and absolute discretion.
In the absence of such notice, Purchaser shall be deemed to have elected not
to proceed.
C. Execution at Closing of the Employment Agreements referenced in
Paragraph 6 hereinabove.
9. Seller's Representations. Seller represents and warrants to Purchaser
as follows:
A. Title to Assets. Seller shall, as of the date of Closing, have
good and marketable title to the Assets, free and clear of restrictions on or
conditions to transfer or assignment as well as any and all liens, pledges,
charges, or encumbrances, except those specifically referred to 1.02
hereinabove. At Closing, Seller shall convey all such Assets.
B. Indemnification. Seller, and Seller's shareholders, do hereby
jointly and severally agree to protect, indemnify, and hold the Purchaser
harmless from and against any loss, damage or expense, as well as reasonable
counsel fees and costs, if incurred, resulting from any breach of the
warranties set forth in Subparagraph A of this Paragraph 9. Specifically,
the within Indemnification shall include any claim made against Purchaser for
any unpaid liability of Seller. Should any claim for indemnification arise
during the pendency of the Escrow as referenced in Paragraph 3 hereinabove,
the Purchaser shall have the right to request that any funds being held on
behalf of the Seller continue to be held pending resolution of such claim
and, further to pay the amount of such claim upon adjudication thereof from
said Escrowed Funds, should same remain unsatisfied. The allocation of any
liability among the Shareholders arising pursuant to the provisions of this
Paragraph shall be in proportion to the equity owned by each in WEB
Associates, Inc., and, except in the case of fraud, shall not exceed the
amount received by each Shareholder as his or her share of the consideration
paid pursuant to this Agreement.
C. Transfer Not Subject to Encumbrances or Third-Party Approval. The
execution and delivery of this Agreement by Seller, and the consummation of
the within contemplated transaction, will not result in the creation or
imposition of any valid lien, charge, or encumbrance on any of the Assets,
and will not require the authorization, consent, or approval of any third
party, including any lender or governmental or regulatory agency.
D. Corporate Existence. Seller is now, and on the Closing Date will
be, a corporation duly organized and validly existing and in good standing
under the laws of the State of Pennsylvania. At Closing, Seller shall
provide a copy of a Certificate of Good Standing issued by the State of
Pennsylvania and the Pennsylvania Department of Revenue. In addition, Seller
shall comply with all applicable governmental and legal requirements in
relation to the bulk sales of its Assets.
E. Authorization. The execution, delivery, and performance of this
Agreement has been duly authorized and approved by the Board of Directors and
shareholders of Seller having a majority of the issued and outstanding Common
Stock thereof, and this Agreement constitutes a valid and binding Agreement
of Seller in accordance with its terms.
F. Noncancelable Contracts. At the time of Closing, there will be no
leases (other than the Paragraph 8A lease), employment contracts, contracts
for services or maintenance, or other similar material contracts existing or
relating to or connected with the operation of Seller's business not
cancelable at Closing or within 30 days thereof.
G. Continued Operations. Seller will continue to conduct its business
up to the date of Closing in essentially the same manner as it has been
conducted in the past, and in accordance with all applicable laws and
regulations. Until Closing, Seller shall maintain all of its Assets in their
present condition. Seller shall use its best efforts to preserve, for
Purchaser, the goodwill of vendors, suppliers, customers and others having
business relations with it. Prior to Closing, Seller will not sell or
transfer any of the Assets which are the subject of this Agreement. Seller
has no knowledge of a business termination of a material customer, vendor or
supplier.
H. Withholding Taxes. Seller has paid in full, or will arrange for
the payment in full, in a timely manner, of all federal and State of
Pennsylvania taxes incurred by Seller, including, but not limited to income,
withholding, social security, unemployment insurance, and sales taxes due
through the Date of Closing, and shall hold Purchaser harmless therefrom.
I. Financial Records. Financial records and other documents delivered
by Seller to Purchaser in connection with the within transaction, including
profit and loss statements and balance sheets, contracts, and other books and
records, accurately reflect the financial condition of Seller. To the best
of Seller's knowledge, Seller is in compliance with all laws and regulations
affecting its business.
J. Employee Benefits. Except for its SEP retirement plan, health and
dental insurance plan, life insurance plan and disability plan, Seller does
not maintain any retirement or deferred compensation plan, savings,
incentive, stock option or stock purchase plan, unemployment compensation
plan, vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangement for any
employee, consultant or agent of the Seller, whether pursuant to contract,
arrangement, custom or informal understanding, which constitute an "Employee
Benefit Plan" (as defined in Section 3(3) of ERISA. The Seller does not
maintain, nor has it ever contributed to, any Multi-employer Plan as defined
by Section 3(37) of ERISA. The Seller does not currently maintain any
Employee Pension Benefit Plan subject to Title IV of ERISA. There have been
no "prohibited transactions" (as described in Section 406 of ERISA or Section
4975 of the Code) with respect to an Employee Pension Benefit Plan or
Employee Welfare Benefit party. Seller has no written contracts with
employees. Seller shall be responsible for paying, prior to Closing, all
accrued vacation or sick pay entitlements. Seller and seller shareholders
shall indemnify and hold purchaser harmless from any liability or obligation
arising in relation to any employee benefit including, but not limited to any
of the employee benefit plans referred to in this Sub-Paragraph J. The
allocation of any liability among the Shareholders arising pursuant to the
provisions of this Paragraph shall be in proportion to the equity owned by
each in WEB Associates, Inc., and, except in the case of fraud, shall not
exceed the amount received by each Shareholder as his or her share of the
consideration paid pursuant to this Agreement.
K. Accuracy of Representations and Warranties. None of the
representations or warranties of Seller contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading.
Seller knows of no fact or circumstance that has resulted, or that in the
reasonable judgment of Seller will result, in a material change in the
business, operations, or assets of Seller that has not been previously
disclosed or set forth in this Agreement.
L. Seller's Agreement to Restriction on Sale of Seller's Stock
Conveyed Pursuant to the Within Agreement. The Sellers agree that any sale
or other disposition of the Securities after the one year anniversary of the
Closing Date shall be a bona fide transaction in accordance with Rule 144, as
promulgated under the Securities Act of 1933 as amended, conducted through a
major brokerage firm or such other firm as is mutually agreed by the parties
in writing, and shall be sold in a manner not to cause any materially adverse
effect on the market for the Corporation's common stock. These
representations by the Sellers are material to the Purchaser's decision to
enter into this Agreement and, Seller's agree that any violation hereof would
entitle the Purchaser to injunctive relief to preclude Securities sales
activity by the Sellers in contravention of these representations. Any
legend that would appear on the stock certificates is set forth on Exhibit K
attached hereto.
10. Purchaser's Representations. Purchaser represents and warrants to
Seller as follows:
A. Corporate Existance. Buyer is a DELAWARE corporation, duly
organized, validly existing and in good standing under the laws of the state
of Delaware and has the power and authority to carry on its business, as now
conducted, to own and operate its properties and assets, to execute the
Agreement and other agreements and instruments referred to therein and
delivering and carrying out the transactions contemplated.
B. Authorization. Execution and delivery of the Agreement and other
Agreements and instruments referred to have been duly authorized by the board
of directors and shareholders of Cadapult Graphic Systems, Inc. and
constitute legal, valid, binding and enforceable agreements and instruments.
Neither the execution, delivery or performance of the Agreement or any other
agreement or instrument executed and delivered by or on behalf of Cadapult
Graphic Systems, Inc., nor the consummation of the transactions nor
compliance with the terms and provisions of the Agreement contravenes the
Certificate of Incorporation, Articles of Incorporation, or bylaws or any
provision of law, statute, rule, regulation or order of any court or
governmental authority to which Cadapult Graphic Systems, Inc., is subject,
or any judgment, decree, franchise, order or permit applicable to it, or
conflicts or inconsistent with, or will result in any breach of or constitute
a default under, any contract, commitment, agreement, understanding,
arrangement or instrument, or result in the creation of or imposition of, or
the obligation to create or impose any lien, encumbrance or liability upon,
any of the property or assets of it, or will increase any such lien,
encumbrance, or liability.
C. Indemnification. Purchaser shall indemnify Seller against any and
all loss, liability, deficiency, or damage suffered or incurred by WEB, or
its shareholders, resulting from any untrue representation, breach of
warranty or non-fulfillment of any covenant or agreement by Cadapult Graphic
System, Inc. contained in the Agreement or in any certificate, document, or
instrument delivered to WEB in connection with the within transaction.
11. Mutual Indemnification. Purchaser and Seller agree to protect,
indemnify, and hold the other harmless against, and with respect to, any
loss, damage or expense occasioned by any breach or alleged breach, falsity,
or failure of any of the representations, covenants, warranties or agreements
of any such party contained herein or contained in any document exchanged
between Purchaser and Seller in connection with this transaction. This
Indemnification shall survive the Closing.
12. Default. In the event of a material breach, the non-breaching party
shall have the right, in addition to seeking damages, to choose to compel the
breaching party to perform under the terms of this Agreement (specific
performance). Irrespective of the aforesaid, and in addition thereto, in the
event of a material breach by Purchaser, Seller shall have the right to
retain the Deposit irrespective of whether Seller is able to establish
damages, seeks to compel specific performance, or ultimately obtains a
judgment for damages in excess of the Deposit provided however that in the
event of the latter, the amount of the Deposit shall be deducted from any
damage award.
13. Miscellaneous.
A. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written
agreement signed by all of the parties hereto.
B. Notices. All notices, requests, consents, approvals or other
communications under this Agreement shall be in writing and mailed by
certified mail, return receipt requested, postage prepaid, or delivered by a
nationally recognized overnight courier service which obtains delivery
receipts (e.g., Federal Express), addressed:
Seller:
Wayne and Elizabeth Breisch
36 Harper Lane
North Wales, PA 19454
Barbara O'Brien
208 Devon Road
Cinnaminson, NJ 08077
Jeffrey B. Rotwitt, Esq.
Obermayer, Rebmann, Maxwell & Hippel, LLP
19th Floor
1617 John F. Kennedy Blvd.
Philadelphia, PA 19103-1895
Purchaser:
Cadapult Graphic Systems, Inc.
110 Commerce Drive
Allendale, New Jersey 07401
Bruce M. Meisel, Esq.
263 Center Avenue
Westwood, New Jersey 07675
Either party may, by notice given as aforesaid, change its address for all
subsequent notices. All notices hereunder shall be effective upon receipt of
same.
C. Legal Fees in the Event of Dispute. In the event a dispute arises
between the parties in relation to the interpretation and/or implementation
of the within Agreement resulting in the filing of a legal proceeding in a
court of competent jurisdiction, the non-prevailing party shall reimburse the
prevailing party to the extent of reasonable counsel fees and costs incurred
by the latter.
D. No Broker. The Seller and Purchaser represent and warrant, each to
the other, that neither has engaged or in any way dealt with a broker,
finder, agent, or anyone in a similar capacity, in relation to the
transaction contemplated by the within Agreement. To this extent, Seller and
Purchaser do each hereby agree to indemnify, defend and hold the other
harmless from and against any and all loss, expense, including but not
limited to reasonable counsel fees and costs, damage or liability resulting
from any claim or claims arising from an alleged rendering of any services to
the indemnifying party in breach of the within warranty.
E. Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor affect the interpretation of this Agreement. All pronouns and
any variation thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or persons may
require.
F. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understanding and
agreements among them respecting the subject matter of this Agreement. Any
amendments to this Agreement must be in writing and signed by the party
against whom enforcement of that amendment is sought.
G. Presumption. This Agreement, or any Section thereof, shall not be
construed against any part due to the fact that said Agreement or any Section
thereof was drafted by said party.
H. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forebear from all such action
as may be necessary or appropriate to achieve the purpose of the Agreement.
I. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on
all the parties hereto even though all the parties are not signatories to the
original or the same counterpart.
J. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid. The remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid, shall not be affected thereby.
K. Governing Law. The parties agree that the terms of this Agreement,
as well as any dispute arising as a consequence thereof, shall be interpreted
in accordance with and governed by the laws of the State of Delaware.
L. Assignment. Seller shall have the right to assign its post-Closing
rights under this Agreement to its shareholders in connection with the
liquidation of Seller.
Executed as of the dates set forth below, in several counterparts, each of
which shall be deemed an original, but all constituting only one agreement.
Purchaser:
Cadapult Graphic Systems, Inc.
Date: June 7, 1999 By: /s/ Michael Levin
----------------------------
Michael Levin, President
Seller:
WEB Associates, Inc.
Date: June 7, 1999 By: /s/ Wayne Breisch
---------------------------
Wayne Breisch, Pres.
Solely as to the provisions of Paragraphs
6, 9B and 9J as same pertains to the
undersigned and as to no other provision
contained herein.
/s/ Elizabeth Breisch
------------------------------
Elizabeth Breisch
/s/ Barbara O'Brien
------------------------------
Barbara O'Brien
/s/ Wayne Breisch
------------------------------
Wayne Breisch
EXHIBIT 3(i)(5)
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
CADAPULT GRAPHIC SYSTEMS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"corporation") is Cadapult Graphic Systems, Inc.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article Fourth thereof and by substituting in lieu of
said Article the following new Article:
"FOURTH: The total number of shares of stock that this
corporation is authorized to issue is twenty five million (25,000,000),
consisting of twenty million (20,000,000) shares of common stock with $.001
par value per share and five million (5,000,000) shares of preferred stock
with $.001 par value.
A. Preferred Stock. The Board of Directors is expressly
authorized to provide for the issue of all or any shares of the preferred
stock, in one or more series, and to fix for each such series such voting
powers, full or limited, and such designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series (a "Preferred Stock Designation") and as may be
permitted by the Delaware General Corporation Law. The number of authorized
shares of preferred stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the corporation entitled to vote generally in
the election of directors (the "Voting Stock"), voting together as a single
class, without a separate vote of the holders of the Preferred Stock, or any
series thereof, unless a vote of any such holders is required pursuant to any
Preferred Stock Designation.
B. Common Stock. Except as otherwise required by law or
as otherwise provided in any Preferred Stock Designation, the holders of the
Common Stock shall exclusively possess all voting power and each share of
common stock shall have one vote."
3. The amendment of the certificate of incorporation herein
certified has been duly adopted and written consent has been given in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the state of Delaware.
IN WITNESS WHEREOF, the undersigned, being the President and Chairman
of the Board of Directors of the corporation, does make and file this
Certificate of Amendment to the Certificate of Incorporation, hereby
declaring and certifying that the facts stated herein are true, and
accordingly hereunto has set his hand and seal this 26th of August, 1999.
/s/ Michael W. Levin
------------------------
Michael W. Levin
President and Chairman of the Board
EXHIBIT 3(i)(6)
CERTIFICATE OF INCORPORATION
OF
MEDIA SCIENCES, INC.
__________
To: The Department of Treasury
State of New Jersey
Pursuant to the provisions of the New Jersey Business Corporation
Act, the undersigned, being a natural person of at least 18 years of age and
acting as the incorporator of the corporation hereby being organized thereunder,
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is Media Sciences, Inc.
SECOND: The corporation is organized for the following purpose
or purposes:
To engage in any activity within the purposes for which corporations
may be organized under the New Jersey Business Corporation Act.
To carry on a general mercantile, industrial, investing, and
trading business in all its branches; to devise, invent, manufacture,
fabricate, assemble, install, service, maintain, alter, buy, sell, import,
export, license as licensor or licensee, lease as lessor or lessee,
distribute, job, enter into, negotiate, execute, acquire, and assign
contracts in respect of, acquire, receive, grant, and assign licensing
arrangements, options, franchises, and other rights in respect of, and
generally deal in and with, at wholesale and retail, as principal, and as
sales, business, special, or general agent, representative, broker, factor,
merchant, distributor, jobber, advisor, and in any other lawful capacity,
goods, wares, and merchandise, commodities, and unimproved, improved,
finished, processed, and other real, personal, and mixed property of any and
all kinds, together with the components, resultants, and by-products thereof;
to acquire by purchase or otherwise own, hold, lease, mortgage, sell, or
otherwise dispose of, erect, construct, make, alter, enlarge, improve, and to
aid or subscribe toward the construction, acquisition or improvement of any
factories, shops, storehouses, buildings, and commercial and retail
establishments of every character, including all equipment, fixtures,
machinery, implements and supplies necessary, or incidental to, or connected
with, any of the purposes or business of the corporation; and generally to
perform any and all acts connected therewith or arising therefrom or incidental
thereto, and all acts proper or necessary for the purpose of the business.
To engage generally in the real estate business as principal,
agent, broker, and in any lawful capacity, and generally to take, lease,
purchase, or otherwise acquire, and to own, use, hold, sell, convey,
exchange, lease, mortgage, work, clear, improve, develop, divide, and
otherwise handle, manage, operate, deal in and dispose of real estate, real
property, lands, multiple-dwelling structures, houses, buildings and other
works and any interest or right therein; to take, lease, purchase or
otherwise acquire, and to own, use, hold, sell, convey, exchange, hire,
lease, pledge, mortgage, and otherwise handle, and deal in and dispose of, as
principal, agent, broker, and in any lawful capacity, such personal property,
chattels, chattels real, rights, easements, privileges, choses in action,
notes, bonds, mortgages, and securities as may lawfully be acquired, held, or
disposed of; and to acquire, purchase, sell, assign, transfer, dispose of,
and generally deal in and with, as principal, agent, broker, and in any
lawful capacity, mortgages and other interests in real, personal, and mixed
properties; to carry on a general construction, contracting, building, and
realty management business as principal, agent, representative, contractor,
subcontractor, and in any other lawful capacity.
To apply for, register, obtain, purchase, lease, take licenses in
respect of or otherwise acquire, and to hold, own, use, operate, develop,
enjoy, turn to account, grant licenses and immunities in respect of,
manufacture under and to introduce, sell, assign, mortgage, pledge or
otherwise dispose of, and, in any manner deal with and contract with
reference to:
(a) inventions, devices, formulae, processes and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented processes,
copyrights, designs, and similar rights, trade-marks, trade symbols, and
other indications of origin and ownership granted by or recognized under the
laws of the United States of America or of any state or subdivision thereof,
or of any foreign country or subdivision thereof, and all rights connected
therewith or appertaining thereunto;
(c) franchises, licenses, grants, and concessions.
To have all of the powers conferred upon corporations organized
under the New Jersey Corporation Act.
THIRD: The aggregate number of shares which the corporation
shall have authority to issue is one thousand, all of which are of a par
value of one dollar each, and all of which are of the same class.
FOURTH: The address of the initial registered office of the
corporation within the state of New Jersey is c/o Corporation Service
Company, 830 Bear Tavern Road, West Trenton, New Jersey 08628; and the name
of the initial registered agent at such address is Corporation Service
Company.
FIFTH: The number of directors constituting the first Board of
Directors of the corporation is three; and the names and the addresses of the
persons who are to serve as the first directors of the corporation are as
follows:
NAME ADDRESS
---- -------
Michael W. Levin 110 Commerce Drive, Allendale, New Jersey 07401
Frances Blanco 110 Commerce Drive, Allendale, New Jersey 07401
Paul Baker 110 Commerce Drive, Allendale, New Jersey 07401
SIXTH: The name and the address of the incorporator are as
follows:
NAME ADDRESS
---- -------
Kenneth Oh 99 Park Avenue, 16th Floor
New York, New York, 10016.
SEVENTH: For the management of the business and for the conduct
of the affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
shareholders or any class thereof, as the case may be, it is further
provided:
1. The management of the business and the conduct of the affairs
of the corporation, including the election of the Chairman of the Board of
Directors, if any, the President, the Treasurer, the Secretary, and other
principal officers of the corporation, shall be vested in its Board of
Directors.
2. The Board of Directors shall have the power to remove
directors for cause and to suspend directors pending a final determination
that cause exists for removal.
3. The corporation shall, to the fullest extent permitted by
Section 14A:3-5 of the New Jersey Business Corporation Act, as the same may
be amended and supplemented, indemnify any and all corporate agents whom it
shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by
said Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any By-Law, agreement, vote of shareholders, or otherwise, and shall
continue as to a person who has ceased to be a corporate agent and shall
inure to the benefit of the heirs, executors, administrators, and personal
representatives of such a corporate agent. The term "corporate agent" as
used herein shall have the meaning attributed to it by Sections 14A:3-5 and
14A:5-21 of the New Jersey Business Corporation Act and by any other
applicable provision of law.
4. The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by subsection 14A:2-7(3) of
the New Jersey Business Corporation Act, as the same may be amended and
supplemented.
EIGHTH: The shareholders shall not have preemptive rights.
NINTH: The duration of the corporation is to be perpetual.
Signed on August 9, 1999.
/s/ Kenneth Oh
-----------------------------------
Kenneth Oh, Incorporator
EXHIBIT 4.1
SEAFOODS PLUS, LTD.
1998 INCENTIVE PLAN
ARTICLE I.
DEFINITIONS
1.01 Administrator means the Board and any delegate of the
Board that is appointed in accordance with Article III.
1.02 Agreement means a written agreement (including any
amendment or supplement thereto) between the Company and a Participant
specifying the terms and conditions of a Stock Award or Option granted to such
Participant.
1.03 Board means the Board of Directors of the Company.
1.04 Change in Control shall mean an event or series of events
that would be required to be described as a change in control of the Company in
a proxy or information statement distributed by the Company pursuant to section
14 of the Securities Exchange Act of 1934 (the "Exchange Act") in response to
Item 6(e) of Schedule 14A promulgated thereunder or otherwise adopted. The
determination whether and when a change in control has occurred or is about to
occur shall be made by the Board in office immediately prior to the occurrence
of the event or series of events constituting such change in control.
1.05 Code means the Internal Revenue Code of 1986, and any
amendments thereto.
1.06 Common Stock means the common stock of the Company.
1.07 Company means Seafoods Plus, Ltd.
1.08 Control Change Date means the occurrence of the event or
series of events constituting a Change in Control as determined by the Board.
1.09 Exchange Act means the Securities Exchange Act of 1934,
as amended and as in effect on the date of this Agreement.
1.10 Fair Market Value means, on any given date, the closing
price (or, if there is none, the average of the closing bid and asked price) of
<PAGE>
the Common Stock on such quotation system or principal securities exchange on
which the Common Stock is traded on such day, or, if the Common Stock is not so
traded on such day, then on the next preceding day that the Common Stock was
traded, all as reported by such source as the Administrator may select.
1.11 Forfeitable Shares shall have the meaning set forth in
Section 9.04.
1.12 Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the price
set forth in an Agreement.
1.13 Participant means an employee of and non-employee
director, advisor and independent consultant to the Company or a Related Entity,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Administrator to receive a
Stock Award, an Option or a combination thereof.
1.14 Plan means the Company's 1998 Incentive Plan.
1.15 Related Entity means any entity that directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company.
1.16 Stock Award means Common Stock awarded to a Participant
under Article IX.
1.17 Stockholders means the stockholders of the Company.
ARTICLE II.
PURPOSES
The Plan is intended to assist the Company and Related
Entities in recruiting and retaining employees, directors, officers,
consultants, and advisors who are exclusive agents of the Company, and in
compensating such individuals by enabling such individuals to participate in the
future success of the Company and the Related Entities and to associate their
interests with those of the Company and its Stockholders. The Plan is intended
to permit the grant of Stock Awards and the grant of both Options qualifying
under Section 422 of the Code ("incentive stock options") and Options not so
qualifying. No Option that is intended to be an incentive stock option shall be
invalid for failure to qualify as an incentive stock option. The proceeds
received by the Company from the sale of Common Stock pursuant to this Plan
shall be used for general corporate purposes.
<PAGE>
ARTICLE III.
ADMINISTRATION
The Plan shall be administered by the Administrator. The
Administrator shall have authority to grant Stock Awards and Options upon such
terms (not inconsistent with the provisions of this Plan) as the Administrator
may consider appropriate. Such terms may include conditions (in addition to
those contained in this Plan) on the exercisability of all or any part of an
Option or on the transferability or forfeitability of a Stock Award, including
by way of example and not limitation, conditions on which Participants may defer
receipt of benefits under the Plan, requirements that the Participant complete a
specified period of employment with or service to the Company or a Related
Entity, that the Company achieve a specified level of financial performance or
that the Company achieve a specified level of financial return. Notwithstanding
any such conditions, the Administrator may, in its discretion, accelerate the
time at which any Option may be exercised, or the time at which a Stock Award
may become transferable or nonforfeitable. In addition, the Administrator shall
have complete authority to interpret all provisions of this Plan, to prescribe
the form of Agreements, to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator. Any
decision made, or action taken, by the Administrator or in connection with the
administration of this Plan shall be final and conclusive. Neither the
Administrator nor any member of the Board shall be liable for any act done in
good faith with respect to this Plan or any Agreement, Option or Stock Award.
All expenses of administering this Plan shall be borne by the Company.
The Board, in its discretion, may appoint a committee of the
Board and delegate to such committee all or part of the Board's authority and
duties with respect to the Plan. The Board may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Board's delegate or delegates that were consistent with the terms of the
Plan.
ARTICLE IV.
ELIGIBILITY
Section 4.01 General. Any employee, director, officer, or
exclusive agent of, and advisor or consultant to, the Company or a Related
Entity (including a corporation that becomes a Related Entity after the adoption
of this Plan) is eligible to participate in this Plan if the Administrator, in
its sole discretion, determines that such person has contributed significantly
or can be expected to contribute significantly to the profits or growth of the
<PAGE>
Company or a Related Entity. Directors of the Company who are employees of the
Company or a Related Entity may be selected to participate in this Plan.
Section 4.02 Grants. The Administrator will designate
individuals to whom Stock Awards and Options are to be granted and will specify
the number of shares of Common Stock subject to each award or grant. All Stock
Awards and Options granted under this Plan shall be evidenced by Agreements
which shall be subject to the applicable provisions of this Plan and to such
other provisions as the Administrator may adopt. No Participant may be granted
incentive stock options (under all incentive stock option plans of the Company
and any Related Entity) which are first exercisable in any calendar year for
stock having an aggregate Fair Market Value (determined as of the date an Option
is granted) that exceed the limitation prescribed by Code section 422(d). The
preceding annual limitation shall not apply with respect to Options that are not
incentive stock options.
ARTICLE V.
STOCK SUBJECT TO PLAN
Section 5.01 Shares Issued. Upon the award of shares of Common
Stock pursuant to a Stock Award, the Company may issue shares of Common Stock
from its authorized but unissued Common Stock. Upon the exercise of any Option,
the Company may deliver to the Participant (or the Participant's broker if the
Participant so directs), shares of Common Stock from its authorized but unissued
Common Stock.
Section 5.02 Aggregate Limit. The maximum aggregate number of
shares of Common Stock that may be issued under this Plan shall not exceed
500,000 shares.
Section 5.03 Reallocation of Shares. If an Option is
terminated, in whole or in part, for any reason other than its exercise, or if a
Stock Award is forfeited in whole or in part, the number of shares of Common
Stock allocated to the Option or Stock Award or portion thereof may be
reallocated to other Options and Stock Awards to be granted under this Plan.
<PAGE>
ARTICLE VI.
OPTION EXERCISE PRICE
The price per share for Common Stock purchased on the exercise
of an Option shall be determined by the Administrator on the date of grant;
provided, however, that the price per share for Common Stock purchased on the
exercise of an Option that is an incentive stock option shall not be less than
the Fair Market Value on the date the Option is granted. Notwithstanding the
foregoing, the price per share for Common Stock purchased on the exercise of an
Option granted to any person then owning more than ten percent (10%) of the
total combined voting power of all classes of shares of the Company, or of its
parent or subsidiary corporation, shall be one hundred ten percent (110%) of the
Fair Market Value of the Common Stock at the time of grant of the Option.
ARTICLE VII.
EXERCISE OF OPTIONS
Section 7.0 Maximum Option Period. The maximum period in
which an Option may be exercised shall be determined by the Administrator on the
date of grant, except that no Option that is an incentive stock option shall be
exercisable after the expiration of ten years from the date such Option was
granted. Notwithstanding the foregoing, any Option granted to any person then
owning more than ten percent (10%) of the total combined voting power of all
classes of shares of the Company, or of its parent or subsidiary corporation,
must be exercised within five years from the date of the grant thereof. The
terms of any Option that is an incentive stock option may provide that it is
exercisable for a period less than such maximum period.
Section 7.02 Nontransferability. Any Option granted under this
Plan shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer, the Option must be transferred
to the same person or person(s). During the lifetime of the Participant to whom
the Option is granted, the Option may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or subject
to, any lien, obligation, or liability of such Participant.
Section 7.03 Employee Status. For purposes of determining the
applicability of Section 422 of the Code (relating to incentive stock options),
or in the event that the terms of any Option provide that it may be exercised
only during employment or within a specified period of time after termination of
employment, the Administrator may decide to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment.
<PAGE>
Section 7.04 Change in Control. Section 7.01 to the contrary
notwithstanding, after a Control Change Date, each Option shall be fully
exercisable thereafter in accordance with the terms of the applicable Agreement.
If not sooner exercisable under the terms of the applicable Agreement, a
Participant's Option shall be fully exercisable (i) as of his or her termination
of employment if his or her employment terminates after a Control Change Date
and he or she is terminated without cause or following his refusal to move to
another location or (ii) as of the date that there is a material reduction in
the Participant's compensation or duties if such reduction occurs after a
Control Change Date. For purposes of the preceding sentence, the term "cause"
means a willful neglect of responsibilities to the Company or a Related Entity.
ARTICLE VIII.
METHOD OF EXERCISE
Section 8.01 Exercise. Subject to the provisions of Articles
VII and XI, an Option may be exercised in whole at any time or in part from time
to time at such times and in compliance with such requirements as the
Administrator shall determine. An Option granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the Option could be exercised. A partial exercise of an Option shall
not affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to the remaining shares
subject to the Option.
Section 8.02 Payment. Unless otherwise provided by the
Agreement, payment of the Option exercise price shall be made in cash or a cash
equivalent acceptable to the Administrator. If the Agreement provides, or in the
discretion of the Board, payment of all or part of the Option price may be made
by surrendering shares of Common Stock to the Company, including by allowing the
Company to deduct from the number of shares of Common Stock deliverable upon
exercise of the Option, a number of such shares which has an aggregate Fair
Market Value, determined as of the day preceding the date of exercise of the
Option, equal to the aggregate Option exercise price. If Common Stock is used to
pay all or part of the Option price, the shares surrendered must have a Fair
Market Value (determined as of the day preceding the date of exercise) that is
not less than such price or part thereof.
Section 8.03 Installment Payment. If the Agreement provides,
and if the Participant is employed by the Company on the date the Option is
exercised, payment of all or part of the Option price may be made in
installments. In that event the Company may, if so determined by the
Administrator, lend the Participant an amount equal to not more than ninety
percent (90%) of the Option price of the shares acquired by the exercise of the
Option. This amount shall be evidenced by the Participant's promissory note and
<PAGE>
shall be payable in not more than five equal annual installments, unless the
amount of the loan exceeds the maximum loan value for the shares purchased,
which value shall be established from time to time by regulations of the Board
of Governors of the Federal Reserve System. In that event, the note shall be
payable in equal quarterly installments over a period of time not to exceed five
years.
The Participant shall pay interest on the unpaid balance at
the minimum rate necessary to avoid imputed interest or original issue discount
under the Code. All shares acquired with cash borrowed from the Company shall be
pledged to the Company as security for the repayment thereof. In the discretion
of the Administrator, shares of stock may be released from such pledge
proportionately as payments on the note (together with interest) are made,
provided the release of such shares complies with the regulations of the Federal
Reserve System relating to securities credit transactions then applicable. While
shares are so pledged, and so long as there has been no default in the
installment payments, such shares shall remain registered in the name of the
Participant, and he shall have the right to vote such shares and to receive all
dividends thereon.
Section 8.04 Shareholder Rights. No Participant shall have any
rights as a stockholder with respect to shares subject to an Option until the
date of exercise of such Option.
ARTICLE IX.
STOCK AWARDS
Section 9.01 Awards. In accordance with the provisions of
Article IV, the Administrator will designate each individual to whom a Stock
Award is to be made and will specify the number of shares of Common Stock
covered by such awards.
Section 9.02 Vesting. The Administrator, on the date of the
award, may prescribe that a Participant's rights in the Stock Award shall be
forfeitable or otherwise restricted for a period of time set forth in the
Agreement. By way of example and not of limitation, the restrictions may
postpone transferability of the shares or may provide that the shares will be
forfeited if the Participant separates from the service of the Company and its
Related Entities before the expiration of a stated term or if the Company and
its Related Entities or the Participant fails to achieve stated objectives.
Section 9.03 Change in Control. Section 9.02 to the contrary
notwithstanding, after a Control Change Date, each Stock Award will become
transferable and nonforfeitable in accordance with the terms of the applicable
Agreement. If not sooner transferable and nonforfeitable under the terms of the
applicable Agreement, a Participant's interest in a Stock Award shall be
transferable and nonforfeitable (i) as of his termination of
<PAGE>
employment if his employment terminates after a Control Change Date and he is
terminated without cause or following his refusal to move to another location or
(ii) as of the date that there is a material reduction in the Participant's
compensation or duties if such reduction occurs after a Control Change Date. For
purposes of the preceding sentence, the term "cause" means a willful neglect of
responsibilities to the Company or a Related Entity.
Section 9.04 Stockholder Rights. If all or any portion of a
Stock Award is forfeitable pursuant to the Agreement, at all times prior to a
forfeiture thereof, a Participant will have all rights of a Stockholder with
respect to forfeitable shares of the Stock Award (the "Forfeitable Shares"),
including the right to receive dividends and vote the Forfeitable Shares;
provided, however, that (i) a Participant may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of the Forfeitable Shares, (ii) the
Company shall retain custody of the certificates evidencing the Forfeitable
Shares, and (iii) the Participant will deliver to the Company a stock power,
endorsed in blank, with respect to the Forfeitable Shares. The limitations set
forth in the preceding sentence shall not apply after the Forfeitable Shares are
no longer forfeitable.
ARTICLE X.
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options that are
incentive stock options may be granted under this Plan shall be proportionately
adjusted, and the terms of outstanding Stock Awards and Options shall be
adjusted, as the Board shall determine to be equitably required in the event
that (a) the Company (i) effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or (ii) engages in a transaction to
which Section 424 of the Code applies or (b) there occurs any other event which,
in the judgment of the Board necessitates such action. Any determination made
under this Article X by the Board shall be final and conclusive.
The issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, outstanding Stock Awards or Options.
The Board may make Stock Awards and may grant Options in
substitution for performance shares, phantom shares, stock awards, stock
options, stock appreciation rights, or similar awards held by an individual who
becomes an employee of the Company or a Related Entity in connection with a
transaction described in clause (ii) of the first paragraph of this Article X.
Notwithstanding any provision of the Plan (other than the limitation of
<PAGE>
Article V), the terms of such substituted Stock Award(s) or Option grant(s)
shall be as the Board, in its discretion, determines is appropriate.
ARTICLE XI.
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any listing agreement to which the Company is a
party, and the rules of all domestic stock exchanges on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any share certificate issued to evidence
Common Stock when a Stock Award is granted or for which an Option is exercised
may bear such legends and statements as the Administrator may deem advisable to
assure compliance with federal and state laws and regulations. No Common Stock
shall be issued, no certificate for shares shall be delivered and no payment
shall be made under this Plan until the Company has obtained such consent or
approval as the Administrator may deem advisable from regulatory bodies having
jurisdiction over such matters.
ARTICLE XII.
GENERAL PROVISIONS
Section 12.01 Effect on Employment. Neither the adoption of
this Plan, its operation, nor any documents describing or referring to this Plan
(or any part thereof) shall confer upon any individual any right to continue in
the employ or service of the Company or a Related Entity or in any way affect
any right and power of the Company or a Related Entity to terminate the
employment or service of any individual at any time with or without assigning a
reason therefor.
Section 12.02 Disposition of Stock. A Participant shall notify
the Administrator of any sale or other disposition of Common Stock acquired
pursuant to an Option that was an incentive stock option if such sale or
disposition occurs (i) within two years of the grant of an Option or (ii) within
one year of the issuance of the Common Stock to the Participant. Such notice
shall be in writing and directed to the Secretary of the Company.
<PAGE>
Section 12.03 Rules of Construction. Headings are given to the
articles and sections of this Plan solely as a convenience to facilitate
reference. The reference to any statute, regulation, or other provision of law
shall be construed to refer to any amendment to or successor of such provision
of law.
Section 12.04 Employee Status. In the event that the terms of
any Stock Award or the grant of any Option provide that shares may be issued or
become transferable and nonforfeitable thereunder only after completion of a
specified period of employment, the Administrator may decide in each case to
what extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
Section 12.05 Limitation on Awards. Notwithstanding any other
provision of the Plan, if any award under this Plan, either alone or together
with payments that a Participant has the right to receive from the Company or a
Related Entity, would constitute a "parachute payment" (as defined in section
280G of the Code), all such payments shall be reduced to the largest amount that
will result in no portion being subject to the excise tax imposed by section
4999 of the Code.
ARTICLE XIII.
AMENDMENT
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Stock Award or Option
outstanding at the time such amendment is made.
ARTICLE XIV.
DURATION OF PLAN
No Stock Award or Option may be granted under this Plan more
than ten years after the date the Plan is adopted by the Board, or the date the
Plan is approved by the Stockholder, whichever is earlier.
<PAGE>
ARTICLE XV.
EFFECTIVE DATE OF PLAN
Stock Awards and Options may be granted under this Plan upon
its adoption by the Board, provided that no incentive stock option will continue
to be effective unless this Plan is approved by a majority of the votes entitled
to be cast by the Stockholders, voting either in person or by proxy, at a duly
held Stockholders' meeting or by the consent of Stockholders owning more than
fifty percent (50%) of shares of the Common Stock within twelve months of such
adoption.
EXHIBIT 4.2
FORM OF OPTION AGREEMENT
OPTION AGREEMENT made this _____ day of ________, ____, between
Cadapult Graphic Systems, Inc., a Delaware corporation (the "Company"), and
___________________, a management-level employee of the Company or one or
more of its subsidiaries (the "Employee").
The Company desires, by affording the Employee an opportunity to
purchase its common stock, par value $.001 per share (the "Common Shares"),
to carry out the purpose of the 1998 Incentive Stock Option Plan of Seafoods
Plus, Ltd./Cadapult Graphic Systems, Inc., which has been authorized by the
Board of Directors and has been approved by the shareholders.
Now, therefore, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to the
Employee the right and option (the "Option") to purchase all or any part of
an aggregate of __________ Common Shares (such number being subject to
adjustment as provided in paragraph 8 hereof) subject to and on the terms and
conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $_____ per share flat or ex-dividend (the "Purchase Price").
3. Term of Option. The term of the Option shall be for a period of
ten years from the date hereof, subject to earlier termination as provided in
paragraphs 5, 6 and 7 hereof. The Option may be exercised within the above
limitations, at any time or from time to time, as to any part of or all the
shares covered thereby; provided, however, that the Option may not be
exercised as to less than 100 shares at any one time (or the remaining shares
then purchasable under the Option, if less than 100 shares). The Purchase
Price of the shares as to which the Option shall be exercised shall be paid
in full in cash at the time of exercise. Except as provided in paragraphs 6
and 7 hereof, the Option may not be exercised at any time unless the Employee
shall have been in the continuous employ of the Company and/or of one or more
of its subsidiaries, from the date hereof to the date of the exercise of the
Option. The holder of the Option shall not have any of the rights of a
shareholder with respect to the shares covered by the Option except to the
extent that one or more certificates for such shares shall be delivered to
the Employee upon the due exercise of the Option. The Company will endeavor
to obtain, prior to the time when the Option would otherwise be exercisable,
the registration under the Act of the shares covered by the Option.
4. Nontransferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Employee, only by the Employee. More
particularly (but without limiting the generality of the foregoing), the
Option may not be assigned, transferred (except as provided above), pledged,
or hypothecated in any way, shall not be assignable by operation of law, and
shall not be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition
of the Option contrary to the provisions hereof, and the levy of any
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
5. Employment. In consideration of the granting of the Option and
regardless of whether or not the Option shall be exercised, the Employee
agrees to remain in the employ of the Company or one or more of its
subsidiaries for a period of at least one year after the date hereof; and
Employee will, during such employment, devote Employee's full business time,
energy, and skill to the service of the Company or one or more of its
subsidiaries, subject to vacations, sick leaves, and other approved absences.
Such employment, subject to the provisions of paragraph 6 hereof and subject
also to the provisions of any contract between the Company or any such
subsidiary and the Employee, shall be at the pleasure of the Board of
Directors of each employing company and at such compensation as such
employing company or companies shall reasonably determine. In the event of
any termination of the Employee's employment during the period during which
he has agreed by the foregoing provisions of this paragraph 5 to remain in
employment that is either (a) for cause or (b) voluntary on the part of the
Employee and without the consent of Employee's employing company or
companies, the Option (and any other option or options held by Employee under
the above-mentioned Incentive Option Plan), to the extent not previously
exercised, shall immediately terminate.
6. Termination of Employment. In the event that the employment of the
Employee shall be terminated (otherwise than by reason of death), the Option
may, subject to the provisions of paragraph 5 hereof, be exercised by the
Employee (to the extent that Employee shall have been entitled to do so at
the time and date of termination of Employee's employment) at any time within
three months after such termination, but not more than five years after the
date hereof. So long as the Employee shall continue to be an employee of the
Company or one or more of its subsidiaries, the Option shall not be affected
by any change in Employee's duties or position. Nothing in this Option
Agreement shall confer upon the Employee any right to continue in the employ
of the Company or of any of its subsidiaries or interfere in any way with the
right of the Company or any such subsidiary to terminate Employee's
employment at any time.
7. Death of Employee. If the Employee shall die while Employee shall
be employed by the Company or one or more of its subsidiaries or within three
months after the termination of Employee's employment, the Option may be
exercised (to the extent that the Employee shall have been entitled to do so
at the date of Employee's death) by a legatee or legatees of the Employee
under Employee's last will, or by Employee's personal representatives or
distributee, at any time within three years after Employee's death, but not
more than five years after the date hereof.
8. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any share dividend, split-up reorganization,
merger, consolidation, combination or exchange of shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result
of which shares of any class shall be issued in respect of outstanding Common
Shares or Common Shares shall be changed into the same or a different number
of shares of the same or another class or classes, the person or persons so
exercising the Option shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares which, if Common Shares
(as authorized at the date hereof) had been purchased at the date hereof for
the same aggregate price (on the basis of the price per share set forth in
paragraph 2 hereof) had been purchased at the date hereof for the same
aggregate price (on the basis of the price per share set forth in paragraph 2
hereof) and had not been disposed of, such person or persons would be
holding, at the time of such exercise, as a result of such purchase and all
such share dividends, split-ups, recapitalization, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations, or
liquidations; provided, however, that no fractional share shall be issued
upon any such exercise, and the aggregate price paid shall be appropriately
reduced on account of any fractional share not issued. No adjustment shall
be made in the minimum number of shares which may be purchased at any one
time, as fixed by paragraph 3 hereof.
9. Limitation. The Employee shall not exercise any one or more
Options hereunder if and to the extent that the Employee would thereby be
entitled to purchase Common Shares in any one calendar year the value of
which, determined at the time of the grant of the Options or Options, would
exceed $100,000; provided, however, that such exercise shall nonetheless be
permitted if and to the extent that the right to first exercise said options
shall have accumulated over a number of years rather than having first
occurred in the year of exercise, to the extent in compliance with said
calender limit of accumulation.
10. Method of Exercising Option. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by written notice to
the Secretary of the Company, at the Company's executive offices. Such
notice shall state the election to exercise the Option and the number of
shares in respect of which it is being exercised, and shall be signed by the
person or persons so exercising the Option. Such notice shall either:
(a) be a notice in substantially the form attached hereto as
Exhibit A (Subscription Form) or similar written notice setting forth the
Employee's election to exercise the Option, accompanied by the Purchase
Price, in which event the Company shall deliver a certificate or certificates
representing such Common Shares as soon as practicable after the notice shall
be received; or
(b) fix a date (not less than five nor more than ten business
days from the date such notice shall be received by the Company) for the
payment of the full Purchase Price of such Common Shares at the Company's
executive offices, against delivery of a certificate or certificates
representing such Common Shares; or
(c) be a notice in substantially the form attached hereto as
Exhibit B (Cashless Exercise Form) duly executed by the Employee (such
exercise being referred to herein as a "Cashless Exercise") setting forth
such Employee's election to receive the number of Common Shares specified in
the Cashless Exercise Form. Such presentation and surrender shall be deemed
a waiver of the Employee's obligation to pay all or any portion of the
Purchase Price in cash. In the event of a Cashless Exercise, the Employee
hereof shall exchange Employee's Option for that number of Common Shares
determined by multiplying the number of Common Shares for which the Employee
desires to exercise Employee's Option by a fraction, the numerator of which
shall be the result (but not less than zero) obtained by subtracting the
Purchase Price then in effect from the fair market value per share (the "Fair
Market Value") of the Common Shares of the Exercise Date, and the denominator
of which shall be such Fair Market Value. For purposes of any computation
under this Section 10(c), the Fair Market Value of Common Shares as of any
date shall be deemed to be the Fair Market Value as of the day preceding the
date of exercise of the Option on the principal national or regional
securities exchange on which the Common Shares are admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
closing price as reported by the Nasdaq National or SmallCap Markets, or if
not then listed on the Nasdaq National or SmallCap Markets, the average of
the highest reported bid and lowest reported asked prices as reported by the
National Association of Securities Dealers, Inc. Over-The-Counter Bulletin
Board (the "OTC Bulletin Board"), or if not then publicly traded, the fair
market value of the Common Shares as determined by the Board of Directors of
the Company.
Payment of such Purchase Price shall, in either case, be made by cash
or a certified or bank check payable to the order of the Company. The
certificate or certificates for the shares as to which the Option shall have
been so exercised shall be registered in the name of the person or persons so
exercising the Option (or, if the Option shall be exercised by the Employee
and if the Employee shall so request in the notice exercising the Option,
shall be registered in the name of the Employee and another person jointly,
with right of survivorship) had shall be delivered as provided above to or
upon the written order of the person or persons exercising the Option. In
the event the Option shall be exercised, pursuant to paragraph 7 hereof, by
any person or persons other than the Employee, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the Option. All shares that shall be purchased upon the exercise of
the Option as provided herein shall be fully paid and nonassessable.
11. General. The Company shall at all times during the term of the
Option reserve and keep available such number of Common Shares as will be
sufficient to satisfy the requirements of this Option Agreement, shall pay
all original issue and transfer taxes with respect to the issue and transfer
of shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith, and will from time to time
use its best efforts to comply with all laws and regulations which, in the
opinion of counsel for the Company, shall be applicable thereto.
12. Subsidiary. As used herein, the term "subsidiary" shall mean any
present or future company which would be a "subsidiary corporation" of the
Corporation, as that term is defined in Section 424 of the Internal Revenue
Code of 1986, as amended.
IN WITNESS WHEREOF the Company has caused this Option Agreement to be
duly executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand and seal, all on the day and year first above
written.
Corporate Seal CADAPULT GRAPHIC SYSTEMS, INC.
Attest: by:_______________________________
Michael W. Levin, President
____________________________
Frances Blanco, Secretary
EMPLOYEE
by:________________________
<PAGE>
EXHIBIT A
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by the undersigned's Option, to purchase shares of common stock
in accordance with the terms of that certain Option pursuant to the 1998
Incentive Plan. The undersigned requests that a certificate for such
securities be registered in the name of __________________ whose address is
____________________ and that such Certificate be delivered to
_______________ whose address is ____________________.
Dated: _______________________
Signature ___________________________________________
(Signature must conform in all respects to name of holder as
specified on the face of the Option.)
Social Security ________________________
(or Other Identifying Number)
<PAGE>
EXHIBIT B
CASHLESS EXERCISE FORM
(To be executed upon a Cashless Exercise)
The undersigned hereby irrevocably elects to surrender its Option
for _______ shares of common stock or such lesser number of shares of common
stock as may be purchased pursuant to the Cashless Exercise provisions of the
Option granted under the 1998 Incentive Plan.
INSTRUCTION FOR REGISTRATION OF STOCK
Name: ______________________________________________________
(Please typewrite or print)
Address: ______________________________________________________
______________________________________________________
______________________________________________________
Signature: ______________________________________________________
Social Security Number:____________________________________________________
And if said number of shares shall not be all the shares
exchangeable or purchasable under the Option, a new Option of like tenor is
to be issued in the name of the undersigned for the balance of the shares
purchasable thereunder.
Signature: ________________________________
Printed Name: _____________________________
Dated: _______________
EXHIBIT 4.3
FORM OF OPTION AGREEMENT
OPTION AGREEMENT made this _____day of __________, _____, between
Cadapult Graphic Systems, Inc., a Delaware corporation (the "Company"), and
________________, an employee of the Company or one or more of its
subsidiaries (the "Employee").
The Company desires, by affording the Employee an opportunity to
purchase its common stock, par value $.001 per share (the "Common Shares"),
to carry out the purpose of the Company's 1998 Incentive Stock Option Plan of
Seafoods Plus, Ltd./Cadapult Graphic Systems Inc., which has been authorized
by the Board of Directors.
Now, therefore, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to the
Employee the right and option (the "Option") to purchase all or any part of
an aggregate of ________ Common Shares (such number being subject to
adjustment as provided in paragraph 8 hereof) subject to and on the terms and
conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $______ per share flat or ex-dividend.
3. Term of Option. The term of the Option shall be for a period of
ten years from the date hereof, subject to earlier termination as provided in
paragraphs 5, 6 and 7 hereof. The Option may be exercised within the above
limitations, at any time or from time to time, as to any part of or all the
shares covered thereby; provided, however, that: (a) the Option may not be
exercised as to less than 100 shares at any one time (or the remaining shares
then purchasable under the Option, if less than 100 shares); and (b) the
Option shall not be exercisable prior to the expiration of one year from the
date hereof; (c) the Option may be exercised to purchase up to _____ Common
Shares upon the expiration of one year from the date hereof; (d) the Option
may be exercised to purchase an additional _____ Common Shares upon the
expiration of two years from the date hereof; and (e) the Option may be
exercised to purchase an additional _____ Common Shares upon the expiration of
three years from the date hereof. The purchase price of the shares as to
which the Option shall be exercised shall be paid in full in cash at the time
of exercise. Except as provided in paragraphs 6 and 7 hereof, the Option may
not be exercised at any time unless the Employee shall have been in the
continuous employ of the Company and/or of one or more of its subsidiaries,
from the date hereof to the date of the exercise of the Option. The holder
of the Option shall not have any of the rights of a shareholder with respect
to the shares covered by the Option except to the extent that one or more
certificates for such shares shall be delivered to the Employee upon the due
exercise of the Option.
4. Nontransferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Employee, only by the Employee. More
particularly (but without limiting the generality of the foregoing), the
Option may not be assigned, transferred (except as provided above), pledged,
or hypothecated in any way, shall not be assignable by operation of law, and
shall not be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition
of the Option contrary to the provisions hereof, and the levy of any
execution, attachment, or similar process upon the Option, shall be null and
void and without effect.
5. Employment. In consideration of the granting of the Option and
regardless of whether or not the Option shall be exercised, the Employee
agrees to remain in the employ of the Company or one or more of its
subsidiaries for a period of at least one year after the date hereof; and
Employee will, during such employment, devote Employee's full business time,
energy, and skill to the service of the Company or one or more of its
subsidiaries, subject to vacations, sick leaves, and other approved absences.
Such employment, subject to the provisions of paragraph 6 hereof and subject
also to the provisions of any contract between the Company or any such
subsidiary and the Employee, shall be at the pleasure of the Board of
Directors of each employing company and at such compensation as such
employing company or companies shall reasonably determine. In the event of
any termination of the Employee's employment during the period during which
he has agreed by the foregoing provisions of this paragraph 5 to remain in
employment that is either (a) for cause or (b) voluntary on the part of the
Employee and without the consent of Employee's employing company or
companies, the Option (and any other option or options held by Employee under
the above-mentioned Incentive Option Plan), to the extent not previously
exercised, shall immediately terminate.
6. Termination of Employment. In the event that the employment of the
Employee shall be terminated (otherwise than by reason of death), the Option
may, subject to the provisions of paragraph 5 hereof, be exercised by the
Employee (to the extent that Employee shall have been entitled to do so at
the time and date of termination of Employee's employment) at any time within
three months after such termination, but not more than ten years after the
date hereof. So long as the Employee shall continue to be an employee of the
Company or one or more of its subsidiaries, the Option shall not be affected
by any change in Employee's duties or position. Nothing in this Option
Agreement shall confer upon the Employee any right to continue in the employ
of the Company or of any of its subsidiaries or interfere in any way with the
right of the Company or any such subsidiary to terminate Employee's
employment at any time.
7. Death of Employee. If the Employee shall die while Employee shall
be employed by the Company or one or more of its subsidiaries or within three
months after the termination of Employee's employment, the Option may be
exercised (to the extent that the Employee shall have been entitled to do so
at the date of Employee's death) by a legatee or legatees of the Employee
under Employee's last will, or by Employee's personal representatives or
distributee, at any time within three years after Employee's death, but not
more than five years after the date hereof.
8. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any share dividend, split-up reorganization,
merger, consolidation, combination or exchange of shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result
of which shares of any class shall be issued in respect of outstanding Common
Shares or Common Shares shall be changed into the same or a different number
of shares of the same or another class or classes, the person or persons so
exercising the Option shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares which, if Common Shares
(as authorized at the date hereof) had been purchased at the date hereof for
the same aggregate price (on the basis of the price per share set forth in
paragraph 2 hereof) had been purchased at the date hereof for the same
aggregate price (on the basis of the price per share set forth in paragraph 2
hereof) and had not been disposed of, such person or persons would be
holding, at the time of such exercise, as a result of such purchase and all
such share dividends, split-ups, recapitalization, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations, or
liquidations; provided, however, that no fractional share shall be issued
upon any such exercise, and the aggregate price paid shall be appropriately
reduced on account of any fractional share not issued. No adjustment shall
be made in the minimum number of shares which may be purchased at any one
time, as fixed by paragraph 3 hereof.
9. Limitation. The Employee shall not exercise any one or more
Options hereunder if and to the extent that the Employee would thereby be
entitled to purchase Common Shares in any one calendar year the value of
which, determined at the time of the grant of the Options or Options, would
exceed $100,000; provided, however, that such exercise shall nonetheless be
permitted if and to the extent that the right to first exercise said options
shall have accumulated over a number of years rather than having first
occurred in the year of exercise, to the extent in compliance with said
calendar limit of accumulation.
10. Method of Exercising Option. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by written notice to
the Secretary of the Company, at the Company's executive offices. Such
notice shall state the election to exercise the Option and the number of
shares in respect of which it is being exercised, and shall be signed by the
person or persons so exercising the Option. Such notice shall either:
(a) be a notice in substantially the form attached hereto as
Exhibit A (Subscription Form) or similar written notice setting forth the
Employee's election to exercise the Option, accompanied by the Purchase
Price, in which event the Company shall deliver a certificate or certificates
representing such Common Shares as soon as practicable after the notice shall
be received; or
(b) fix a date (not less than five nor more than ten business
days from the date such notice shall be received by the Company) for the
payment of the full Purchase Price of such Common Shares at the Company's
executive offices, against delivery of a certificate or certificates
representing such Common Shares; or
(c) be a notice in substantially the form attached hereto as
Exhibit B (Cashless Exercise Form) duly executed by the Employee (such
exercise being referred to herein as a "Cashless Exercise") setting forth
such Employee's election to receive the number of Common Shares specified in
the Cashless Exercise Form. Such presentation and surrender shall be deemed
a waiver of the Employee's obligation to pay all or any portion of the
Purchase Price in cash. In the event of a Cashless Exercise, the Employee
hereof shall exchange Employee's Option for that number of Common Shares
determined by multiplying the number of Common Shares for which the Employee
desires to exercise Employee's Option by a fraction, the numerator of which
shall be the result (but not less than zero) obtained by subtracting the
Purchase Price then in effect from the fair market value per share (the "Fair
Market Value") of the Common Shares as of the Exercise Date, and the
denominator of which shall be such Fair Market Value. For purposes of any
computation under this Section 10(c), the Fair Market Value of Common Shares
as of any date shall be deemed to be the Fair Market Value as of the day
preceding the date of exercise of the Option on the principal national or
regional securities exchange on which the Common Shares are admitted to
trading or listed, or if not listed or admitted to trading on any such
exchange, the closing price as reported by the Nasdaq National or SmallCap
Markets, or if not then listed on the Nasdaq National or SmallCap Markets,
the average of the highest reported bid and lowest reported asked prices as
reported by the National Association of Securities Dealers, Inc. Over-The-
Counter Bulletin Board (the "OTC Bulletin Board"), or if not then publicly
traded, the fair market value of the Common Shares as determined by the Board
of Directors of the Company.
Payment of such Purchase Price shall, in either case, be made by cash
or a certified or bank check payable to the order of the Company. The
certificate or certificates for the shares as to which the Option shall have
been so exercised shall be registered in the name of the person or persons so
exercising the Option (or, if the Option shall be exercised by the Employee
and if the Employee shall so request in the notice exercising the Option,
shall be registered in the name of the Employee and another person jointly,
with right of survivorship) had shall be delivered as provided above to or
upon the written order of the person or persons exercising the Option. In
the event the Option shall be exercised, pursuant to paragraph 7 hereof, by
any person or persons other than the Employee, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the Option. All shares that shall be purchased upon the exercise of
the Option as provided herein shall be fully paid and nonassessable.
11. General. The Company shall at all times during the term of the
Option reserve and keep available such number of Common Shares as will be
sufficient to satisfy the requirements of this Option Agreement, shall pay
all original issue and transfer taxes with respect to the issue and transfer
of shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith, and will from time to time
use its best efforts to comply with all laws and regulations which, in the
opinion of counsel for the Company, shall be applicable thereto.
12. Subsidiary. As used herein, the term "subsidiary" shall mean any
present or future company which would be a "subsidiary corporation" of the
Corporation, as that term is defined in Section 424 of the Internal Revenue
Code of 1986, as amended.
IN WITNESS WHEREOF the Company has caused this Option Agreement to be
duly executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand and seal, all on the day and year first above
written.
Corporate Seal CADAPULT GRAPHIC SYSTEMS, INC.
Attest: by: ____________________________
Michael W. Levin, President
__________________________
Frances Blanco, Secretary
EMPLOYEE
by:________________________
<PAGE>
EXHIBIT A
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by the undersigned's Option, to purchase shares of common stock
in accordance with the terms of that certain Option pursuant to the 1998
Incentive Plan. The undersigned requests that a certificate for such
securities be registered in the name of __________________ whose address is
____________________ and that such Certificate be delivered to
_______________ whose address is ____________________.
Dated: _______________________
Signature ___________________________________________
(Signature must conform in all respects to name of holder as
specified on the face of the Option.)
Social Security ________________________
(or Other Identifying Number)
<PAGE>
EXHIBIT B
CASHLESS EXERCISE FORM
(To be executed upon a Cashless Exercise)
The undersigned hereby irrevocably elects to surrender its Option
for _______ shares of common stock or such lesser number of shares of common
stock as may be purchased pursuant to the Cashless Exercise provisions of the
Option granted under the 1998 Incentive Plan.
INSTRUCTION FOR REGISTRATION OF STOCK
Name: ______________________________________________________
(Please typewrite or print)
Address: ______________________________________________________
______________________________________________________
______________________________________________________
Signature: ______________________________________________________
Social Security Number:____________________________________________________
And if said number of shares shall not be all the shares
exchangeable or purchasable under the Option, a new Option of like tenor is
to be issued in the name of the undersigned for the balance of the shares
purchasable thereunder.
Signature: ________________________________
Printed Name: _____________________________
Dated: _______________
EXHIBIT 4.4
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO: (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT; (ii) TO
THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER
SUCH ACT RELATING TO THE, DISPOSITION OF SECURITIES); OR (iii) AN OPINION OF
COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE ON OR BEFORE
5:30 P.M. NEW YORK TIME, _________ __, ____
NO. W-___ __________ Warrants
This is to certify that, FOR VALUE RECEIVED, ____________________ or
his registered assigns (the "Holder") is entitled to purchase, subject to the
provisions of this Warrant, from CADAPULT GRAPHIC SYSTEMS, INC., a Delaware
corporation (the "Company"), a total of __________ shares of the Company's
common stock, at the purchase price of $______ per share (the "Exercise
Price").
(a) Exercise of Warrant. This Warrant may be exercised in whole or
in part at any time or from time to time, but not later than 5:30 PM, New
York time, on __________ __, ____ (the "Expiration Date"), or if said day is
a day on which banking institutions are authorized by law to close, then on
the next succeeding day which shall not be such a day, by presentation and
surrender hereof to the Company or at the office of its stock transfer agent,
if any, with the Purchase Form annexed hereto duly executed, together with
all Federal and state taxes applicable upon such exercise, if any. Upon
receipt by the Company of this Warrant at the office or the agency of the
Company, in proper form for exercise, the Holder shall be deemed to be the
Holder of record of the Shares issuable upon such exercise, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such Shares shall not then be actually delivered to
the Holder.
(b) Redemption. Prior to the Expiration Date, the Warrant shall be
redeemable, under the circumstances described below at the discretion of the
Company for $_____ per underlying share (the "Redemption Fee"). The
Company's right to redemption shall be exercisable commencing upon the day
following the thirtieth consecutive business day during which the Company's
common stock has traded at prices in excess of $_______ per share with weekly
volume of such trading being in excess of twice the total number of shares
represented by this Warrant. In the event the Company exercises its right to
redeem the Warrants, the Company shall give the Holder written notice of such
decision. In the event that the Company does not receive the Warrant from
the Holder within 60 days from the date on the notice to the Holder of the
Company's intention to redeem the Warrant, then the Warrant shall be deemed
cancelled, and the Holder shall not be entitled to the Redemption Fee.
(c) Reservation of Shares. The Company hereby agrees that, during
the time period the Warrant is exercisable, there shall be reserved for
issuance and/or delivery upon exercise of this Warrant such number of shares
of its common stock as shall be required for issuance or delivery upon
exercise of this Warrant.
(d) Fractional Shares. With respect to any fraction of a Share
called for upon any exercise hereof, the Holder agrees to waive the Holder's
right to such fractional Shares. As such, no fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant.
(e) Exchange, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the discretion of the Holder, upon
presentation and surrender hereof to the Company or at the office of its
stock transfer agent, if any, for other Warrants of different denominations
entitling the Holder thereof to purchase in the aggregate the same number of
Shares exercisable hereunder. Any assignment hereof shall be made by
surrender of this Warrant to the Company or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto duly executed
and with funds sufficient to pay any transfer tax, if any; whereupon, the
Company, shall execute and shall deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. The term "Warrant" as used herein includes any
Warrants issued in substitution for or replacement of this Warrant or into
which this Warrant may be divided or exchanged. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction, or mutilation
of this Warrant, and (in the case of loss, theft, destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and will deliver a new
Warrant of like tenor and date. Any such new Warrant executed and delivered
shall constitute an additional contractual obligation on the part of the
Company, whether or not this Warrant so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
(f) Rights of the Holder. The Holder, by virtue hereof, shall not be
entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(g) Notices to Warrant Holders. So long as this Warrant shall be
outstanding and unexercised; during the time period that the Warrant is
exercisable and (i) if the Company shall offer to the Holders for
subscription or purchase by them any shares of stock of any class or any
other rights, or (ii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or transfer of
all or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation, or winding
up of the Company shall be effected, then, in any such case, the Company
shall cause to be delivered to the Holder, at least ten (10) days prior to
the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (x) a record is to be taken for the purpose of such offering or rights,
or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation, or winding up is to take place
and the date, if any, is to be fixed, as of which the holders of record shall
be entitled to exchange their Shares for securities or other property
deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation, or winding up.
(h) Reclassification, Reorganization or Merger. If, during the time
period that the Warrant is exercisable, there is any reclassification,
capital reorganization, or other change of outstanding Shares of the Company
(other than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of an issuance of Shares by way of
dividend or other distribution or of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary, in which merger the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization, or other change of outstanding
Stock of the class issuable upon exercise of this Warrant), or in case of any
sale or conveyance to another corporation of the property of the Company as
an entirety or substantially as an entirety, the Company shall cause
effective provision to be made so that the Holder shall have the right
thereafter, by exercising this Warrant, to purchase the kind and amount of
shares and/or other securities and property receivable upon such
reclassification; capital reorganization; or other change, consolidation,
merger, sale, or conveyance as maybe issued or payable with respect to or in
exchange for the number of Shares of the Company theretofore purchasable upon
the exercise of this Warrant had such recapitalization; capital
reorganization; or other change, consolidation, merger, sale or conveyance
not taken place. Any such provisions shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section (h)
shall similarly apply to successive reclassification; capital
reorganizations; changes of Shares; and to successive consolidations,
mergers, sales, or conveyances.
In the event that in any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional
shares shall be issued in exchange, conversion, substitution or payment, in
whole or in part, for a security of the Company other than Stock, any such
issue shall be treated as an issue of Shares with the amount of the
consideration received upon the issue thereof being determined by the Board
of Directors of the Company, such determination to be final and binding on
the Holder.
(i) Registration Under the Securities Act of 1933.
(1) In the event of a registered public offering of at least
_____ million dollars in securities as calculated therein ("PO"), the Company
shall use reasonable efforts to file a registration statement under the Act
which shall include the Warrant Securities within ten months of the effective
date of the PO. The Company shall bear the expenses of such registration,
including but not limited to legal, accounting and printing fees; provided,
however, that in no event shall the Company be obligated to pay (A) any fees
and disbursements of special counsel for the holders of the Warrants or the
Shares, or (B) any underwriters' discount or commission in respect of such
Warrants or Shares.
(2) In addition to the rights above provided, the Company will
cooperate with the Holder(s) of the Warrants and Shares issued upon the
exercise of the Warrants in preparing and in signing any Registration
Statement required in order to sell or to transfer the aforesaid Shares.
(3) The Company and the holders of the Warrants and Shares will
cooperate with each other in the preparation and the filing to establish that
any proposed disposition by such holders is exempt under the Act. The
holders will indemnify and will hold the Company and its officers, directors
and controlling persons harmless from and against all losses, damages,
expenses and liabilities based upon or arising out of or in connection with
the investigation of any untrue statement of a material fact contained in any
such Registration Statement or any applicable Prospectus, Offering Circular,
amendment or supplement thereto, or arising out of or based upon or in
connection with the investigation of an omission to state a material fact
required to be stated or necessary to make any statement therein not
misleading in light of the circumstances in which it was made, to the extent
that such untrue statement or omission was made by the Company or by its
officers and directors in reliance upon information furnished by such owner.
The Company will indemnify and will hold each of such owner and each person,
if any, who controls such owner harmless from and against all losses,
damages, expenses and liabilities based upon or arising out of or in
connection with the investigation of any untrue statement of a material fact
required to be stated or necessary to make any statement therein not
misleading in light of the circumstances in which it was made, but only to
the extent that such untrue statement or omission was not made by the Company
or by its officers or directors upon information furnished by such owner.
Prior to the effective date of any such Registration Statement or
Notification, the Company and each owner of Warrants or Warrant Securities
shall enter into reciprocal indemnification agreements as herein contemplated
substantially in the form customarily used by reputable investment bankers.
(j) Transfer to Comply with the Securities Act of 1933,
(1) This Warrant or the Warrant Securities or any other
securities issued or issuable upon exercise of this Warrant may not be sold,
transferred, or otherwise disposed of except to a person who, in the opinion
of counsel for the Company, is a person to whom this Warrant or such Warrant
Securities may legally be transferred pursuant to Section (e) hereof without
registration and without the delivery of a current Prospectus under the Act
with respect thereto and then only against receipt of an agreement of such
person to comply with the provisions of this Section (i) with respect to any
resale or other disposition of such securities.
(2) The Company may cause the following legend or one similar
thereto to be set forth on each certificate representing Warrant Securities
or any other security issued or issuable upon exercise of this Warrant,
unless counsel for the Company is of the opinion as to any such certificate
that such legend is unnecessary:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act") and are "restricted securities" as that term is defined in
Rule 144 under the Act. The shares may not be offered for sale,
sold, or otherwise transferred except pursuant to an effective
registration statement under the Act or pursuant to an exemption
from registration under the Act, the availability of which is to
be established to the satisfaction of the Company.
(3) Applicable Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of the Company's corporate
domicile.
(k) Piggyback Registration. If the Company, at any time from the
date of this Warrant through the date of expiration of this Warrant, proposes
to register any of its securities under the Securities Act for sale to the
public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Forms S-4,
S-8 and any successor forms thereto), each such time it will give written
notice to such effect to all holders of outstanding Registerable Securities
at least 30 days prior to such filing. Upon the written request of any such
holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of its Eligible Securities, the
Company will cause the Eligible Securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder of such Eligible
Securities so registered. Notwithstanding the foregoing, in the event that
any registration pursuant to this Section (k) shall be, in whole or in part,
an underwritten public offering of common stock, the number of Eligible
Securities to be included in such an underwriting may be reduced (pro rata
among the requesting holders and the Company's placement agent and its
assigns (based upon the number of Eligible Securities requested to be
registered by them)) if and to the extent that the managing underwriter shall
be of the good faith opinion that such inclusion would reduce the number of
shares to be offered by the Company, the placement agent and its assigns or
requesting holders of Eligible Securities. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to
in this Section (k) without thereby incurring any liability to the holders of
eligible securities.
For purpose of this Section (k):
"Eligible Securities" shall mean all Registrable Securities other than
Excluded Securities.
"Excluded Securities" shall mean Registrable Securities that are
actually free of restriction on resale under the Securities Act (by removal
of all restrictive legends, instructions to transfer agent or otherwise)
pursuant to Rule 144(k).
"Registrable Securities" shall mean (i) the common stock underlying the
Warrant, and (ii) any common stock of the Company issued as a divided or
other distribution with respect to, or in exchange for or in replacement of
such common stock, or stock issued upon conversion thereof, and (iii) any
other shares of common stock otherwise acquired by the Holder, but excluding
any shares of common stock satisfying (i), (ii) or (iii) above but which
shares (x) are eligible for resale under Rule 144A, or (y) sold by the Holder
in a transaction in which such Holder's registration rights are not assigned.
Dated: __________ __, ____
CADAPULT GRAPHIC SYSTEMS, INC.
By:_______________________________
Michael W. Levin
President
(Corporate Seal)
ATTEST:
By:___________________________
Frances Blanco
Secretary
EXHIBIT A
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of common stock
in accordance with the terms of that Certain Warrant Certificate No. _____.
The undersigned requests that a certificate for such securities be registered
in the name of ________________________________________________________ whose
address is ________________________________________________________________
and that such Certificate be delivered to _________________________________
whose address is __________________________________________________________.
Dated:_____________________________
Signature______________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Social Security__________________________________________________
(or Other Identifying Number of Holder)
EXHIBIT B
ASSIGNMENT FORM
(To be completed and executed by the holder of the Warrant to
which this exhibit is attached to transfer the Warrant.)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
Name:________________________________________________________________
(Please type, write or print in block letters)
Address:_____________________________________________________________
whose taxpayer identification number is ______ ______________________
the right to purchase the Common Stock represented by this Warrant (warrant
certificate number W-____) to the extent of ____________________ shares as to
which such right is exercisable and does hereby irrevocably constitute and
appoint____________________________________ attorney, to transfer the same on
the books of the Company with full power of substitution.
Dated: ________________________
___________________________________________________________
NOTE: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
_________________________________________________
_________________________________________________
_________________________________________________
(Address of Warrant Holder)
Signature guaranteed by _______________________________________________
EXHIBIT 10.1
[FORM OF EMPLOYMENT AGREEMENT]
AGREEMENT, dated May 1, 1998, between CADAPULT GRAPHIC SYSTEMS, INC., a
New Jersey corporation with offices at 110 Commerce Drive, Allendale, New
Jersey 07401 ("Employer"), and MICHAEL W. LEVIN ("Employee") residing at 8
Meadow Lane, Allendale, New Jersey 07401.
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee and
Employee desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby agrees to serve, as President and Chief Executive Officer of Employer,
for the Term of Employment (as defined in Section 2). Employee agrees to
perform such services as are customary for such office. Employee further
agrees to use Employee's best efforts to promote the interest of Employer and
to devote Employee's full business time and energies during normal business
hours to the business and affairs of Employer during the Term of Employment.
2. TERM OF EMPLOYMENT. The employment hereunder which shall
commence on the date of the execution of this Agreement and shall continue
for a term of five (5) years (the "Term of Employment"), unless earlier
terminated: (a) upon death of Employee; (b) at the option of Employer upon
30 days' prior written notice to Employee, in the event Employee, by reason
of physical injury or illness, is unable to materially perform his duties
hereunder for a continuous period of 120 days and has no expectation of
returning to work within a reasonable time thereafter; or (c) upon the
discharge of Employee by the Board of Directors of Employer for "cause" (as
defined in Section 10 hereof). The Term of Employment may be renewed for an
additional five years commencing five years after the execution of this
Agreement, upon written notice of the Board of Directors of Employer given at
any time in the first eight months of the fifth year of the Term of
Employment, subject to acceptance thereof by Employee.
3. COMPENSATION.
A. Base Salary. As compensation for the services to be
provided hereunder and in consideration of Employee's agreement not to
compete as set forth in Section 4, during the Term of Employment, Employer
shall pay Employee an annual salary of one hundred eighty thousand dollars
($180,000) with adjustments of not less than the change in the Consumer Price
Index, or such greater annual salary as may be established by Employer's
Board of Directors, which shall be payable in appropriate installments to
conform with the regular payroll dates for salaried personnel of Employer.
Commencing in the third year of this Agreement, Employee's base annual salary
shall be increased, each fiscal quarter, to equal at least one percent of the
Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") in the most recent fiscal year.
B. Incentive Transaction Bonus. In addition to any bonus to
be determined by the Board of Directors, Employee is eligible for certain
incentive bonuses upon Employer completing a "business combination." For
purposes of Section 3.B, a "business combination" shall be defined to include
any transaction with any person or entity (excluding Employer) consummating
in: (i) a tax-free reorganization (under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code")) with the person or entity; (ii) an
exchange of shares for more than 25% of the voting shares of the person or
entity (excluding Employer); (iii) a sale to the Employer of all or
substantially all of the person or entity's assets; (iv) a transaction by
which Employer attains the voting power to elect the majority of the Board of
Directors of the person or entity (excluding Employer); (v) a "change in
control" as defined in Section 5; (vi) any other transaction, regardless of
the structure of the transaction, giving the shareholders of any party to the
transaction appraisal rights; or (vii) any other transaction, regardless of
the structure of the transaction, that is determined by the Board of
Directors as a qualifying for the calculation of the bonus in Section 3.B.
For each business combination, Employee shall receive a
cash bonus, payable within 90 days following the closing of the most recent
business combination, equal to one-half percent (.5%) of the gross sales of
the entity based upon the entity's most recent fiscal year. At such point
when the cumulative gross sales of the business combination entities exceeds
$12 million, Employee's bonus shall be increased to equal one percent (1%) of
the gross sales of the entity based upon the entity's most recent fiscal
year. For purpose of illustration, if Employer acquires Entity A, a company
with $4 million in gross sales, and Employer acquires Entity B, a company
with $10 million in gross sales, Employee shall receive bonuses of $20,000
and $60,000 for the respective business combinations.
C. Incentive Earnings Bonus. In addition to any bonus to be
determined by the Board of Directors, Employee is eligible for certain
incentive bonuses contingent upon certain corporate earnings milestones.
Beginning in the first year of employment, Employee shall be paid a cash
bonus equal to three percent (3%) of Employee's base salary for said fiscal
year, as computed in Section 3.A, for each and every fiscal quarter in said
fiscal year that the Company's EBITDA exceeds $200,000, and, if the Company's
EBITDA exceeds $800,000 for said fiscal year, Employee shall receive an
additional cash bonus equal to ten percent (10%) of Employee's base salary.
For each subsequent fiscal year, Employee shall receive similar bonuses, as
computed in this subsection, except that the EBITDA goals to be exceeded in
subsequent fiscal quarters and fiscal years shall be increased to one hundred
twenty five percent (125%) of the prior fiscal year EBITDA goals. Bonuses
shall be paid within ninety (90) days of the end of the relevant fiscal
quarter or fiscal year.
Additionally, Employee is hereby granted five year options to
purchase 800,000 shares of the Company's common stock, par value $.001 per
share. These options will vest upon the achievement of certain corporate
earnings milestones as set forth herein. Options to purchase 200,000 shares
at $1.375 per share shall vest following the first fiscal year end in which
the Company's EBITDA exceeds $500,000, additional options to purchase 200,000
additional shares, at $1.375 per share, shall vest in each year that the
Company's EBITDA exceeds $1,000,000, $1,500,000 and $2,000,000, respectively.
These options are cumulative and are subject to anti-dilution rights.
D. Bonus. Employee shall, during the term of this Agreement,
be entitled to a performance bonus as the Board of Directors shall determine
from time to time.
E. Other Benefits. Employee shall be entitled to the
following fringe benefits, perquisites, and other benefits of employment
during the Term of Employment: (i) medical and dental insurance under such
group medical and dental insurance policies as Employer may provide to its
employees; (ii) sick days in accordance with Employer's policy regarding
officers; (iii) up to six (6) weeks vacation in each year fully worked; (iv)
participation in Employer's 401(k) plan or such other plan as Employer may
adopt; (v) participation in Employer's employee stock option plan when and if
established; and (vi) Employer shall also during the term hereof and for one
year thereafter provide and pay for a fifteen year (15-year) term life
insurance policy on the life of Employee, subject to Employee's reasonable
insurability, with a face amount of benefit of $1,000,000 with the
beneficiary thereof to be Employee's estate, or as otherwise directed by
Employee. Employee shall have the option to maintain such insurance at his
own expense one year after the end of the term hereof, if such term is not
renewed. In addition to the foregoing, Employee shall also be entitled to
any benefits, perquisites and other benefits to the extent that the Board of
Directors determines such benefits are to be made available to Employer's
employees in general.
F. Payment Upon Early Termination. In the event of early
termination of employment for any reason specified in Section 10 hereof,
Employer shall no longer be obligated to make any payments of compensation to
Employee or Employee's estate under this Agreement except as provided for
herein. However, any salary or bonus earned and/or vested for prior periods,
but not yet paid, shall be paid by Employer to Employee or Employee's estate.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY;
CONFIDENTIALITY.
A. Covenant Not to Compete and Solicit. During the Term of
Employment, Employee will not, within any jurisdiction in which Employer or
any affiliate conducts its business operations, or in any way materially
competing with Employer, directly or indirectly, own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business of
the type or character engaged in or competitive with that conducted by
Employer. The decision of Employer's Board of Directors as to what
constitutes a competing business shall be final and binding upon Employee,
and such decision shall be made in good faith. For these purposes, ownership
by Employee or any affiliate of Employee of securities of a public company
not in excess of 1% of any class of such securities shall not be considered
to be competition with Employer.
For a period of three (3) years after termination of
Employee's employment with Employer, Employee further agrees to refrain from
interfering with the employment relationship between Employer and its other
employees by soliciting any of such individuals to participate in independent
business ventures and agrees to refrain from soliciting business from any
client or prospective client (as disclosed in a list to be provided to
Employee by Employer at the time he ceases to be employed, which list shall
be binding upon Employee) of Employer's for Employee's benefit or for any
other entity.
It is the desire and intent of the parties that if any
provisions of this Section 4(A) shall be adjudicated to be invalid or
unenforceable, this Section 4(A) shall be deemed amended to delete therefrom
such provisions or portion adjudicated to be invalid or unenforceable, such
amendment to apply only with respect to the operation of this paragraph in
the particular jurisdiction in which such adjudication is made.
B. Intellectual Property. During the Term of Employment,
Employee will disclose to Employer all ideas, inventions and business plans
developed by Employee during such period which relates directly or indirectly
to the business of Employer or affiliates, including without limitation any
process, operation, product or improvement which may be patentable or
copyrightable. Employee agrees that such will be the property of Employer
and that Employee will, at Employer's request and cost, do whatever is
necessary to secure the rights thereto by patent, copyright or otherwise to
Employer.
C. Confidentiality. Employee agrees to not divulge to anyone
(other than Employer or any other persons employed or designated by Employer)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of Employer or any of its subsidiaries or
affiliates, including without limitation all types of trade secrets (unless
readily ascertainable from public or published information or trade sources).
Employee further agrees not to disclose, publish or make use of any such
knowledge or information of a confidential nature without prior written
consent of Employer.
5. CHANGE OF CONTROL. Employee shall have the right to terminate
the employment agreement in the event of a "change in control" of Employer.
"Change of control" is defined to be any of the following: (i) a change in
the ownership or management of Employer that would be required to be reported
in response to certain provisions of the Securities Exchange Act of 1934;
(ii) an acquisition (other than directly from Employer) by a person or entity
(excluding Employer) of 25% or more of the Employer's common stock or the
Employer's then outstanding voting securities; (iii) a change in a majority
of the current Board of Directors (the "Incumbent Board") (excluding any
persons approved by a vote of at least a majority of the Incumbent Board
other than in connection with an actual or threatened proxy contest); (iv)
consummation of a reorganization, merger, consolidation or sale of all or
substantially all of the Company's assets (collectively, a "Transaction")
other than a Transaction in which all or substantially all of the
shareholders of Employer prior to such transaction own, in the same
proportion, more than 50% of the voting power of the entity resulting from
the Transaction, at least a majority of the board of directors of the
resulting entity were members of the Incumbent Board, and after which no
person (other than the resulting entity and certain affiliates) beneficially
owns 25% or more of the voting power of the resulting entity, except to the
extent such ownership existed prior to the Transaction; or (v) the approval
by the Employer's stockholders of a complete liquidation or dissolution of
Employer. Upon a change in control, Employee shall be entitled to a lump sum
payment, payable within one month of termination, equal to two hundred and
ninety percent (290%) of Employee's "base amount", as defined in ? 280G(3) of
the Code.
6. REIMBURSEMENT OF EXPENSES. Employee shall be entitled to be
reimbursed for reasonable travel and other expenses incurred in connection
with Employee's services to Employer pursuant to and during the Term of
Employment upon a basis consistent with the policies established or announced
by Employer.
7. AUTOMOBILE. Employer presently provides Employee with an
automobile, including related maintenance, repairs, insurance, and other
costs, for the exclusive use of Employee, under a lease, cosigned by
Employee, due to expire in December 2000. Employer agrees to continue to
said lease, make all necessary payments and related expenses to said
automobile, and prior to the expiration of the lease, Employer shall exercise
the option to purchase said automobile and sell such automobile to Employee
for the sum of $1,000. In the event that Employee's employment with Employer
shall be terminated for whatsoever reason, Employer shall immediately
exercise the option to purchase, such automobile and shall sell the
automobile to Employee for the sum of $1,000.
Employer recognizes Employee's need for an automobile for
business purposes. Employer, therefore, upon the expiration of the
aforementioned automobile lease, shall provide Employee with an automobile,
including related maintenance, repairs, insurance, and other costs. The
automobile will be selected by Employee, and the automobile and related costs
shall be comparable to those which Employer presently provides Employee.
8. DEATH BENEFITS. If Employee dies during the Term of Employment,
Employer shall pay to Employee's estate the compensation that would otherwise
be payable to Employee for twelve months following the month in which his
death occurs. In addition, Employer shall pay $100,000, in a lump sum, to
the Employee's widow, or, if he is not then survived by his widow, to the
Employee's surviving children in equal shares, or, if there are no surviving
children, to the Employee's estate.
9. BREACH BY EMPLOYEE. Both parties recognize that the services to
be rendered under this Agreement by Employee are special, unique and
extraordinary in character, and that in the event of a breach by Employee of
the terms and conditions of this Agreement to be performed by Employee, or in
the event Employee performs services during the Term of Employment for any
person, firm, corporation or other entity engaged in a competing line of
business with Employer, or otherwise breaches this Agreement, Employer shall
be entitled, if it so elects, to institute proceedings and to prosecute them
in any court of competent jurisdiction, either in law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the specific
performance thereof by Employee, or to enjoin Employee from performing
services for any such other person, firm, corporation or other entity.
10. TERMINATION FOR CAUSE. Employer may terminate Employee for
cause upon thirty days' prior written notice to Employee. For purposes of
this Agreement, an event or occurrence constituting "cause" shall mean:
A. Employee's willful failure or refusal after notice thereof,
to perform specific directives of Employer's Board of Directors, when such
directives are consistent with the scope and nature of Employee's duties and
responsibilities as set forth in Section 1 and elsewhere herein and such
failure or refusal is: (i) not corrected within a reasonable time after
receipt of written notice is sent by Employer's Board of Directors after
resolution authorizing such notice; (ii) the direct material cause of
material damages to the Employer; and (iii) within the ability and power of
Employee to materially perform such directive as to render such failure or
refusal willful;
B. Employee's conviction of a felony or of any crime involving
moral turpitude, fraud or misrepresentation and final resolution of all
appeals therefrom;
C. Any final court determination of gross or wilful conduct of
Employee resulting in substantial loss to Employer, substantial damage to
Employer's reputation or any material theft from Employer;
D. Other than by reason of physical injury or illness, a final
court determination of Employee's material failure to perform the duties and
responsibilities under this Agreement causing material damage to Employer; or
E. Any final court determination of any material breach (not
covered by any of the clauses (A) through (D)) of any of the provisions of
this Agreement, causing material damage to Employer, and such breach was not
cured within ten days after written notice thereof to Employee by Employer.
11. FISCAL YEAR. For purpose of this Agreement, the Company's
fiscal year end is assumed to be June 30.
12. ASSIGNMENT. This Agreement is a personal contract and, except
as specifically set forth herein, the rights and interests of Employee herein
may not be sold, transferred, assigned, pledged or hypothecated by Employee.
The rights and obligations of Employer hereunder shall be binding upon and
run in favor of the successors and assigns of Employer. In the event of any
attempted assignment or transfer of rights hereunder contrary to the
provisions hereof, Employer shall have no further liability for payments
hereunder. Employee specifically consents to assignment of this Agreement by
Employer pursuant to any reorganization or business combination that Employer
may effect hereafter.
13. GOVERNING LAW; CAPTIONS. This Agreement contains the entire
agreement between the parties and shall be governed by the laws of the State
of New York. It may not be changed orally, but only by agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought, and consented to in writing by the Board
of Directors of Employer. Section headings are for convenience or reference
only and shall not be considered a part of this Agreement.
14. PRIOR AGREEMENTS. This Agreement supersedes and terminates
all prior agreements between Employer and Employee relating to the subject
matter herein addressed.
15. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person to Employer by
delivery to its Chairman of the Board of Directors or sent by telex, telecopy
or by registered or certified mail, postage prepaid, addressed as follows:
if to Employee, to:
Michael W. Levin
8 Meadow Lane
Allendale, New Jersey 07401
if to Employer, to:
Cadapult Graphic System, Inc.
110 Commerce Drive
Allendale, New Jersey 07401
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the date and
year first above written.
CADAPULT GRAPHIC SYSTEMS, INC.
By:_______________________________
Name/Title
EMPLOYEE
__________________________________
Michael W. Levin
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, dated May 1, 1998 between CADAPULT GRAPHIC SYSTEMS INC., a
New Jersey corporation with offices at 110 Commerce Drive, Allendale, New
Jersey 07401 ("Employer"), and FRANCES BLANCO ("Employee") residing at 1128
Park Avenue, Hoboken, New Jersey 07030.
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee and
Employee desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
I. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
agrees to serve, as Vice President of Marketing and Investor Relations,
Treasurer and Secretary of Employer, or such other position and with such
title as Employer may reasonably designate, for the Term of Employment (as
defined in Section 2). Employee agrees to perform such services as are
customary for such office or to such other offices as shall from time to time
be assigned to Employee by Employer's Board of Directors or its designee, and,
in the absence of such assignment, such services customary to such offices as
are necessary to the operations of Employer. Employee further agrees to use
Employee's best efforts to promote the interest of Employer and to devote
Employee's full business time and energies during normal business hours to the
business and affairs of Employer during the Term of Employment.
2. TERM OF EMPLOYMENT. The employment hereunder which shall commence
on the date of the execution of this Agreement and shall continue for a term
of three (3) years (the "Term of Employment"), unless earlier terminated: (a)
upon death of Employee; (b) at the option of Employer upon 30 days' prior
written notice to Employee, in the event Employee, by reason of physical
injury or illness, is unable to materially perform her duties hereunder for a
period of 60 days and has no proof of expectation of returning to work within
a reasonable time thereafter; or (c) upon the discharge of Employee by the
Board of Directors of Employer for "cause" (as defined in Section 7 hereof).
3. COMPENSATION.
A. Base Salary. As compensation for the services to be provided
hereunder and in consideration of Employee's agreement not to compete as set
forth in Section 4, during the Term of Employment, Employer shall pay Employee
an annual salary of eighty thousand dollars ($80,000) with adjustments of not
less than the change in the Consumer Price Index, or such greater amount as
may be established by Employer's Board of Directors, which shall be payable in
appropriate installments to conform with the regular payroll dates for
salaried personnel of Employer.
B. Other Benefits. Employee shall be entitled to the following
fringe benefits, perquisites, and other benefits of employment during the Term
of Employment to the extent that the Board of Directors determines such
benefits are to be made available to the Companie's employees in general: (i)
medical and dental insurance under such group medical and dental insurance
policies as Employer may provide to its employees; (ii) sick days in
accordance with Employer's policy regarding officers; (iii) up to four (4)
weeks vacation in each year fully worked, and it is not to be deemed to have
any cash value; (iv) participation in Employer's 401(k) plan or such other
plan as Employer may adopt; and (v) participation in Employer's employee stock
option plan when and if established.
C. Payment Upon Early Termination. In the event of early
termination of employment for any reason specified in Section 7 hereof,
Employer shall no longer be obligated to make any payments of compensation to
Employee or Employee's estate under this Agreement. However, any salary or
bonus earned and/or vested for prior periods, but not yet paid, shall be paid
by Employer to Employee or Employee's estate.
D. Bonus. Employee shall, during the term of this Agreement, be
entitled to a performance bonus as the Board of Directors may determine from
time to time. A grant of any bonus or other compensation to another of
Employer's employee, shall not be, in any way, interpreted so as to entitle
Employee to such bonus or other compensation.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY;
CONFIDENTIALITY.
A. Covenant Not to Compete and Solicit. During the Term of
Employment and for a period of three (3) years after termination of Employee's
employment with Employer, Employee will not, within any jurisdiction in which
Employer or any affiliate conducts its business operations, directly or
indirectly, own, manage, operate, control, be employed by or participate in
the ownership, management, operation or control of, or be connected in any
manner with, any business of the type or character engaged in or competitive
with that conducted by Employer. The decision of Employer's Board of
Directors as to what constitutes a competing business shall be final and
binding upon Employee, and such decision shall be made in good faith, or as
adjudicated in a court of law. For these purposes, ownership by Employee or
any affiliate of Employee of securities of a public company not in excess of
1% of any class of such securities shall not be considered to be competition
with Employer.
For a period of three (3) years after termination of Employee's
employment with Employer, Employee further agrees to refrain from interfering
with the employment relationship between Employer and its other employees by
soliciting any of such individuals to participate in any way in any other
business ventures and agrees to refrain from soliciting business from any
client or prospective client (as disclosed in a list, compiled in good faith,
to be provided to Employee by Employer at the time she ceases to be employed,
which list shall be binding upon Employee) of Employer's for Employee's
benefit or for any other entity.
It is the desire and intent of the parties that if any provisions
of this Section 4(A) shall be adjudicated to be invalid or unenforceable, this
Section 4(A) shall be deemed amended to delete therefrom such provisions or
portion adjudicated to be invalid or unenforceable, such amendment to apply
only with respect to the operation of this paragraph in the particular
jurisdiction in which such adjudication is made.
B. Intellectual Property. During the Term of Employment,
Employee will disclose to Employer all ideas, inventions and business plans
developed by Employee during such period which relates directly or indirectly
to the business of Employer or affiliates, including without limitation any
process, operation, product or improvement which may be patentable or
copyrightable. Employee agrees that such will be the property of Employer and
that Employee will, at Employer's request and cost, do whatever is reasonably
necessary to secure the rights thereto by patent, copyright or otherwise to
Employer.
C. Confidentiality. Employee agrees to not divulge to anyone
(other than Employer or any other persons employed or designated by Employer)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of Employer or any of its subsidiaries or affiliates,
including without limitation all types of trade secrets (unless readily
ascertainable from public or published information or trade sources).
Employee further agrees not to disclose, publish or make use of any such
knowledge or information of a confidential nature without prior written
consent of Employer.
5. REIMBURSEMENT OF EXPENSES. Employee shall be entitled to be
reimbursed for reasonable travel and other reasonable expenses incurred in
connection with Employee's services to Employer pursuant to and during the
Term of Employment upon a basis consistent with the policies established or
announced by Employer.
6. BREACH BY EMPLOYEE. Both parties recognize that the services to be
rendered under this Agreement by Employee are special, unique and
extraordinary in character, and that in the event of a breach by Employee of
the terms and conditions of this Agreement to be performed by Employee, or in
the event Employee performs services during the Term of Employment for any
person, firm, corporation or other entity engaged in a competing line of
business with Employer, or otherwise breaches this Agreement, Employer shall
be entitled, if it so elects, to take all actions, either in law or in equity,
that it deems necessary to protect its rights and interests.
7. TERMINATION FOR CAUSE. Employer may terminate Employee for cause
upon ten days' prior written notice to Employee. For purposes of this
Agreement, an event or occurrence constituting "cause" shall mean:
A. Employee's willful failure or refusal after notice thereof, to
perform specific directives of Employer's Board of Directors, when such
directives are consistent with the scope and nature of Employee's duties and
responsibilities as set forth in Section 1 and elsewhere herein;
B. Dishonesty of Employee affecting Employer;
C. Employee's conviction of a felony or of any crime involving
moral turpitude, fraud or misrepresentation;
D. Any gross or willful conduct of Employee resulting in
substantial loss to Employer, substantial damage to Employer's reputation or
theft from Employer;
E. Other than physical injury or illness, Employee's failure to
perform the duties and responsibilities under this Agreement; or
F. Any material breach (not covered by any of the clauses (A)
through (E)) of any of the provisions of this Agreement, causing damage to
Employer, if such breach is not cured within ten days after written notice
thereof to Employee by Employer.
8. ASSIGNMENT. This Agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of Employee herein may
not be sold, transferred, assigned, pledged or hypothecated by Employee. The
rights and obligations of Employer hereunder shall be binding upon and run in
favor of the successors and assigns of Employer. In the event of any
attempted assignment or transfer of rights hereunder contrary to the
provisions hereof, Employer shall have no further liability for payments
hereunder. Employee specifically consents to assignment of this Agreement by
Employer pursuant to any reorganization or merger that Employer may effect
hereafter.
9. GOVERNING LAW; CAPTIONS. This Agreement contains the entire
agreement between the parties and shall be governed by the laws of the State
of New York. It may not be changed orally, but only by agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought, and consented to in writing by the
President of Employer. Section headings are for convenience or reference only
and shall not be considered a part of this Agreement.
10. PRIOR AGREEMENTS. This Agreement supersedes and terminates all
prior agreements between Employer and Employee relating to the subject matter
herein addressed.
11. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person to Employer by
delivery to its Chairman of the Board of Directors or sent by telex, telecopy
or by registered or certified mail, postage prepaid, addressed as follows:
If to Employee, to:
Frances Blanco
1128 Park Avenue
Hoboken, New Jersey 07030.
If to Employer, to:
Cadapult Graphic Systems Inc.
Attn: Michael Levin, President
110 Commerce Drive
Allendale, New Jersey 07401
fax: 201-236-9320
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the date and
year first above written.
CADAPULT GRAPHIC SYSTEMS INC.
By: /s/ Michael W. Levin
--------------------------
Name/Title
EMPLOYEE
/s/ Frances Blanco
-----------------------------
Frances Blanco
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT, dated May 1, 1998 between CADAPULT GRAPHIC SYSTEMS INC., a
New Jersey corporation with offices at 110 Commerce Drive, Allendale, New
Jersey 07401 ("Employer"), and DUNCAN HUYLER ("Employee") residing at 551
Lattintown Road, Marlboro, New York 12542.
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee and
Employee desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
I. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
agrees to serve, as Vice President of Technical Services of Employer, or such
other position and with such title as Employer may reasonably designate, for
the Term of Employment (as defined in Section 2). Employee agrees to perform
such services as are customary for such office or to such other offices as
shall from time to time be assigned to Employee by Employer's Board of
Directors or its designee, and, in the absence of such assignment, such
services customary to such offices as are necessary to the operations of
Employer. Employee further agrees to use Employee's best efforts to promote
the interest of Employer and to devote Employee's full business time and
energies during normal business hours to the business and affairs of Employer
during the Term of Employment.
2. TERM OF EMPLOYMENT. The employment hereunder which shall commence
on the date of the execution of this Agreement and shall continue for a term
of three (3) years (the "Term of Employment"), unless earlier terminated:
(a) upon death of Employee; (b) at the option of Employer upon 30 days' prior
written notice to Employee, in the event Employee, by reason of physical
injury or illness, is unable to materially perform his duties hereunder for a
period of 60 days and has no proof of expectation of returning to work within
a reasonable time thereafter; or (c) upon the discharge of Employee by the
Board of Directors of Employer for "cause" (as defined in Section 7 hereof).
3. COMPENSATION.
A. Base Salary. As compensation for the services to be
provided hereunder and in consideration of Employee's agreement not to
compete as set forth in Section 4, during the Term of Employment, Employer
shall pay Employee an annual salary of ninety-five thousand dollars ($95,000)
with adjustments of not less than the change in the Consumer Price Index, or
such greater amount as may be established by Employer's Board of Directors,
which shall be payable in appropriate installments to conform with the
regular payroll dates for salaried personnel of Employer.
B. Other Benefits. Employee shall be entitled to the following
fringe benefits, perquisites, and other benefits of employment during the
Term of Employment to the extent that the Board of Directors determines such
benefits are to be made available to Employer's employees in general: (i)
medical and dental insurance under such group medical and dental insurance
policies as Employer may provide to its employees; (ii) sick days in
accordance with Employer's policy regarding officers; (iii) up to four (4)
weeks vacation in each year fully worked, and it is not to be deemed to have
any cash value; (iv) participation in Employer's 401(k) plan or such other
plan as Employer may adopt; and (v) participation in Employer's employee
stock option plan when and if established.
C. Payment Upon Early Termination. In the event of early
termination of employment for any reason specified in Section 7 hereof,
Employer shall no longer be obligated to make any payments of compensation to
Employee or Employee's estate under this Agreement. However, any salary or
bonus earned and/or vested for prior periods, but not yet paid, shall be paid
by Employer to Employee or Employee's estate.
D. Bonus. Employee shall, during the term of this Agreement, be
entitled to a performance bonus as the Board of Directors may determine from
time to time. A grant of any bonus or other compensation to another of
Employer's employee, shall not be, in any way, interpreted so as to entitle
Employee to such bonus or other compensation.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY;
CONFIDENTIALITY.
A. Covenant Not to Compete and Solicit. During the Term of
Employment and for a period of three (3) years after termination of
Employer's employment with Employee, Employee will not, within any
jurisdiction in which Employer or any affiliate conducts its business
operations, or in any way materially competing with Employer, directly or
indirectly, own, manage, operate, control, be employed by or participate in
the ownership, management, operation or control of, or be connected in any
manner with, any business of the type or character engaged in or competitive
with that conducted by Employer. The decision of Employer's Board of
Directors as to what constitutes a competing business shall be final and
binding upon Employee, and such decision shall be made in good faith. For
these purposes, ownership by Employee or any affiliate of Employee of
securities of a public company not in excess of 1% of any class of such
securities shall not be considered to be competition with Employer.
For a period of three (3) years after termination of Employee's
employment with Employer, Employee further agrees to refrain from
interfering with the employment relationship between Employer and its other
employees by soliciting any of such individuals to participate in any way in
any other business ventures and agrees to refrain from soliciting business
from any client or prospective client (as disclosed in a list to be provided
to Employee by Employer at the time he ceases to be employed, which list
shall be binding upon Employee) of Employer's for Employee's benefit or for
any other entity.
It is the desire and intent of the parties that if any provisions
of this Section 4(A) shall be adjudicated to be invalid or unenforceable,
this Section 4(A) shall be deemed amended to delete therefrom such provisions
or portion adjudicated to be invalid or unenforceable, such amendment to
apply only with respect to the operation of this paragraph in the particular
jurisdiction in which such adjudication is made.
B. Intellectual Property. During the Term of Employment,
Employee will disclose to Employer all ideas, inventions and business plans
developed by Employee during such period which relates directly or indirectly
to the business of Employer or affiliates, including without limitation any
process, operation, product or improvement which may be patentable or
copyrightable. Employee agrees that such will be the property of Employer
and that Employee will, at Employer's request and cost, do whatever is
necessary to secure the rights thereto by patent, copyright or otherwise to
Employer.
C. Confidentiality. Employee agrees to not divulge to anyone
(other than Employer or any other persons employed or designated by Employer)
any knowledge or information of any type whatsoever of a confidential nature
relating to the business of Employer or any of its subsidiaries or
affiliates, including without limitation all types of trade secrets (unless
readily ascertainable from public or published information or trade sources).
Employee further agrees not to disclose, publish or make use of any such
knowledge or information of a confidential nature without prior written
consent of Employer.
5. REIMBURSEMENT OF EXPENSES. Employee shall be entitled to be
reimbursed for pre-approved reasonable travel and other pre-approved expenses
incurred in connection with Employee's services to Employer pursuant to and
during the Term of Employment upon a basis consistent with the policies
established or announced by Employer.
6. BREACH BY EMPLOYEE. Both parties recognize that the services to be
rendered under this Agreement by Employee are special, unique and
extraordinary in character, and that in the event of a breach by Employee of
the terms and conditions of this Agreement to be performed by Employee, or in
the event Employee performs services during the Term of Employment for any
person, firm, corporation or other entity engaged in a competing line of
business with Employer, or otherwise breaches this Agreement, Employer shall
be entitled, if it so elects, to take all actions, either in law or in
equity, that it deems necessary to protect its rights and interests.
7. TERMINATION FOR CAUSE. Employer may terminate Employee for cause
upon ten days' prior written notice to Employee. For purposes of this
Agreement, an event or occurrence constituting "cause" shall mean:
A. Employee's willful failure or refusal after notice thereof,
to perform specific directives of Employer's Board of Directors, when such
directives are consistent with the scope and nature of Employee's duties and
responsibilities as set forth in Section 1 and elsewhere herein;
B. Dishonesty of Employee affecting Employer;
C. Employee's conviction of a felony or of any crime involving
moral turpitude, fraud or misrepresentation;
D. Any gross or wilful conduct of Employee resulting in
substantial loss to Employer, substantial damage to Employer's reputation or
theft from Employer;
E. Other than physical injury or illness, Employee's failure to
perform the duties and responsibilities under this Agreement; or
F. Any material breach (not covered by any of the clauses (A)
through (E)) of any of the provisions of this Agreement, causing damage to
Employer, if such breach is not cured within ten days after written notice
thereof to Employee by Employer.
8. ASSIGNMENT. This Agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of Employee herein
may not be sold, transferred, assigned, pledged or hypothecated by Employee.
The rights and obligations of Employer hereunder shall be binding upon and
run in favor of the successors and assigns of Employer. In the event of any
attempted assignment or transfer of rights hereunder contrary to the
provisions hereof, Employer shall have no further liability for payments
hereunder. Employee specifically consents to assignment of this Agreement by
Employer pursuant to any reorganization or business combination that Employer
may effect hereafter.
9. GOVERNING LAW; CAPTIONS. This Agreement contains the entire
agreement between the parties and shall be governed by the laws of the State
of New York. It may not be changed orally, but only by agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought, and consented to in writing by the
President of Employer. Section headings are for convenience or reference
only and shall not be considered a part of this Agreement.
10. PRIOR AGREEMENTS. This Agreement supersedes and terminates all
prior agreements between Employer and Employee relating to the subject matter
herein addressed.
11. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person to Employer by
delivery to its Chairman of the Board of Directors or sent by telex, telecopy
or by registered or certified mail, postage prepaid, addressed as follows:
If to Employee, to:
Duncan Huyler
551 Lattintown Road
Marlboro, New York 12542.
If to Employer, to:
Cadapult Graphic Systems Inc.
Attn: Michael Levin, President
110 Commerce Drive
Allendale, New Jersey 07401
fax: 201-236-9320
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the date and
year first above written.7
CADAPULT GRAPHIC SYSTEMS INC.
By: /s/ Michael W. Levin
--------------------------
Name/Title
EMPLOYEE
/s/ Duncan Huyler
-----------------------------
Duncan Huyler
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made as of September 1, 1998,
between CADAPULT GRAPHIC SYSTEMS, INC., a Delaware corporation with offices
at 110 Commerce Drive, Allendale, New Jersey 07401 ("Employer"), and MICHAEL
W. LEVIN ("Employee") residing at 8 Meadow Lane, Allendale, New Jersey 07401,
amending the employment agreement dated May 1, 1998 between Employer and
Employee.
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee and
Employee desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
I. EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby agrees to serve, as President and Chief Executive Officer of Employer,
for the Term of Employment (as defined in Section 2). Employee agrees to
perform such services as are customary for such office. Employee further
agrees to use Employee's best efforts to promote the interest of Employer and
to devote Employee's full business time and energies during normal business
hours to the business and affairs of Employer during the Term of Employment.
2. TERM OF EMPLOYMENT. The employment hereunder which commenced
on May 1, 1998 and shall continue for a term of five (5) years (the "Term of
Employment"), unless earlier terminated: (a) upon death of Employee; (b) at
the option of Employer upon 30 days' prior written notice to Employee, in the
event Employee, by reason of physical injury or illness, is unable to
materially perform his duties hereunder for a continuous period of 120 days
and has no expectation of returning to work within a reasonable time
thereafter; or (c) upon the discharge of Employee by the Board of Directors
of Employer for "cause" (as defined in Section 10 hereof). The Term of
Employment may be renewed for an additional five years commencing five years
after the execution of this Agreement, upon written notice of the Board of
Directors of Employer given at any time in the first eight months of the
fifth year of the Term of Employment, subject to acceptance thereof by
Employee.
3. COMPENSATION.
A. Base Salary. As compensation for the services to be
provided hereunder and in consideration of Employee's agreement not to
compete as set forth in Section 4, during the Term of Employment, Employer
shall pay Employee an annual salary of one hundred eighty thousand dollars
($130,000) with adjustments of not less than the change in the Consumer Price
Index, or such greater annual salary as may be established by Employer's
Board of Directors, which shall be payable in appropriate installments to
conform with the regular payroll dates for salaried personnel of Employer.
Commencing in the third year of this Agreement, Employee's base annual salary
shall be increased, each fiscal quarter, to equal at least one percent of the
Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") in the most recent fiscal year.
B. Incentive Earnings Bonus. In addition to any bonus to be
determined by the Board of Directors, Employee is eligible for certain
incentive bonuses contingent upon certain corporate earnings milestones.
Employee is hereby granted five year options to purchase 500,000 shares of
the Company's common stock, par value $.001 per share. These options will
vest upon the achievement of certain corporate earnings milestones as set
forth herein. Options to purchase 125,000 shares at $1.375 per share shall
vest following the first fiscal year end in which the Company's EBITDA
exceeds $500,000; additional options to purchase 125,000 additional shares at
$1.375 per share shall vest following the first fiscal year end in which the
Company's EBITDA exceeds $1,000,000; additional options to purchase 125,000
additional shares at $1.375 per share shall vest following the first fiscal
year end in which the Company's EBITDA exceeds $1,500,000; and additional
options to purchase 125,000 additional shares at $1.375 per share shall vest
following the first fiscal year end in which the Company's EBITDA exceeds
$2,000,000. These options are cumulative and are subject to anti-dilution
rights.
C. Bonus. Employee shall, during the term of this
Agreement, be entitled to an annual performance bonus equal to up to fifty
percent (50%) of Employee's base salary, as defined in Section 3.A, or such
other amount as the Board of Directors may determine. Additionally, Employee
shall be entitled to such other bonuses as the Board of Directors shall
determine from time to time.
D. Other Benefits. Employee shall be entitled to the
following fringe benefits, perquisites, and other benefits of employment
during the Term of Employment: (i) medical and dental insurance under such
group medical and dental insurance policies as Employer may provide to its
employees; (ii) sick days in accordance with Employer's policy regarding
officers; (iii) up to six (6) weeks vacation in each year fully worked; (iv)
participation in Employer's 401(k) plan or such other plan as Employer may
adopt; (v) participation in Employer's employee stock option plan when and if
established; and (vi) Employer shall also during the term hereof and for one
year thereafter provide and pay for a fifteen year (15-year) term life
insurance policy on the life of Employee, subject to Employee's reasonable
insurability, with a face amount of benefit of $1,000,000 with the
beneficiary thereof to be Employee's estate, or as otherwise directed by
Employee. Employee shall have the option to maintain such insurance at his
own expense one year after the end of the term hereof, if such term is not
renewed. In addition to the foregoing, Employee shall also be entitled to
any benefits, perquisites and other benefits to the extent that the Board of
Directors determines such benefits are to be made available to Employer's
employees in general.
E. Payment Upon Early Termination. In the event of early
termination of employment for any reason specified in Section 10 hereof,
Employer shall no longer be obligated to make any payments of compensation to
Employee or Employee's estate under this Agreement except as provided for
herein. However, any salary or bonus earned and/or vested for prior periods,
but not yet paid, shall be paid by Employer to Employee or Employee's estate.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY;
CONFIDENTIALITY.
A. Covenant Not to Compete and Solicit. During the Term of
Employment, Employee will not, within any jurisdiction in which Employer or
any affiliate conducts its business operations, or in any way materially
competing with Employer, directly or indirectly, own, manage, operate,
control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business of
the type or character engaged in or competitive with that conducted by
Employer. The decision of Employer's Board of Directors as to what
constitutes a competing business shall be final and binding upon Employee,
and such decision shall be made in good faith. For these purposes, ownership
by Employee or any affiliate of Employee of securities of a public company
not in excess of 1% of any class of such securities shall not be considered
to be competition with Employer.
For a period of three (3) years after termination of
Employee's employment with Employer, Employee further agrees to refrain from
interfering with the employment relationship between Employer and its other
employees by soliciting any of such individuals to participate in independent
business ventures and agrees to refrain from soliciting business from any
client or prospective client (as disclosed in a list to be provided to
Employee by Employer at the time he ceases to be employed, which list shall
be binding upon Employee) of Employer's for Employee's benefit or for any
other entity.
It is the desire and intent of the parties that if any
provisions of this Section 4(A) shall be adjudicated to be invalid or
unenforceable, this Section 4(A) shall be deemed amended to delete therefrom
such provisions or portion adjudicated to be invalid or unenforceable, such
amendment to apply only with respect to the operation of this paragraph in
the particular jurisdiction in which such adjudication is made.
B. Intellectual Property. During the Term of Employment,
Employee will disclose to Employer all ideas, inventions and business plans
developed by Employee during such period which relates directly or indirectly
to the business of Employer or affiliates, including without limitation any
process, operation, product or improvement which may be patentable or
copyrightable. Employee agrees that such will be the property of Employer
and that Employee will, at Employer's request and cost, do whatever is
necessary to secure the rights thereto by patent, copyright or otherwise to
Employer.
C. Confidentiality. Employee agrees to not divulge to
anyone (other than Employer or any other persons employed or designated by
Employer) any knowledge or information of any type whatsoever of a
confidential nature relating to the business of Employer or any of its
subsidiaries or affiliates, including without limitation all types of trade
secrets (unless readily ascertainable from public or published information or
trade sources). Employee further agrees not to disclose, publish or make use
of any such knowledge or information of a confidential nature without prior
written consent of Employer.
5. CHANGE OF CONTROL. Employee shall have the right to terminate
the employment agreement in the event of a "change in control" of Employer.
"Change of control" is defined to be any of the following: (i) a change in
the ownership or management of Employer that would be required to be reported
in response to certain provisions of the Securities Exchange Act of 1934;
(ii) an acquisition (other than directly from Employer) by a person or entity
(excluding Employer) of 25% or more of the Employer's common stock or the
Employer's then outstanding voting securities; (iii) a change in a majority
of the current Board of Directors (the "Incumbent Board") (excluding any
persons approved by a vote of at least a majority of the Incumbent Board
other than in connection with an actual or threatened proxy contest); (iv)
consummation of a reorganization, merger, consolidation or sale of all or
substantially all of the Company's assets (collectively, a "Transaction")
other than a Transaction in which all or substantially all of the
shareholders of Employer prior to such transaction own, in the same
proportion, more than 50% of the voting power of the entity resulting from
the Transaction, at least a majority of the board of directors of the
resulting entity were members of the Incumbent Board, and after which no
person (other than the resulting entity and certain affiliates) beneficially
owns 25% or more of the voting power of the resulting entity, except to the
extent such ownership existed prior to the Transaction; or (v) the approval
by the Employer's stockholders of a complete liquidation or dissolution of
Employer. Upon a change in control, Employee shall be entitled to a lump sum
payment, payable within one month of termination, equal to two hundred and
ninety percent (290%) of Employee's "base amount", as defined in Section
280G(3) of the Code.
6. REIMBURSEMENT OF EXPENSES. Employee shall be entitled to be
reimbursed for reasonable travel and other expenses incurred in connection
with Employee's services to Employer pursuant to and during the Term of
Employment upon a basis consistent with the policies established or announced
by Employer.
7. AUTOMOBILE. Employer presently provides Employee with an
automobile, including related maintenance, repairs, insurance, and other
costs, for the exclusive use of Employee, under a lease, cosigned by
Employee, due to expire in December 2000. Employer agrees to continue to
said lease, make all necessary payments and related expenses to said
automobile, and prior to the expiration of the lease, Employer shall exercise
the option to purchase said automobile and sell such automobile to Employee
for the sum of $1,000. In the event that Employee's employment with Employer
shall be terminated for whatsoever reason, Employer shall immediately
exercise the option to purchase, such automobile and shall sell the
automobile to Employee for the sum of $1,000.
Employer recognizes Employee's need for an automobile for
business purposes. Employer, therefore, upon the expiration of the
aforementioned automobile lease, shall provide Employee with an automobile,
including related maintenance, repairs, insurance, and other costs. The
automobile will be selected by Employee, and the automobile and related costs
shall be comparable to those which Employer presently provides Employee.
8. DEATH BENEFITS. If Employee dies during the Term of
Employment, Employer shall pay to Employee's estate the compensation that
would otherwise be payable to Employee for twelve months following the month
in which his death occurs. In addition, Employer shall pay $100,000, in a
lump sum, to the Employee's widow, or, if he is not then survived by his
widow, to the Employee's surviving children in equal shares, or, if there are
no surviving children, to the Employee's estate.
9. BREACH BY EMPLOYEE. Both parties recognize that the services
to be rendered under this Agreement by Employee are special, unique and
extraordinary in character, and that in the event of a breach by Employee of
the terms and conditions of this Agreement to be performed by Employee, or in
the event Employee performs services during the Term of Employment for any
person, firm, corporation or other entity engaged in a competing line of
business with Employer, or otherwise breaches this Agreement, Employer shall
be entitled, if it so elects, to institute proceedings and to prosecute them
in any court of competent jurisdiction, either in law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the specific
performance thereof by Employee, or to enjoin Employee from performing
services for any such other person, firm, corporation or other entity.
10. TERMINATION FOR CAUSE. Employer may terminate Employee for
cause upon thirty days' prior written notice to Employee. For purposes of
this Agreement, an event or occurrence constituting "cause" shall mean:
A. Employee's willful failure or refusal after notice thereof,
to perform specific directives of Employer's Board of Directors, when such
directives are consistent with the scope and nature of Employee's duties and
responsibilities as set forth in Section 1 and elsewhere herein and such
failure or refusal is: (i) not corrected within a reasonable time after
receipt of written notice is sent by Employer's Board of Directors after
resolution authorizing such notice; (ii) the direct material cause of
material damages to the Employer; and (iii) within the ability and power of
Employee to materially perform such directive as to render such failure or
refusal willful;
B. Employee's conviction of a felony or of any crime involving
moral turpitude, fraud or misrepresentation and final resolution of all
appeals therefrom;
C. Any final court determination of gross or wilful conduct of
Employee resulting in substantial loss to Employer, substantial damage to
Employer's reputation or any material theft from Employer;
D. Other than by reason of physical injury or illness, a final
court determination of Employee's material failure to perform the duties and
responsibilities under this Agreement causing material damage to Employer; or
E. Any final court determination of any material breach (not
covered by any of the clauses (A) through (D)) of any of the provisions of
this Agreement, causing material damage to Employer, and such breach was not
cured within ten days after written notice thereof to Employee by Employer.
11. FISCAL YEAR. For purpose of this Agreement, the Company's
fiscal year end is assumed to be June 30.
12. ASSIGNMENT. This Agreement is a personal contract and, except
as specifically set forth herein, the rights and interests of Employee herein
may not be sold, transferred, assigned, pledged or hypothecated by Employee.
The rights and obligations of Employer hereunder shall be binding upon and
run in favor of the successors and assigns of Employer. In the event of any
attempted assignment or transfer of rights hereunder contrary to the
provisions hereof, Employer shall have no further liability for payments
hereunder. Employee specifically consents to assignment of this Agreement by
Employer pursuant to any reorganization or business combination that Employer
may effect hereafter.
13. GOVERNING LAW; CAPTIONS. This Agreement contains the entire
agreement between the parties and shall be governed by the laws of the State
of New York. It may not be changed orally, but only by agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought, and consented to in writing by the Board
of Directors of Employer. Section headings are for convenience or reference
only and shall not be considered a part of this Agreement.
14. PRIOR AGREEMENTS. This Agreement supersedes and terminates
all prior agreements between Employer and Employee relating to the subject
matter herein addressed.
15. NOTICES. Any notice or other communication required or
permitted hereunder shall be sufficiently given if delivered in person to
Employer by delivery to its Chairman of the Board of Directors or sent by
telex, telecopy or by registered or certified mail, postage prepaid,
addressed as follows:
if to Employee, to:
Michael W. Levin
8 Meadow Lane
Allendale, New Jersey 07401
if to Employer, to:
Cadapult Graphic System, Inc.
110 Commerce Drive
Allendale, New Jersey 07401
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the date and
year first above written.
CADAPULT GRAPHIC SYSTEMS INC.
By: /s/ Frances Blanco
--------------------------
Frances Blanco
Vice President and Director
EMPLOYEE
/s/ Michael W. Levin
-----------------------------
Michael W. Levin
EXHIBIT 10.8
AGREEMENT OF LEASE
PREAMBLE
The Landlord and Tenant agree to the leasing of the premises indicated
on the terms and conditions specified and agree that the following terms
whenever used in this Lease shall have the meanings indicated unless the
terms are otherwise expressly modified, limited or expanded herein.
(1) LANDLORD: Allendale Associates, a New Jersey General
Partnership
ADDRESS: 500 Route 17 South, Hasbrouck Heights, N.J. 07604
(2) TENANT: Cadapult Graphic Systems, Inc., A New Jersey
Corporation
ADDRESS: 17 Arcadian Way, Paramus, New Jersey 07652
(3) DATE OF LEASE: December , 1992
(4) LEASED PREMISES: Portion of Building as shown on
Exhibits A & B
ADDRESS: 110 Commerce Drive, Allendale, New Jersey
DESCRIPTION: As shown on Exhibits A & B
(5) TERM: Six Years(subject to renewal option per
paragraph 46)
COMMENCEMENT DATE OF TERM: February 1, 1993
TERMINATION DATE: February 28, 1999
(6) SIZE OF ENTIRE BUILDING: 45,752 Sq. Ft.
APPROXIMATE SIZE OF LEASED PREMISES: 7,212 Sq. Ft.
(7) BASE RENT: $12.65 per Sq. Ft.
COMMENCEMENT DATE BASE RENT: February 1, 1993
TOTAL LEASE BASE RENTAL: $547,390.80
ANNUAL BASE RENTAL: $91,231.80
MONTHLY BASE RENTAL: $7,602.65
RENT DUE DATE: First of Month
(8) SECURITY DEPOSIT: $27,676.05
(9) TENANTIS ALLOCABLE PERCENTAGE: 15.8%
(10) ESTIMATED ADDITIONAL MONTHLY RENTAL CHARGE: $1,622.70
(11) PERMITTED USE: Office and Warehouse
(12) INSURANCE REQUIREMENTS:
LANDLORD: Per Paragraph 20
TENANT: Per Paragraph 7
(13) BROKER: C.B. Commercial Real Estate Group, Inc. and
Edward S. Gordon Company of New Jersey, Inc.
(14) TAX IDENTIFICATION NO.
LANDLORD: 22-2698417
TENANT: 22-2808768
(15) TENANT SIC NO: 5045
(16) EXHIBITS: A. Site Plan
B. Plan of Tenant Improvements
C. Work Letter
D. Form of Non-Disturbance Agreement
E. Sign Regulations
W I T N E S S E T H:
PREMISES.
1. The Landlord hereby leases to Tenant and Tenant hereby takes from
Landlord, those certain premises, consisting of a portion of a building
constructed or to be constructed by Landlord (which building and premises are
hereinafter referred to as the "Building" and the "Premises", respectively),
located in the Borough of Allendale, County of Bergen and State of New
Jersey, and more particularly described on Schedule "All attached hereto and
made a part hereof, subject however, to all of the terms, covenants,
provisions and conditions herein set forth and to all present and future
liens, encumbrances, conditions, rights, easements, restrictions, rights-of-
way, covenants, other matters of records, and zoning and building laws,
ordinances, regulations and codes affecting or governing the Building or
which may hereafter affect or govern the Building, and such matters as may be
disclosed by inspection or survey, which Landlord represents do not materially
impair the use and enjoyment of the Premises by Tenant for the
purpose hereinafter stated in Paragraph 6 and which are not violated by the
terms and provisions of this Lease.
TO HAVE AND TO HOLD the Premises for the term and at the rents herein
set forth.
TERM.
2. (a) The term of this lease (hereinafter referred to as "Term")
shall be for the period stated following the Commencement Date, as
hereinafter defined, unless sooner terminated as herein expressly provided.
In the event however, that the Commencement Date is not the first day of a
month, then the Term shall end on the last day of the month in which the
anniversary of the Commencement Date shall fall.
(b) The term, and the Tenant's obligation to pay Rental, as
hereinafter defined, shall commence on the earlier of the following dates
(which date is hereinafter referred to as the "Commencement Date"): (a) On
"Delivery of Possession" (as hereinafter defined in Paragraph 3; or (b) the
date on which Tenant shall first conduct any business activities on the
Premises.
(c) For purposes of this lease, a "Lease Year" shall be deemed
to be each consecutive period of twelve (12) full calendar months during the
Term hereof, except that the first Lease Year shall also include the
fractional portion of the month, if any, immediately following the
Commencement Date, and that the last Lease Year shall run only from the day
following the termination of the previous Lease Year to the termination date
of the lease.
CONSTRUCTION.
3. (a) The Landlord shall complete the building in which the
demised Premises are located and complete the demised Premises in accordance
with the plans attached as Exhibit B and in accordance with the work letter
attached as Exhibit C. The plans for the Tenant layout shall be prepared by
the Tenant's architect at the Tenant's cost and expense. Landlord shall give
Tenant an allowance of $.50 per square foot of office areas shown on final
Tenant layout drawings towards the cost of such plans. The construction
shall be in a good and workmanlike manner and shall be in compliance with all
applicable laws, ordinances, rules and regulations of any duly constituted
governmental authority having jurisdiction thereof. The Landlord represents
and warrants that the Premises and all systems contained in or related to
operation of the Premises, including, without limitation, the electrical,
lighting, heating, ventilating and air conditioning systems shall be free of
defects and in good working condition on the date of delivery of possession.
All systems installed in the Premises shall be new and not rebuilt. The
Landlord will assign and transfer to Tenant all representations and
warranties given to Landlord by third parties with respect to the Premises
and all systems contained in or related to the operation of the Premises.
(b) The Landlord shall have complied with its obligations
hereunder notwithstanding that there are any insubstantial items of
construction, installation, finishing work or mechanical adjustments which do
not unreasonably interfere with the Tenants use and occupancy of the Leased
Premises subject to receipt by Tenant of a Certificate of Occupancy which
permits Tenant's use of the Premises, which may be temporary noting minor
incomplete items not affecting substantial use of the Leased Premises, the
date of which shall be deemed "Delivery of Possession" which certificate
shall be obtained by Landlord on or before April 1, 1993 provided that the
Landlord has received on or before December 15, 1992, Tenant's final layout
drawings. The April 1, 1993 date shall be extended one day for each day of
delay in receipt of the plans by the Landlord. If it is not, Tenant may at
its option, terminate this Lease, have its deposits refunded and neither
party shall have any further claim against the other. Any construction items
which are incomplete at the time of the issuance of the temporary certificate
shall be completed by Landlord within thirty (30) days of the issuance of the
temporary certificate..
(c) The base rent has been calculated based upon the rentable
area containing 7,212 sq. ft. when measured from the outside of all exterior
walls and the mid-line of any interior demising wall (without deduction for
any exterior recess area covered by the roof of the building) and a pro-rata
share of all utility and mechanical rooms in the building. At the time of
substantial completion of the building, the Landlord's architect shall
certify to the Landlord and Tenant the exact square footage of the building
and of the rental area defined as set forth in this sub-paragraph and there
shall be an addition or subtraction from the base rent as the case may be of
$12.65 per sq. ft. per year (for the first year per year pro-rated on a
monthly basis) for any variance in the square feet actually constructed from
7,212 sq. ft. Any amount so calculated shall be added to or subtracted from
the next months rental payment as the case may be. This amount will be
increased each year thereafter by multiplying the exact square footage by the
base rent listed in Paragraph 7 of the Preamble.
LANDLORDS' FINANCING.
4. Not used in this Lease.
RENTAL.
5. (a) Tenant covenants and agrees to pay to the Landlord the
following Rental:
(i) a base rent during the Term of this lease or any
extension as may be provided for herein (hereinafter called the "Base Rent")
in the sum stated in the Preamble payable by Tenant in equal monthly
installments as stated on or before the first day of each month, in advance,
to Landlord at the office of Landlord above designated or to such other place
as shall be designated by Landlord, without any prior notice or demand
therefor and without any deduction, abatement or set off for any reason
whatsoever except that the first month's rent, together with any security to
be paid pursuant to Paragraph 30 hereof, shall be paid upon the execution of
the Lease by Tenant;
(ii) All charges payable pursuant to this lease as
additional rental (hereinafter referred to as "Additional Rental");
(iii) In the event that the Commencement Date shall be other
than the first day of a month, then the Tenant shall pay, on the earlier of
the Delivery of Possession or the Commencement Date, the Base Rent and
Additional Rental for the fractional portion of the month on a per them basis
(calculated on the basis of a thirty-day month) until the first day of the
next succeeding month.
Such Base Rent and Additional Rental are herein referred to
collectively as "Rental".
(b) It is intended that the Rental provided for in this lease
shall be an absolutely net return to Landlord throughout the Term hereof,
free of any expense, charge or other deduction whatsoever, with respect to
the Premises, the Building and/or the ownership, leasing, operation,
management, maintenance, repair, rebuilding, use or occupation thereof, or
any portion thereof, with respect to any interest of Landlord therein, except
only as otherwise expressly provided in this lease. Any attempt by Tenant
"to escrow" any rent due or similar self-help shall constitute a default.
(c) In the event that any payment of Rental due hereunder shall
be overdue, beyond the fifth day of each month a late charge of 5% for each
dollar so overdue may be charged by the Landlord for each month or part
thereof that the same remains overdue. This charge shall be in addition to
and not in lieu of any other remedy the Landlord may have under the
circumstances and is in addition to any reasonable fees and charges of any
agents or attorneys Landlord may employ as a result of any default in the
payment of Rental hereunder, whether authorized herein or by law. Any such
"late charges" if not previously paid shall, at the option of the Landlord,
be added to and become part of the succeeding rental payment to be made
hereunder and shall be deemed to constitute additional Rental.
(d) If as a consequence of any act and/or omission of the
Tenant, its agents, employees, representatives or contractors or the failure
of the Tenant to promptly comply with all requests and requirements of
utility companies servicing the demised Premises the Delivery of Possession
shall be delayed despite the application by Landlord of due diligence (which
shall not include overtime or weekend work), then and in such event, the
Landlord, by written notice delivered to the Tenant, shall establish the
Commencement Date as the date on which such Date would have occurred pursuant
to the provisions of this lease, had it not been for said acts or omissions
of the Tenant, and the period of the Term shall be adjusted accordingly. It
is further acknowledged that if as a further consequence of said acts or
omissions of the Tenant, the Landlord shall suffer any damage, such as a loss
of rental from other tenants of the Building, then and in such event, the
Tenant, on written notice, shall promptly pay over to the Landlord a sum
equal to the damages so suffered by Landlord, which amount shall be deemed to
constitute Additional Rental.
USE.
6. The Premises are to be used by Tenant solely for the permitted
use, subject to and in accordance with all rules, regulations, laws,
ordinances and requirements of all governmental authorities, the Fire
Insurance Rating organizations and Boards of Fire Insurance Underwriters, and
any similar bodies having jurisdiction thereof, and for no other purpose.
INSURANCE.
7. (a) Tenant shall provide, on or before the earlier of Tenant's
entry in the Premises or the Commencement Date, and keep in force, at all
times during the Term, at its sole cost and expense, a comprehensive public
liability insurance policy, in the names of and for the mutual benefit of
Landlord and any of its designees (without any obligation to pay premium) and
Tenant, insuring the Landlord and Tenant against any claim or liability for
personal injury to or death of any persons, and/or damage to property
occurring in, on or about the Premises, or any appurtenances thereto. Such
policy shall contain a "Landlord Protective Liability" endorsement and shall
provide for limits of liability thereunder of not less than Two Million
($2,000,000.00) Dollars in respect to personal in]ury or death to any one
person, Two Million ($2,000,000.00) Dollars in respect to personal injury or
death to any number of persons and One Million ($1,000,000) Dollars in
respect to property damage. The above limits may be provided through primary
coverage in the amount of One Million ($1,000,000.00) Dollars with an
umbrella liability policy supplementing coverage for the remainder. The
limit of any such insurance shall not limit the liability of the Tenant
hereunder.
(b) Landlord agrees to obtain and keep in full force and effect,
at all times during the Term, at Tenant's sole cost and expense, policies of
insurance covering the Building and improvements made by the Landlord to the
Premises, against all risks to physical damage with extended coverage, in
amounts equal to the full replacement value of such improvements, without any
coinsurance; comprehensive general liability insurance; rental insurance
sufficient to include both Base and Additional Rental; and such other
insurance coverages as Landlord may deem necessary or proper, all of which
insurance coverages shall be in such amounts and with such companies as
Landlord may deem reasonable and proper. The cost of any such insurance
shall be paid as Additional Rental pursuant to Paragraph 20 hereof. It is
understood and agreed that the Landlord shall be responsible for insuring all
improvements installed in connection with the initial construction of the
Leased Premises and that Tenant shall be responsible for insuring any
improvements installed thereafter.
(c) Landlord shall not provide any insurance covering the Tenant's
possessions or business operations. Tenant agrees to obtain, at its sole
cost and expense, an insurance policy covering its contents and a liability
policy covering its business operations which shall include contractual
liability.
(d) Landlord and Tenant agree that the insurance policies to be
obtained hereunder shall provide that the insurance carriers shall waive all
rights of subrogation against Landlord and Tenant and that such policies
shall not be invalidated should the insured waive in writing prior to a loss
any or all right of recovery against any party for losses covered by such
policies. Landlord and Tenant hereby waive and release any and all right of
recovery which it might otherwise have against the other, their agents and
employees, and all liability or responsibility of Landlord, their agents and
employees, for all injury and for loss or damage to its business, contents,
furniture, furnishings, fixtures and other property of the Landlord or
Tenant, notwithstanding that such injury, loss or damage may result from the
negligence or fault of Landlord or Tenant, their agents, or employees,
provided that no such waiver or release shall operate to invalidate any
insurance coverage.
(e) Each party agrees to deliver to the other, at least fifteen
(15) days prior to the time such insurance is first required to be carried by
the party, and thereafter at least fifteen (15) days prior to the expiration
of any such policy, either a duplicate original or a certificate of insurance
procured by the party in compliance with its obligations hereunder, together
with evidence of payment therefor, All such policies shall provide for notice
of cancellation to be provided thirty (30) days prior to any cancellation.
INCREASE OF INSURANCE RATES.
8. Tenant agrees, at its sole cost and expense, to promptly comply
with all of the rules and regulations of the Insurance Service Organization
of New Jersey having jurisdiction, or any similar body. If, at any time, as
a result of or in connection with any failure by Tenant to comply with the
foregoing provision, or as a result of any act or omission or commission by
Tenant, its employees, agents, contractors, invitees, licensees or
subtenants, or as a result of or in connection with the Permitted Use, any
insurance rate applicable to the Building and/or to the contents thereof,
shall be higher than that which would be applicable for the Permitted Use,
then and in any of such events, Landlord shall have the right to terminate
this lease if, upon written notice delivered to the Tenant, the Tenant
refuses to pay such additional premiums for all insurance policies in force
with respect to the Building or to cease the activity causing the rate
increase. Tenant shall not use nor install any electrical equipment that
overloads the lines in the Building and Tenant, at its sole cost and expense,
shall promptly make whatever changes are necessary to prevent or remedy such
condition and to comply with all requirements of Landlord, the Board of Fire
Insurance Underwriters or any similar body and any governmental authority
having jurisdiction thereof. For the purposes of this Paragraph, any finding
or schedule of the Fire Insurance Rating Organization or any similar
organization having jurisdiction shall be deemed to be conclusively binding
on the parties hereto.
FIRE AND OTIIER CASUALTY.
9. (a) In case of fire or other casualty, Tenant shall give
immediate notice to Landlord. In the event the Premises shall be partially
damaged by fire, the elements or other casualty, but shall not be so
destroyed or damaged as to require practically a rebuilding thereof, then the
Landlord shall repair the same as speedily as practicable to the extent of
the scope of Landlord is work in the original construction of the Premises,
and if any portion of the Premises shall be rendered untenantable, then the
Tenant's obligation to pay Rental hereunder shall abate in the same
proportion which the square footage of the portion rendered untenantable
bears to the total square footage of the Premises until such time as the
Landlord shall have substantially repaired the Premises and only to the
extent Landlord does not receive proceeds from the rental loss insurance
policy or business interruption insurance in payment of said rent or other
loss incurred by Landlord. In the event that at least twenty-five (25%)
percent of the Premises or if at least twenty-five (25%) percent of the
Building shall be damaged, then the Landlord shall have the right to
terminate the lease on thirty (30) days' written notice delivered to the
Tenant, in which event the Rental as abated, if applicable, shall be paid up
to the time of such termination and then and from thenceforth this lease
shall come to an end. In the event the Landlord does not elect to terminate
this lease, then the lease shall remain in full force and effect, the Rental
payments shall be reduced as aforesaid, and the Landlord shall proceed
diligently to rebuild the Building and/or to restore the Premises to the
extent of the scope of its work in originally constructing the Building and
Premises.
In the event that through no fault of the Tenant, its agents, servants,
employees, contractors or invitees, the Tenant's use of the Premises is
substantially impaired or more than twenty five percent (25%) of the Premises
are destroyed, and in either event, the Landlord does not give notice to the
Tenant within thirty (30) days of the- fire or other casualty that the
Premises will be restored and the Tenant's use will not be substantially
impaired within one hundred twenty (120) days of the date of the notice, or
if the Premises are not substantially restored during such one hundred twenty
(120) day period, the Tenant shall have the right to terminate this Lease on
thirty (30) days written notice delivered to Landlord.
(b) However, there shall not be any abatement, reduction or
moratorium of rent if the fire or other casualty or damage shall be the
result of carelessness, negligence or improper conduct of Tenant of its
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In any such case, Tenant's liability for the payment of the
Rental and the performance of all the covenants, conditions and terms hereof
on its part to be performed shall continue and Tenant shall be liable to
Landlord for the damage or loss suffered by Landlord to the extent that
Landlord does not receive any proceeds from a business interruption or a
rental loss insurance policy in payment of said damage or loss. If Tenant
shall have been insured against any of the risks herein covered, then the
proceeds of such insurance shall be paid over to Landlord to the extent of
Landlord's costs and expenses and for any other damage or loss suffered by
Landlord as a result of such casualty, and such insurance carrier shall have
no recourse against Landlord for reimbursement.
(c) Landlord agrees that its fire insurance policy shall provide
that the insurance company will waive all rights of subrogation against the
Tenant to the extent of all insurance proceeds actually paid to or for the
benefit of the Landlord.
REPAIRS AND MAINTENANCE.
10. (a) Tenant, at its sole cost and expense, shall take good care
of the Leased Premises and shall keep, repair, replace and maintain the
Premises in good order, condition and repair, and each and every part thereof
(including, without limitation, painting and decorating, and the repair,
maintenance and replacement of any heating, ventilating and air conditioning
units or systems) , except only such matters that are expressly stated herein
to be within the Landlord's obligation to repair, replace or maintain, and
shall not cause nor permit any dirt, debris or rubbish to be put, placed or
maintained on the sidewalks, driveways, parking lots, yards, entrances and
curbs, in, on or adjacent to the Building. Tenant further agrees not to use
the Premises or permit the Premises to be used in any manner as to cause
excessive depreciation of or to the Building and improvements, and agrees not
to cause nor permit waste of or damage or nuisance to, in, or about the
Premises or the Building.
(b) Tenant shall not make any alterations, improvements, and/or
additions to the Premises or any part thereof, nor install or attach any
heavy equipment or apparatus, without Landlord's prior consent in accordance
with the provisions of this lease. Tenant shall be entitled to install a
security system at its cost and expense, the Landlord having the right to
approve the location and method of installation of the system.
(c) Landlord, upon reasonable notice from Tenant, shall make
necessary repairs or replacements to the exterior walls and shall keep in
good order, condition and repair or replace the exterior foundations,
downspouts, gutters and roof of the Building, excluding, however, all
windows, doors, plate glass, signs and all repairs or replacements required
by any casualty except as otherwise provided in Paragraph 9 and 13 hereof.
Landlord, at its sole cost and expense, shall be responsible for any
"Structural Repairs", as hereinafter defined. For the purpose of this Lease,
a Structural Repair shall be defined as any structural repair or structural
replacement to the structural steel, footings, foundations, masonry walls,
and roof of the demised Premises. Any repairs or replacements, whether
structural or otherwise, resulting from damage caused by any act, omission or
negligence of Tenant, any subtenant or concessionaire, or their respective
employees, agents, invitees, licensees or contractors shall be performed by
the Landlord at the sole cost and expense of the Tenant and shall be deemed
to constitute Additional Rental.
(d) Landlord further agrees to maintain, repair, replace,
secure, and keep in good order and condition, reasonably clean and free from
snow, dirt and rubbish, all public or common areas surrounding the Building
which are the property of the Landlord, except as otherwise herein provided,
and agrees to furnish all necessary utilities to such public or common areas.
The costs and expenses incurred by Landlord for maintenance, repairs,
utilities, janitorial service, refuse and snow removal and security of the
public or common areas shall be determined in the sole discretion of
Landlord, to ensure the proper quality and the preservation of the reputation
of the Building. Tenant shall pay its proportionate share of all costs and
expenses so incurred by Landlord, as Additional Rental, in accordance with
the provisions of Paragraph 20 hereof.
(e) All common areas are for the general use, in common, of all
tenants of the Building, their employees and guests, and at all times, are
subject to the sole and exclusive control of the Landlord. Pursuant thereto
Landlord shall have the right, from time to time, to establish, modify and
enforce rules. and regulations regarding the common areas, to alter, modify
or otherwise change the common areas, to restrict parking and close all or
any portion of any common parking area as will be legally sufficient to
prevent a dedication or the accrual of any rights to any person or to the
public and to do such other acts, in and to, all common areas as in
Landlord's sole judgment, shall be desirable or advisable to improve or
maintain such areas.
(f) Tenant shall have no right of access to the roof of the
Premises or the Building and shall not install, repair, place or replace any
aerial, fan, air conditioner or other device on the roof of the Premises or
the Building without the prior written consent of Landlord. Any aerial, fan,
air conditioner or device installed without such written consent shall be
subject to removal, at Tenant's expense, without notice, at any time.
Landlord shall repair at Tenant's expense, any damage to the Building or roof
resulting from the installation, repair, use, or replacement of any such air
conditioner or other device.
COVENANTS AGAINST LIENS.
11. (a) Tenant shall not do any act, nor make any contract which may
create any lien or other encumbrance upon the Building or Premises, nor
permit nor suffer same to remain, as a result of any labor, work, services or
materials performed, supplied or furnished for or to the Tenant or the
Premises. If, because of any act or omission (or alleged act or omission) of
Tenant, any mechanics or other lien or encumbrance shall be filed against the
Building or Premises, whether or not such lien or encumbrance is valid or
enforceable as such, Tenant, at its sole cost and expense, shall cause same
to be discharged of record or bonded, within ten (10) days after notice to
Tenant of the filing thereof; and Tenant shall indemnify and save harmless
Landlord against and from all damages, costs, liabilities, suits, penalties
claims and demands, including reasonable counsel fees, resulting from the
creation of such lien or encumbrance. In the event Tenant fails to so
comply, Landlord shall have the option of discharging or bonding any such
lien or encumbrance, and Tenant agrees to reimburse Landlord for all costs,
legal and other expenses incurred in connection therewith, together with
interest at an annual rate equal to two (2%) percent above the annual
interest rate extended by Citicorp to its most favored borrowers, promptly
upon demand, which sums shall be deemed to constitute Additional Rental.
All materialmen, contractors, artisans, mechanics, laborers and any other
persons now or hereafter contracted by Tenant for the furnishing of any
labor, services materials, supplies or equipment, at any time from the date
hereof until the end of the Term, are hereby charged with notice that they
must look exclusively to Tenant to obtain payment for same.
(b) Nothing in this lease shall be deemed to be, or construed in
any way as constituting, the consent or request of Landlord, expressed or
implied, by inference or otherwise, to any person, firm or corporation for
the performance of any labor or the furnishing of any materials for any
construction, rebuilding, alteration, addition or repair of or to the
Premises or any part thereof, nor as giving Tenant any right, power or
authority to contract for or permit the rendering of any services or the
furnishing of any materials which might in any way give rise to the right to
file any lien against Landlord's interest in the Building. Landlord shall
have the right to post and keep posted at all reasonable times on the
Premises any notice which Landlord shall deem necessary so to post for the
protection of Landlord and the Building from any such lien.
ALTERATIONS.
12. (a) Tenant shall not make, or cause, or permit the making of any
repairs, alterations, additions, or improvements in or to the Premises
without obtaining Landlord's prior written consent thereto in each instance.
In the event any such work shall cost in excess of Two Thousand Five Hundred
($2,500.00) Dollars, such work shall not be commenced until Tenant shall
submit to the Landlord plans and specifications relating to any such repairs,
alterations, additions or improvements, and all such work shall be performed
in accordance with the provisions of this lease. Landlord shall not
unreasonably withhold its consent to any such alteration, addition or
improvement, but shall have the right to determine if such work would reduce
the value, size or general utility of the Building or any portion thereof, or
whether such work maintains the architectural harmony of the Building.
Landlord shall respond to Tenant's request to make alterations within fifteen
(15) days o Landlord's receipt of the plans and specifications showing the
proposed alterations. Any approval by Landlord as aforesaid may be upon
condition that Tenant furnish the Landlord such evidence of Tenant's
financial ability to assure completion thereof and payment therefor, as
Landlord may reasonably require, including the furnishing of adequate
security. All such repairs, alterations, additions or improvements, when
installed or attached to the Premises, shall belong to and become the
property of the Landlord and shall be surrendered With the Premises and as
part thereof, upon the expiration or sooner termination of this lease,
without compensation to Tenant. However, if Landlord shall so elect and
advise Tenant at the time of its approval of the alterations, Tenant, at its
sole cost and expense, shall remove any alterations, additions and
improvements made by it prior to the expiration or other termination of this
lease and repair all damage caused by such removal and restore the Premises
to the condition they were in prior to the installation of any such
alteration, addition or improvement. Nothing herein contained shall be
construed in any way to restrict Tenant's right to make any alterations,
additions or improvements in Tenant's own movable trade fixtures. The
Provisions of this Paragraph are subject to the Tenant obtaining the consent
of such Landlord's mortgagee or ground lessor, if required. Landlord
represents that the terms of this paragraph are consistent with the terms of
any existing mortgages or ground leases. Landlord shall advise Tenant if the
consent of any mortgagee or ground Lessee is required.
(b) Any work performed by Tenant, irrespective of cost, shall be
subject to the Landlord's inspection, during business hours and upon
reasonable notice to Tenant, and approval after completion to determine
whether it Complies with the requirements of this lease. The approval or
consent of the Landlord shall not relieve Tenant of its obligation that all
such repairs, alterations, improvements and/or additions be constructed and
performed in a good and workmanlike manner and in accordance With all
applicable governmental and fire underwriting if requirements, nor constitute
a waiver of any rights of Landlord if Tenant fails to perform its
obligations. Tenant, at its sole cost and expense and with Landlord's
cooperation, shall procure all necessary governmental approvals, permits or
certificates in connection with all work performed by Tenant in, on or at the
Premises and shall deliver the original of all such approvals, permits or
certificates to the Landlord, to be retained by Landlord.
(c) During the course of any and all repairs, alterations,
additions or improvements which the Tenant shall either be required to
perform or which the Tenant shall elect to perform Tenant, at its sole cost
and expense, shall at all times obtain and maintain or cause to be obtained
and maintained, workmen's compensation insurance and any other insurance
which shall then be required by law, together with public liability insurance
as set forth in Paragraph 7 hereof, to insure against any additional hazards
created in connection with the performance of any of the aforesaid work.
Prior to the commencement of any such work, Tenant shall deliver to Landlord
copies of all policies or certificates of insurance with respect to all
policies required pursuant to this Paragraph 12(c).
CONDEMNATION.
13. (a) In the event that the whole of the Premises shall be taken
for any public or quasi-public use under any statute or by right of eminent
domain, or by private purchase in lieu thereof, then this lease shall
automatically terminate as of the date that title shall be taken. In the
event that a part of the Premises shall be so taken as to render the
remainder thereof unusable for the purpose for which the Premises are leased,
then Landlord and Tenant shall each have the right to terminate this lease on
thirty (30) days' written notice to the other, given within sixty (60) days
following the date of such taking. In the event that this lease shall
terminate or be terminated, the Rental hereunder shall be equitably adjusted
as of the date of termination.
(b) In the event that a part of the Premises shall be so taken
and this lease shall not terminate or be terminated pursuant to the
provisions of subparagraph (a) above, then the Rental shall be equitably
apportioned according to the square footage of the Premises so taken and this
lease, in all other respects, shall remain in full force and effect, and
Landlord, at its own cost and expense, shall restore the remaining portion of
the Premises to the extent necessary to render it reasonably suitable for the
purpose for which the Premises were leased, and to their condition
immediately prior to such taking to the extent reasonably possible. Such
restoration shall be completed by the Landlord within one hundred twenty
(120) days of the date on which title is taken. In the event that the
premises cannot be restored within such one hundred twenty (120) days of the
physical taking by the condemning authority or if the Landlord advises the
Tenant that it will be unable to so restore the Premises substantially to
their condition immediately prior to such taking, then Tenant may terminate
this lease on thirty (30) days notice to the Landlord.
(c) All compensation awarded or paid upon such a total or
partial taking of the Building or the Premises shall belong to and be the
property of Landlord, and without any sharing by Tenant, whether such
compensation result from diminution in value of the leasehold or to the fee
interest in the Premises. Tenant however, shall have the right to seek and
prosecute any claim directly against the condemning authority in such
condemnation proceedings for relocation and/or business interruption
expenses, inventory and/or movable trade fixtures, furniture and other
personal property belonging to Tenant, so long as such claim shall not
diminish or otherwise adversely affect Landlord's award or the award of any
mortgagee. Notwithstanding the foregoing, Landlord and Tenant acknowledge
and agree that if a single compensation award is paid without a specific
allocation or designation for the claims of the Landlord or Tenant, then
Tenant shall be entitled to share in said award as may be agreed by the
parties. Tenant may participate in any such condemnation proceeding to
further its claims and protect its interest.
(d) Tenant agrees to execute and deliver such instruments as may
be deemed necessary or required to expedite any condemnation proceedings or
to effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the
Premises or any portion thereof. Tenant covenants and agrees to vacate the
Premises, remove all of its personal property therefrom and deliver up
peaceable possession thereof to Landlord or to such other party designated by
Landlord. Failure by Tenant to comply with any provision hereof shall
subject Tenant to such costs, expenses, damages and losses as Landlord may
incur by reason of Tenant's breach hereof.
ACCESS AND RIGHT TO EXHIBIT.
14. (a) Landlord and its designees shall have the right to place and
maintain all utility equipment of any kind, in and on the Premises as may be
necessary or desirable to serve the Building or any portion thereof.
Landlord and its designees shall have the right to enter upon the Premises at
all reasonable hours and on reasonable notice to Tenant (and in emergencies
at all times):
(i) to inspect the same;
(ii) to make repairs, additions or alterations to and/or
to complete initial construction of, the Premises and/or to the Building or
to prevent waste or depreciation thereof;
(iii) to post "For Sale" signs on the Premises and to
exhibit the Premises to any prospective purchaser or mortgagee; or
(iv) for any other lawful purpose.
This Paragraph shall not be deemed to be a covenant by Landlord
nor be construed to create an obligation or duty on the part of Landlord to
make such inspection, repairs, additions or alterations except as otherwise
herein provided. Any performance by Landlord hereunder shall not be deemed a
waiver of Tenant's default in failing to perform same, nor shall Landlord be
liable for any inconvenience, disturbance, loss of business, loss of use of
the Premises or any other damage suffered by Tenant, due to said performance
by Landlord, and the obligations of Tenant pursuant to this lease shall not
thereby be affected in any manner whatsoever Landlord agrees to exercise due
care to cause the least reasonably possible interference with Tenant's
business, but Landlord shall not be required to employ labor on weekends or
on an overtime basis to avoid or reduce any such interference.
(b) For a period commencing one hundred eighty (18o) days prior
to the end of the Term, Landlord and its designees shall have reasonable
access to the Premises for the purpose of exhibiting the same to prospective
tenants and to post any "To Let," or "To Lease" signs upon the Premises.
(c) Landlord shall have the right to carry material in and on
the Premises and to perform work in or on the Premises pursuant to the
provisions of this lease, without the same constituting an actual or
constructive eviction to Tenant, in whole or in part, without the same
permitting any rent reduction or abatement and without the Tenant having the
right to assert any claim for damages other than damage to the Tenant's
tangible property or injury or death to persons, which damage, injury or
death shall be caused directly by the negligence of the Landlord, its agents,
employees, contractors, invitees and licensees and provided that any such
claim shall be limited to the extent of the net proceeds received under any
policies of insurance then in effect insuring against such claim. In no
event shall the Landlord be liable for any inconvenience, disturbance, loss
of business, loss of use of the Premises or any consequential damages which
Tenant may suffer. It is understood and agreed that throughout the term of
this Lease the Landlord shall provide and keep in force a comprehensive
liability policy insuring against any claim or liability for personal injury
to or death of any persons, and or damage to property occurring in, on or
about the Premises which limits of liability shall not be less than Three
Million ($3,000,000.00) Dollars with respect to personal injury or death of
any one person, Three Million ($3,000,000.00) Dollars with respect to
personal-injury or death of any number of persons and One Million
($1,000,000.00) Dollars for property damage. The above limits may be
provided through a primary coverage in the amount of One Million
($1,000,000.00) Dollars with an umbrella liability policy supplementing
coverage for the remainder.
ASSIGNMENT AND SUBLETTING.
15. Tenant shall not either voluntarily, or by operation of law,
assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or any
interest therein, and shall not sublet the Premises or any part thereof, or
any right or privilege appurtenant thereto, or allow any other person (the
employees, agents, servants and invitees of Tenant excepted) to occupy or use
their Premises, or any portion thereof, without first obtaining the written
consent of Landlord. When Tenant requests Landlord's consent to such
assignment or subletting, it shall notify Landlord in writing of the name and
address of the proposed assignee or subtenant and the nature and character of
the business of the proposed assignee or subtenant and shall provide
financial statements for the proposed assignee or subtenant. Landlord's
consent to any proposed assignment or subletting shall not be unreasonably
withheld or delayed. If Landlord approves an assignment or subletting as
herein provided, Tenant shall pay to Landlord, as Additional Rent, the
difference, if any between the Rent plus Additional Rent to be paid by an
approved assignee or subtenant during any renewal term provided for herein.
A consent to one assignment, subletting, occupation or use shall not be
deemed to be a consent to any other or subsequent assignment, subletting,
occupation or use and consent to any assignment or subletting shall in no way
relieve Tenant of any liability under this Lease. Any assignment or
subletting without Landlord's consent shall be void, and shall, at the option
of the Landlord, constitute a default under this Lease. In the event that
Landlord shall consent to a sublease or assignment hereunder, Tenant shall
pay any brokerage fees related to the subletting or assignment of the
Premises.
RULES AND REGULATIONS, COMPLIANCE WITH LAWS.
16. (a) Tenant and Landlord (to the extent of its obligations)
agrees, at all times during the Term hereof, and at its sole cost and
expense:
(i) not to take or permit any action which Would violate
Landlord's union contracts, if any, affecting the Building or the Premises,
or which would create any work stoppage, picketing, labor disruption or
dispute, or which would damage, delay or interfere with any work performed or
to be performed by Landlord or by any other persons in or about the Building,
or which hinder the activities or operations of the Landlord in bringing
about the cessation of any work stoppage, picketing or other labor disruption
or dispute affecting the Building or any work being performed or to be
performed in or about the Building;
(ii) to pay promptly and when due, all taxes, licenses,
fees, assessments or other charges levied or imposed upon the business of
Tenant or upon any fixtures, furnishings or equipment in, on or at the
Premises;
(iii) not to commit any waste or nuisance, nor use the
plumbing facilities for any purpose injurious to same or dispose of any
garbage or any other foreign substance therein, nor place a load on any floor
in the Premises exceeding the floor load per square foot which such floor was
designed to carry, nor install, operate and/or maintain in the Premises any
heavy equipment except in a location approved by Landlord, nor install,
operate and/or maintain in the Premises any electrical equipment which will
overload the electrical system therein, or any part thereof, beyond its
capacity for proper and safe operation as determined by Landlord or which
does not have Underwriter's approval.
(iv) to keep the Premises in a neat, clean, orderly and
sanitary condition, free of all insects, rodents, vermin and pests of every
type and kind;
(v) not to use the Premises for any purpose of business
which is illegal, noxious, offensive because of the emission of noise, smoke,
dust or odors or which could damage the Building or be a nuisance or menace
to or interfere with, any other tenants or the public;
(vi) to comply with all requirements of all suppliers of
public utility services to the Building and not to suffer or permit any act
or omission the consequence of which could be to cause the interruption,
curtailment, limitation or cessation of any utility service to the Building;
(vii) to retain trash, rubbish and garbage created by the
Tenant, its representatives, guests, licensees, or invitees within the
demised Premises until removed from the site at Tenant's expense.
(b) Tenant further agrees, at its sole cost and expense, to
promptly comply, or cause compliance, with all laws, ordinances, orders,
rules, regulations and requirements of all federal, state, county and
municipal governments, and appropriate departments, commissions, boards and
offices thereof, foreseen or unforseen, ordinary as well as extraordinary,
and whether or not the same shall presently be within the contemplation of
the parties hereto or shall involve any change of governmental policy (except
that which may be required by the Americans with Disabilities Act and which
requirements are not occasioned by a change in the Permitted Use or change of
tenancy) or require extraordinary or structural repairs (other than those
which Landlord is required to make under Paragraph 10 (c) and (d), unless the
same are due to the use or occupancy of the Tenant), alterations, equipment
or additions or any work of any kind or irrespective of the costs thereof,
which may be applicable to the Premises, or the purposes to which the
Premises are put, or manner of use of the Premises at the commencement of or
during the Term. The provisions of Paragraph 12 shall apply to all work to
be performed by Tenant pursuant to this Paragraph. Notwithstanding the
foregoing, Landlord shall cure any violations arising from Landlord's
original failure to comply with laws, ordinances, orders, rules, regulations
and requirements presently applicable to the construction of the Building.
(c) No abatement, diminution or reduction of the Rental or other
charges required to be paid by Tenant pursuant to the terms of this lease,
shall be claimed by or allowed to, the Tenant for any inconvenience,
interruption, cessation or loss of business or otherwise caused directly or
indirectly by any present or future laws, rules, requirements, orders,
directions, ordinances or regulations of the federal, state, county or
municipal government, or of any other governmental or lawful authority
whatsoever, or as a result of any diminution of the amount of space used by
Tenant caused by legally required changes in the construction, equipment,
operation or use of the Premises, unless the diminution is caused by a change
unconnected with Tenants use of the Premises. Tenant shall have the right to
an abatement in the rental and other charges required to be paid by Tenant
pursuant to the terms of this Lease in proportion to any diminution of space
not caused by a change in Tenant's use of the Premises. Tenant shall have
the right to terminate this Lease if the Permitted Use is no longer permitted
or if its use becomes substantially impaired.
(d) Tenant, following notice to Landlord, shall have the right
to contest -by appropriate legal proceedings, at its sole cost and expense,
the validity of any law, ordinance, order, rule, regulation or requirement of
the nature herein referred to, provided, however, that:
(i) any noncompliance shall not constitute a crime on the
part of the Landlord or otherwise adversely affect, jeopardize or threaten
the interest of Landlord;
(ii) Tenant shall diligently prosecute any such contest to
a final determination by a court, department or governmental authority having
final jurisdiction and to keep Landlord advised in writing as to all changes
in status and determinations in connection with any such proceedings; and
(iii) Tenant shall indemnify and save harmless Landlord
against any and all losses, costs, expenses, claims, penalties, actions,
demands, liabilities, judgments or other damages which Landlord may sustain
by reason of such contest or as a result of Tenant's failure or delay in
compliance. It is agreed however that Landlord has the right to demand that
the Tenant furnish adequate security to ensure its ability to perform its
indemnity obligations hereunder, which security if so requested, shall be
furnished to Landlord prior to the Tenant commencing or continuing with such
contest, as the case may be. In no event, however, shall Tenant defer
compliance if such deferment would constitute a violation of any of the
provisions of any mortgage or ground lease to which this lease is or shall be
subordinate. Landlord agrees to cooperate reasonably with Tenant, and to
execute any documents or pleadings reasonably required for the purpose of any
such contest, provided that the same shall be without cost or expense to
Landlord. Landlord shall have the right, but not the obligation to contest
by appropriate legal proceedings, at Landlord's expense, any such law,
ordinance, rule, regulation or requirement.
UTILITIES.
17. Tenant agrees to pay as and when the same become due and payable,
all water rents, rates and charges, all sewer rents and all similar charges
assessed or charged to the Leased Premises during the Term, if any, all
charges for electricity, gas, heat, steam, hot water, and other utilities
supplied to the Leased Premises during the Term, together with cost of
repair, maintenance, replacement and reading of all meters measuring Tenant's
use or consumption thereof, whether supplied by Landlord or by a public or
private utility company. In the event that Landlord shall supply any or all
of the aforesaid services, the charges therefor shall be deemed Additional
Rental and be collectible as such on the first day of the following month.
In the event that any or all of the aforesaid services shall be supplied by
others and are not paid as the same become due and payable, Landlord shall
have the right, but not the obligation to make such payments, in which event,
a sum equal to any such payments shall be paid on the first day of the
following month, as Additional Rental, and shall be collectible as such,
together with interest at an annual rate equal to two (2%) percent above the
annual interest rate extended by Citicorp to its most favored borrowers as of
the date of payment, and which interest shall commence to run from the date
of payment. In no event shall Landlord be responsible or liable for the
failure to supply Tenant or for the failure of the Tenant to receive, any
utility service, nor shall Tenant be entitled to any cessation, abatement,
reduction or other offset of Rental in the event of any failure to receive
any utility service.
SIGNS.
18. Tenant may not provide, install or maintain any exterior signs on
the roof or in the windows; nor shall the Tenant provide, install or maintain
any exterior signs on the facade or walls of the Building or on any grounds
adjacent thereto, unless:
(i) such installation be made in such manner as will not affect
any guarantee which shall then be in force and effect;
(ii) all such signs shall have been approved by Landlord in
writing before installation; and
(iii) all such signs must at all times conform to all applicable
rules, regulations, codes and ordinances of any governmental agencies having
jurisdiction thereover, and must comply with Landlord's rules and regulations
governing such signs. Landlord shall cooperate with Tenant in Tenant's
applications to any governmental agencies. All such signs shall be provided,
installed, maintained and removed at the termination of the lease, at
Tenant's sole cost and expense. Tenant further agrees that it will not place
any advertisements or other type of structure or obstruction on the roof
facade or walls of the Building and that it shall not operate any loudspeaker
or other device which can be heard outside of the Premises. In the event
that Landlord or its agents deem it necessary to remove any such signs in
order to paint or make any repairs, alterations or improvements in or upon
the Building or any part thereof, they may be so removed, but shall be
replaced at Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Nothing contained in this Paragraph
shall create any obligation on the part of the Landlord to make any repairs,
alterations or improvements.
TAXES.
19. (a) Tenant covenants and agrees that it shall pay to Landlord,
as Additional Rental, its proportionate share of all real estate taxes,
assessments, added assessments and other governmental charges or substitutes
therefor, foreseen or unforeseen, levied, imposed, assessed or fixed on or
against the Building and land constituting the entire tax lot on which the
Building is constructed or arising from the use, occupancy or possession
thereof, during the Term hereof (hereinafter collectively referred to as the
"Taxes"). The proportionate share of Taxes to be paid by Tenant is set forth
in Paragraph 20 of this lease.
(b) Landlord shall have the right to contest in good faith any
such tax, assessment or added assessment and all costs and expenses,
including, but not limited to, all legal fees, shall be deemed to constitute
additional charges for which Tenant shall pay its proportionate share, as set
forth in Paragraph 20 hereof. Tenant shall pay its share of all such costs
and expenses, as Additional Rental, on the first day of the month following
demand therefor. Provided that the Tenant shall have paid its proportionate
share of all costs and expenses in accordance with the provisions of this
Paragraph 19(b), Tenant shall be entitled to the same proportionate share of
the net proceeds of any refund received by the Landlord as a result of such
contest. If Landlord receives any refund after the expiration of the Term,
Tenant shall be entitled to its proportionate share if it is not in default
of its obligations. Landlord agrees to notify Tenant of the filing of any
tax appeal or contest, not later than 15 days prior to the filing deadline
for which an such appeal is to be taken.
(c) In the event that Landlord shall fail to so notify Tenant,
then and in such event, Tenant shall have the right to contest in good faith
any such tax, assessment or added assessment, at its own cost and expense,
provided, however, that notwithstanding such contest, Tenant at all times:
shall when due, pay its proportionate share thereof; shall comply with all
applicable laws, rules and regulations regarding the payment of taxes; shall
not take any action which would adversely affect, threaten or jeopardize the
interest of the Landlord in the Building or land; shall promptly pay,
indemnify and save Landlord harmless from, all penalties and interest which
may be charged or imposed as a result of or during the pendency of, any such
contest. In the event of any such contest by the Tenant, Landlord agrees to
reasonably cooperate and to execute any necessary papers, provided however,
that the same shall be without any cost or expense to the Landlord.
However,, nothing herein shall require the Landlord to withhold the payment
of any tax, interest or penalty otherwise due and owing to, or charged by,
the taxing authority.
(d) It is further agreed that for the first and last Lease
Years of the Term hereof, the portion of all Taxes, other than such as result
from added assessments, to be paid by the Tenant shall be pro rated,
depending on the proportion which each such Lease Year shall bear to the tax
year in which it falls. The portion of Taxes resulting from added
assessments to be paid by Tenant during the first and last Lease Years of the
Term shall be pro rated depending on the proportion which such Lease Year
shall bear to the portion of the tax year for which the added assessment is
charged.
(e) If at any time during the Term hereof, pursuant to the laws
of the Municipality, the County of Bergen, the State of New Jersey or the
United States of America, a tax or excise on rents or other tax, however
described, is levied or assessed by any Municipality, County, State or
Country or any political subdivision thereof, against the Landlord or the
Rental reserved hereunder, or any part thereof, as a substitute, in whole or
in part, for any revenues derived from any tax assessed or imposed by any
such political entity on land and buildings, the Tenant covenants to pay to
Landlord, such sum as shall be necessary to pay and discharge such tax or
excise on rents or other tax, which sum shall be paid to Landlord in the
manner herein set forth for Taxes, provided, however, that the parties shall
have the right to contest said levy in the same manner as provided herein for
Taxes.
(f) Except as otherwise provided herein, Tenant shall not be
obligated or required hereunder to pay any franchise, excise, corporate,
estate, inheritance, succession, capital levy or transfer tax of Landlord, or
any income, profit or revenue tax upon the income or receipts of Landlord.
(g) Tenant shall be responsible for and shall pay prior to the
time when such payment shall be deemed delinquent, all taxes assessed during
the Term against any leasehold interest, or any improvements, alterations,
additions, fixtures or personal property of any nature placed in, on or about
the Premises by the Tenant, whether such tax shall have been levied or
assessed against the Landlord or the Tenant.
ADDITIONAL CIIARGES.
20. (a) In addition to all other rental charges provided for in this
lease, the Tenant agrees to pay as "Additional Rental," its proportionate
share of:
(i) all insurance premium costs incurred by Landlord, if
any, in connection with its obtaining and maintaining of fire, extended
coverage and all risk insurance; rental insurance sufficient to include both
Base Rent and Additional Rental; sprinkler damage insurance; and public
liability insurance, all of which insurance coverages, if maintained, shall
be in such amounts and with such companies as Landlord may deem reasonable or
proper;
(ii) all costs and expenses incurred by Landlord in
connection with the Landlord's maintenance and non-structural repair of the
entire premises of which the Leased Premises are a part, in accordance with
the provisions of this lease, including, but not limited to, the building
grounds, parking area, utilities, janitorial service, if the same shall be
furnished by the Landlord, as well as all other costs, fees and expenses
incurred by the Landlord in performing its obligations hereunder; and
management fees for the operation of the Building, at an annual sum equal to
four (4%) percent of the total annual Base Rent for the building.
(b) Landlord represents that it will make timely payments of
all expenses which constitute the additional rent charges to avoid the
accrual of late charges, interest or penalties. It is acknowledged that the
total annual Additional Rental to be paid by the Tenant, pursuant to the
provisions of Paragraph 19 and 20 of this lease, cannot be determined except
on an annual basis. It is therefore agreed that, in addition to the payments
of Additional Rental as may be provided for elsewhere in this lease, the
Tenant shall pay the estimated monthly sum set forth in (l0) of the Preamble
on account of its Additional Rental obligations pursuant to the provisions of
Paragraphs 19 and 20 of this lease. Said estimated payments shall be paid in
advance, on the first day of each month, and shall be based on an annual
period from January 1 through December 31 during each year of the Term
hereof, and shall be adjusted annually within ninety (90) days following the
conclusion of each such annual period by written notice delivered by Landlord
to Tenant. Said notice shall set forth the total amount of the costs and
expenses incurred by the Landlord for such annual period, the sum which
represents the proportion to be paid by the Tenant, the sum actually paid by
Tenant for such period, and the amount of any required adjustment. Said
notice shall also set forth the estimated monthly payment to be paid by
Tenant for the following annual period. In addition, Tenant shall have the
right provided it continues to pay the additional rent, to contest the
amounts due in accordance with this Paragraph within thirty (30) days of
receipt of such notice, and in the event of such contest shall be provided
reasonable access to the books and records or other evidence of costs of
Landlord as may be necessary to enable Tenant to verify the appropriateness
of the charges.
(c) For the first and last Lease Years of the Term hereof, the
portion of Additional Rental to be paid by the Tenant shall be pro rated
depending on the proportion which each such Lease Year shall bear to the
aforesaid annual period in which it falls.
NON-LIABILITY OF LANDLORD.
21. (a) Unless caused by Landlord, its agents, servants, or employees
wilful act or gross neglect, Landlord shall not be liable for any damage or
injury which may be sustained by Tenant or by any other person, as a
consequence of the failure, breakage, leakage or obstruction of the street or
sub-surface; or of the water, plumbing, steam, sewer, waste or soil pipes; or
of the roof, walls, drains, leaders, gutters, valleys, downspouts or the
like; or of the electrical, gas,, power" conveyor, refrigeration, sprinkler,
air conditioning or heating systems; or of the elevators or hoisting
equipment; or of any other structural failure; or by reason of the elements;
or resulting from theft or pilferage; or resulting from fire, explosion or
other casualty; or resulting from the carelessness, negligence or improper
conduct on the part of the Tenant, any other tenant, or of Landlord, their
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors; or attributable to any interference with, interruption of or
failure, beyond the control of Landlord, of any services to be furnished or
supplied by Landlord. All property kept, maintained or stored in, on or at
the Premises shall be so kept, maintained or stored at the sole risk of the
Tenant.
(b) Unless caused by Landlord, it's agents, servants or
employees wilful act or gross neglect, Landlord shall not be liable to Tenant
or to any person or entity claiming through the Tenant, nor shall Tenant be
excused from the performance of any obligation hereunder, due to any breach
or violation by Landlord, by any other tenant or by any other person or
entity, of:
(i) any rule or regulation established by Landlord; or
(ii) any provision, covenant, term or condition of any
other agreement affecting the Building and lands or any portion thereof.
Further, Landlord shall not be liable, nor shall Tenant be excused from the
performance of any obligation hereunder, due to the Landlord enforcing any
right or remedy against the Tenant and/or against other tenants of the
Building, but not against all tenants of the Building.
INDEMNITY.
22. Not used in this Lease.
RIGHT TO CURE DEFAULT.
23. In the event Tenant shall fail to comply fully with any of its
obligations hereunder, then Landlord shall have the right, at its option to
cure such breach, at Tenant's expense, upon ten (10) days' prior written
notice to Tenant, except in cases of emergency (in which event no notice need
be given), and if Tenant shall fail to cure said default within such period,
provided however, that if said default cannot be cured within said period,
then Tenant shall have commenced in good faith to cure such default within
said ten (10) day period and shall continue the curing thereof diligently
thereafter. Tenant agrees to reimburse Landlord promptly (as Additional
Rental) for all costs and expenses incurred as a result thereof or in
connection therewith, together with interest at an annual rate equal to two
(2%) percent above the annual interest rate extended by Citicorp to its most
favored borrowers as of the date on which the Landlord made such payment and
which interest shall commence to run from the date on which Landlord made any
such payment. Any action so taken by Landlord pursuant to this lease shall
not serve to waive or release Tenant from its performance of any obligation
hereunder.
REMEDIES UPON DEFAULT.
24. (a) In the event Tenant shall:
(i) default in the payment of the Rental reserved herein
or in making any other payment herein provided for ten (10) days; or
(ii) default in the observance of any of the other terms,
covenants and conditions of this lease, which default continues for twenty
(20) days following the delivery of written notice thereof, as hereinafter
required; or
(iii) abandon, desert or vacate the Premises; or assign,
sublet or permit the Premises to be occupied by someone other than Tenant,
except as herein provided; or
(v) make any assignment for the benefit of creditors, file
a voluntary petition in bankruptcy, be by any court adjudicated a bankrupt,
take the benefit of any insolvency act or be dissolved or liquidated,
voluntarily or involuntarily, or if a receiver or trustee of Tenant and/or
its property shall be appointed in any proceedings or if any Guarantor
hereunder shall cause or suffer any of such events to occur with respect to
itself; or
(vi) fail to move into or take possession of the Premises
upon the Commencement Date; or
(vii) record or attempt to record this lease except
provided herein; or
(viii) suffer or permit any execution, attachment or other
similar process to issue against Tenant or a substantial portion of its
property or assets, or suffer or permit the Premises to be taken and/or
occupied or attempted to be taken and/or occupied by one other than the
Tenant; or
(ix) remove or attempt to remove, or in the judgment of
Landlord, manifest an intention to remove its goods or property from the
Premises, other than in the ordinary course of its business;
then, upon the happening of any of the events set forth in this
Paragraph, Landlord shall have the right to terminate this lease and the Term
hereof upon not less than ten (10) days' written notice to Tenant, with the
same force and effect as though the date so specified were the date
hereinabove first set forth as the date of the expiration of the Term (but
Tenant shall remain liable to Landlord as hereinafter provided) , and at the
expiration of the period provided in said notice, the Term hereof and all of
the Tenant's right, title and interest hereunder shall cease and terminate,
and Landlord without further notice, subject to due process of law, may
reenter the Premises, remove the Tenant and its property therefrom, and have
possession and enjoyment of the same, and/or may recover possession thereof
as prescribed by law relating to summary proceedings.
(b) In the event of any such default, reentry, expiration
and/or dispossess:
(i) the Rental shall become due and be paid up to the
time of such reentry, dispossess and/or expiration, together with such costs
and expenses as Landlord may incur in reacquiring possession of the Premises,
for legal expenses, attorneys' and brokerage fees, putting or restoring the
Premises in or to good order and altering or preparing the same for re-
rental;
(ii) Landlord shall use all reasonable efforts to relet
the Premises or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may, at Landlord's option be less than
or exceed the period which would otherwise have constituted the balance of
the Term, for such rental and on such terms as Landlord shall deem
reasonable;
(iii) Tenant, or the legal representatives of Tenant, shall
pay Landlord any deficiency between the Rental hereby covenanted to be
paid and the net amount, if any, of the rents collected on account of any
reletting of the Premises for each month of the period which would otherwise
have constituted the balance of the Term. In computing such sum, there shall
be added to the Rental hereby covenanted to be paid, such expenses of
Landlord as are referred to in subparagraph (b) (i) of this Paragraph. Any
such deficiency shall be paid in monthly installments by Tenant on the first
day of each month, in advance, and any suit brought to collect the amount of
the deficiency for any month shall not prejudice in any way the rights of
Landlord to collect the deficiency for any subsequent month by a similar
proceeding or by joining, consolidating or otherwise including in one action,
any and all claims for subsequent periods;
(iv) Tenant agrees to pay all legal expenses, attorneys'
and brokerage fees and all other costs and expenses incurred by Landlord in
exercising its rights hereunder or in enforcing any of the obligations of
Tenant under this lease.
(c) Landlord may make such reasonable alterations, repairs,
replacements and/or decorations in or on the Premises as it, in its sole
judgment, considers advisable or necessary for the purpose of reletting the
Premises; and the making of such alterations, repairs, replacements and/or
decorations shall not operate or be construed to relieve Tenant from its
liability hereunder. Landlord shall in no event be liable in any way
whatever for any failure to relet the Premises, or in the event that the
Premises are relet, for the reasonableness of the rental or for the failure
to collect any rent under such reletting.
(d) In the event of a breach or threatened breach or violation
by Tenant of any of the covenants, conditions, terms or provisions of this
lease, Landlord shall have the right to obtain an injunction or to invoke any
remedy allowed at law or in equity, without limitation and in addition to,
all rights and remedies herein provided for.
(e) Unless received by Landlord within ten (10) days of the
date of default provided for herein, no receipt of Rental by Landlord from
Tenant after the due date thereof or the termination in any manner of this
lease, or the performance by Tenant of any obligation hereunder after the
period stated in any notice given pursuant to this lease, shall reinstate,
continue or extend the lease or the Term thereof, affect any such notice or
cure any default theretofore arising hereunder. No receipt of Rental after
the commencement of suit, or after final judgment for possession of the
Premises, shall reinstate, cure, continue or extend the lease or the Term
thereof or affect said suit or said judgment.
(f) The rights and remedies of Landlord specified in this
lease, as well as the rights and remedies to which the Landlord is entitled
by law or in equity, are cumulative and are not intended to be exclusive of
or preclude the exercise of any other rights or remedies which may be
available to the Landlord in the event of a breach by Tenant of any provision
of this lease.
(g) In no event shall the Tenant be entitled to receive all or
any portion of any net surplus monies obtained or received by Landlord either
in connection with any reletting or as a result of the exercise of any other
right or remedy to which Landlord may be entitled.
WAIVER OF REDEMPTION.
25. Not used in this Lease.
MORTGAGE PRIORITY.
26. This lease shall be and hereby is made subject and subordinate at
all times to the lien of all ground and underlying leases and to all
mortgages and all advances made thereon which may now or hereafter affect the
Building, and to all increases, renewals, modifications, consolidations,
participations, replacements and extension thereof, irrespective of the time
of recording such lien, without the necessity of any further instrument of
subordination provided a non-disturbance agreement substantially similar to
the form attached hereto as Exhibit D is executed. Landlord represents that
it is not in default under any existing mortgages. In the event, however,
that Landlord or any lessor or mortgagee desires confirmation of such
subordination, Tenant shall promptly execute and deliver any certificate or
instrument that may be requested. Tenant shall not have the right to place
any lien or encumbrance of any kind against the Premises, or any of its
fixtures, furniture, equipment or improvements, other than a Chattel mortgage
on its movable trade fixtures.
SURRENDER OF PREMISES.
27. On the expiration date or sooner termination of the Term, Tenant
shall quit and surrender the Premises to Landlord, in broom-clean good
condition and repair, reasonable wear and tear excepted, as well as all keys
to the Premises, together with all alterations, additions and improvements
which may have been made in, on or to the Premises, except for movable
furniture and equipment, or unattached movable trade fixtures put in at the
sole expense of Tenant; provided, however, that Tenant shall ascertain from
Landlord, at least thirty (30) days prior to the end of the Term, whether
Landlord desires to have the Premises or any part thereof restored to the
condition in which it was originally delivered to Tenant. In the event
Landlord shall so desire, then Tenant, prior to the end of the Term, at its
sole cost and expense, shall so restore the Premises, remove therefrom all of
its property together with such alterations, additions and improvements which
by Landlord's consent to their addition were required to be removed, and fix
and repair any and all damage or defacement to the Building and/or lands
caused by the installation and/or removal of alterations, additions,
improvements, furniture, equipment, trade fixtures or any other property.
Any or all of such property, alterations, additions or improvements not so
removed, at Landlord's option, shall become the exclusive property of
Landlord or be disposed of by Landlord at Tenant's cost and expense, without
further notice or demand. If the Premises be not surrendered as and when
aforesaid, Tenant shall indemnify Landlord against any damages, loss or
liability resulting therefrom, including, without limitation, any claims made
by any succeeding occupant founded on such delay. Tenant's obligation under
this Paragraph shall survive the expiration or sooner termination of the
Term.
UNAVOIDABLE DELAYS.
28. (a) Other than as to the payment of any financial obligation due
hereunder, if, as a result of strikes, lockouts, labor disputes, inability to
obtain labor, materials or reasonable substitutes therefor, acts of God,
governmental restrictions, regulations or controls, enemy or hostile
governmental action, civil commotion, insurrection, revolution, sabotage,
fire or other casualty, whether prior to or during the Term, either party
shall fail punctually to perform any lease obligation, then and in any of
such events, such obligation shall be punctually performed as soon as
practicable after such condition shall abate. In the event that either
party, as a result of any such condition, shall be unable to exercise any
right or option within any time limit provided in this lease, such time limit
shall be deemed extended for a period equal to the duration of such
condition. The failure of either party to perform any lease obligation for
the reasons set herein shall not affect, curtai1, impair or excuse this lease
or the obligations of the other party hereunder.
(b) Unless caused by the wilful act or gross neglect of the
Landlord, its agents, servants or employees, no diminution or abatement of
rent, or other compensation, shall be claimed or allowed for loss or damage
arising from the making of repairs or improvements to the Building , or
arising from the construction of or repairs or improvements to, other
buildings, structures, lands or appliances, whether or not the same shall be
owned by Landlord. In respect to the various "services", if any, to be
furnished by the Landlord to the Tenant, it is agreed that there shall be no
diminution or abatement of the rent, or any other compensation, for
interruption or curtailment of such "service", when such interruption or
curtailment shall be due to accident, alterations or repairs necessary to be
made or to inability or difficulty in securing supplies or labor for the
maintenance of such "service" or to some other cause, not gross negligence or
wilful misconduct on the part of the Landlord, its agents, employees,
licensees and invitees. No such interruption or curtailment of any such
"service" nor any non-performance by Landlord pursuant to subparagraph (a) of
this Paragraph, shall be deemed a constructive eviction, nor shall there be
any abatement or diminution of rent because of making of repairs,
improvements or decorations to the Premises after the date above fixed for
the commencement of the Perm, it being understood that the Rental shall in
any event, commence to run at such date so above fixed.
LANDLORD CONSENT.
29. With respect to any provision hereof which provides for the
consent or approval of Landlord, said consent or approval 3hall be in writing
and shall not be unreasonably withheld or delayed. Tenant's sole remedies
shall be an action or proceeding to enforce any such provision, or for any
injunction or declaratory judgment. All expenses reasonably incurred by
Landlord in reviewing and acting upon any request for consent hereunder,
including but not limited to, attorneys' and architects' fees, shall be
reimbursed by Tenant to Landlord, shall be deemed to constitute Additional
Rental and shall be paid over to Landlord on the first day of the month
following demand therefor.
SECURITY.
30. (a) Tenant simultaneously herewith has deposited
with Landlord the sum set forth in (8) of the Preamble to be held
by Landlord as security for the faithful performance by Tenant of
all of the terms, covenants, provisions and conditions of this Lease to be
performed by Tenant. On the twenty-fifth month of the Perm, if the Tenant is
not in default of any of its obligations hereunder, Landlord shall refund one
third of the Security paid hereunder to the Tenant. In the event Tenant
defaults with respect to any of the terms, covenants, provisions or
conditions of this lease, including, but not limited to, the payment of
Rental, then without notice to Tenant, and in addition to any other remedies
to which Landlord may be entitled by virtue of the provisions of this lease,
or pursuant to law or equity, Landlord shall have the right to use, apply or
retain the whole or any part of the security so Deposited to the extent
required for the payment of any Rental or any other sum as to which Tenant is
in default or any sum which Landlord may expend or may be required to expend
by reason of Tenant's default, including, but not limited to damages or
deficiencies resulting from the reletting of the Premises, whether such
damages or deficiencies accrued before or after summary proceedings or other
reentry by Landlord.
(b) In the event the entire security or any portion thereof is
appropriated or applied by Landlord for the payment of Rental or any other
sums due and payable to Landlord by Tenant hereunder, or for the payment or
reimbursement of any cost or expense incurred by Landlord as a result of any
default or failure of performance by Tenant hereunder, then Tenant, upon the
written demand of Landlord, shall forthwith remit to Landlord a sufficient
amount in cash to restore said security to the original amount in cash to
restore said security to the original sum deposited, which sum is hereby
deemed to be Additional Rental, and Tenant's failure to do so within five (5)
days after the forwarding of such demand shall constitute a breach of this
lease.
(c) In the event that Tenant shall fully and faithfully comply
with all the terms, provisions, covenants and conditions of this lease, then
the security shall be returned to the Tenant on the expiration of the Term
hereof.
(d) Tenant shall not be entitled to any interest on the
aforesaid deposit of security. Tenant further covenants that it will not
assign or encumber or attempt to assign or encumber the security deposited
herein except as permitted under the provisions of Paragraph 15 hereof, and
that neither Landlord nor its successors or assigns shall be bound by any
such assignment, encumbrance, attempted assignment or attempted encumbrance.
(e) In the event of a sale or ground leasing of the Premises,
Landlord shall have the right to transfer the security to the purchaser or
lessee, shall furnish Tenant with written notice thereof and thereupon shall
be released by Tenant from all liability for the return of such security, and
Tenant agrees to look to the transferee solely for the application of said
security. It is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new transferee.
(f) It is expressly understood and agreed that the exercise of
any remedy by Landlord for any default on the part of Tenant shall not be
deemed such a termination of this lease as to entitle Tenant to the recovery
of the said security, and said security shall be retained and remain in the
possession of Landlord as hereinbefore stated.
CERTIFICATION.
31. Each party agrees, without charge and at any time, within ten
(10) days after written request of the other, to certify by a written
instrument duly executed, acknowledged and delivered to the requesting party
or any other person, firm or corporation specified in such request:
(a) as to whether this lease has been modified or amended, and
if so the substance and manner of such modification or amendment;
(b) as to the validity and force and effect of this lease;
(c) as to the existence of any default thereunder;
(d) as to the existence of any offsets, counter-
claims or defenses thereto on the part of Tenant;
(e) as to the commencement and expiration dates of the Term;
(f) as to the dates to which Rental payments have been made;
(g) as to any other matters as may reasonably be so requested.
Any such certificate may be relied upon by the requesting party and any
other person, firm or corporation to whom the same may be exhibited or
delivered, and the Tenant or Landlord shall be bound by the contents of such
certificate.
Tenant further agrees to furnish to Landlord at any time, but not more
frequently than once per year, within ten (10) days after written request of
Landlord, a copy of its financial statement for its last full fiscal year,
certified by a corporate officer and prepared by independent certified Public
Accountants, including, but not limited to, a profit and loss statement.
WAIVER OF TRIAL BY JURY.
32. Not used in this Lease.
QUIET ENJOYMENT.
33. Landlord represents that it is the sole owner of the Premises and
Building and that it is authorized and empowered to enter into this Lease and
to bind the Partnership. Landlord covenants and agrees with Tenant that upon
Tenant's paying the Rental and observing and performing all of the terms,
provisions, covenants and conditions on its part to be observed and
performed, Tenant may peaceably and quietly enjoy the P remises during the
Term hereof, subject however, to all of the terms, conditions, covenants and
provisions of this lease and to any mortgage o r ground lease to which this
lease is subject. In the event of any breach by Landlord of this covenant,
provided the same would in law or equity entitle Tenant to cancel, Tenant
may, by not less than thirty (30) days, written notice given to Landlord,
cancel this lease, unless within such thirty (30) day period, Landlord shall
have commenced appropriate action to cure such breach and shall thereafter
proceed diligently to cure such breach. Upon such cancellation, all rights
of either party against the other shall cease and the term shall expire with
the same force and effect as if the date of such cancellation were the date
originally fixed herein for the expiration of the Term.
LANDLORD.
34. (a) The term "Landlord" as used in this lease means only the
owner, the holder of a lease or the mortgage in possession for the time being
of the Premises, so that in the event of any sale of the land and Building of
an assignment of this lease or any underlying lease, Landlord herein shall be
and hereby is entirely freed and relieved of all obligations Of Landlord
hereunder without the necessity of further agreement between the parties and
such purchaser, assignee or lessee that the purchaser, assignee or lessee has
assumed and agreed to observe and perform all obligations of Landlord
hereunder. Landlord shall continue to remain responsible for all Of its
obligations under this Lease and all events occurring during its ownership as
provided herein, notwithstanding any subsequent transfer unless Landlord's
transferee specifically assumes, in writing, such responsibilities and Tenant
is notified of such assumption.
(b) Notwithstanding anything herein contained to the contrary,
it is specifically understood and agreed that there shall be no personal
liability on the part of the Landlord, its successors or assigns, with
respect to any Of the terms, provisions, covenants and conditions of this
lease, and that Tenant shall look solely to the estate, property and equity
of Landlord or such successor in interest in the Building and subject to the
prior rights of any mortgagee or ground lessee, for the satisfaction of each
and every remedy of Tenant in the event of any breach by Landlord or by such
successor in interest of any of the terms, provisions, covenants and
conditions of this lease to be performed by Landlord, which exculpation of
personal liability shall be absolute and without exception.
NOTICES.
35. All notices, demands or requests required under the terms of this
lease shall be given in writing by either party to the other and shall be
complete by personal delivery or by mailing such notices by certified or
registered mail, return receipt requested, to the Landlord at the address set
forth hereinabove, and to the Tenant at the Premises, or to such other
address as either party may designate in writing, which notice of change of
address shall be given in the same manner. Copies of any Notice of Default
shall be forwarded to Stephen R. Roth, Tenant's Attorneys at 62 Summit
Avenue, Hackensack, New Jersey 07601.
COVENANTS, EFFECT OF WAIVER.
36. (a) Every term, condition, agreement or provision set forth in
this lease shall be deemed to also constitute a covenant. (b) The waiver of
any term, provisions, covenant or condition by Landlord shall not be
construed as a waiver of a subsequent breach of the same or any other term,
provision, covenant or condition, and the consent or approval by Landlord to
or of any act by Tenant requiring Landlord's consent or approval shall not be
construed to waiver or render unnecessary Landlord's consent or approval to
or of any subsequent similar act by Tenant. The failure of Landlord to
insist in any one or more instances upon the strict performance of any term,
condition, provision, covenant or agreement or to exercise any option or any
right hereunder, shall not be construed as a waiver or relinquishment of the
same for the future. The receipt by Landlord of any Rental payment or the
acceptance by Landlord of the performance of anything required to be
performed by this lease, with knowledge of a breach of any term, condition,
provision or covenant of this lease shall not be deemed a waiver o f such
breach. No term, condition, provision or covenant of this lease shall be
deemed to have been waived unless such waiver is in writing and signed by
Landlord. No payment by Tenant or receipt and/or acceptance by Landlord of a
lesser sum than the agreed upon Rental shall operate or be deemed or
construed to be other than on account of the earliest Rental then unpaid, nor
shall any endorsement or statement on any check or any letter or writing
accompanying any check nor the acceptance of any check or payment be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to its right to recover the balance of any Rental or to
pursue any other remedy to which it may be entitled.
HOLDING OVER.
37. Any holding over or continued occupancy by Tenant after the
expiration of the Term of this lease shall not operate to extend or renew
this lease or to imply or create a new lease. In such event, Landlord shall
have the right to immediately terminate the Tenant's occupancy, or to treat
the Tenant's occupancy as a month-to-month tenancy, in which event Tenant
shall continue to pay one and one-half the Rental charges and shall perform
all obligations as shall be in effect immediately prior to the termination of
the Term hereof. In no event however, shall Tenant be relieved of any
liability to Landlord for damages resulting from such holding over.
REFERENCE.
38. Wherever herein the singular number is used, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders, if applicable. The paragraph headings and captions used
herein are for reference and convenience only. the words "reenter" and
"reentry" as used herein are not restricted to their technical legal meaning.
ENTIRE AGREEMENT.
39. This lease contains the entire agreement between the parties. No
oral statement or prior written matter shall have any force or effect nor
shall the waiver of any provision of this agreement be effective unless in
writing, signed by the waiving party. Tenant agrees that it is not relying
on any representations or agreements other than those contained in this
lease. This agreement shall not be modified except by a writing executed by
both parties, nor may this lease be cancelled by Tenant except with written
consent of Landlord, unless otherwise specifically provided herein. The
covenants, provisions, terms, conditions and agreements contained in this
lease shall bind the Landlord and Tenant and their respective successors and
assigns and shall inure to the benefit of the Landlord, the Tenant, their
respective successors, the assigns of Landlord and the assigns of Tenant who
shall have obtained an assignment of lease in accordance with the provisions
of this lease.
ATTORNMENT.
40. At the option of the Landlord, a purchaser of the Building, or
the holder of any mortgage or ground lease affecting the Premises, Tenant
agrees that neither the cancellation nor the termination of any ground or
underlying lease to which this lease is now or may become subject or
subordinate, nor the sale of the Building, nor the foreclosure of any
mortgage affecting the Premises, nor the institution of any suit, action,
summary or other proceeding by Landlord or any mortgagee shall, by operation
of law or otherwise, result in the cancellation or termination of this lease
or the obligations of Tenant hereunder, and Tenant covenants and agrees in
such event to attorn to Landlord or to the holder of such mortgage or ground
or underlying lease or to the purchaser of the Building, whether by
foreclosure or otherwise.
REAL ESTATE BROKER.
41. Landlord and Tenant each represent to the other that it has dealt
with no real estate broker in connection with this lease unless so stated in
the Preamble. Landlord and Tenant agree that if any claims should be made
for commissions by any other broker by reason of any acts of either or its
representatives, the party to be charged will indemnify and save harmless the
other from any and all claims, demands, losses, liabilities, judgments,
costs, expenses attorneys' fees or other damages resulting from, arising out
of, or in connection therewith. Landlord agrees to pay brokerage commission
due in connection with this lease, if any, to the broker named in the
Preamble in accordance with the terms and conditions of a separate agreement
entered into or to be entered into between the Landlord and said broker.
VALIDITY OF LEASE.
42. The terms, conditions, covenants and provisions of this lease
shall be deemed to be severable. If any clause or provision herein contained
shall be adjudged to be invalid or unenforceable by a court of competent
jurisdiction or by operation of any applicable law, the same shall be deemed
to be severable and shall not affect the validity of any other clause or
provision herein, but such other clauses or provisions shall remain in full
force and effect, unless such provisions shall relate to any payment of
Rental hereunder. In such event, Landlord, on not less than thirty (30) days
written notice to Tenant, shall have the right to terminate this lease on the
date specified in such notice, whereupon all Rental charges shall be
apportioned as of the date of termination and with the same force and effect
as if the lease terminated on the maturity date set forth herein.
COMMON AREAS.
43. Notwithstanding anything herein contained to the contrary, all
common areas and facilities which Tenant is allowed or permitted to use, are
to be used by virtue of a revocable license and if such license shall be
revoked or if the common areas shall be diminished or the locations changed,
none of such events shall subject Landlord to any liability nor permit any
adjustment or abatement of any Rental payments nor be deemed to constitute an
actual or constructive eviction.
REPRESENTATIONS.
44. (a) Tenant represents that it is a corporation in good standing
of the State of New Jersey,, that there are no judgments or suits pending
against it, and that it does not owe any taxes, that and are its President
and Secretary respectively, and that they are empowered and authorized to
enter into this lease for and on behalf of the corporation. Tenant agrees to
deliver to Landlord simultaneously with the execution hereof, a certified
copy of a resolution of its Board of Directors authorizing the execution of
this lease.
(b) Landlord represents that it is a New Jersey Partnership in
good standing, that there are no judgments or suits pending against it and
that it is not in default of any tax payments, that its Partners are
authorized and empowered to enter into this Lease for and on behalf of the
Partnership. Landlord agrees to deliver a Partnership Resolution authorizing
the execution of this Lease.
ECRA AND ENVIRONMENTAL LAWS.
45. The parties hereto recognize that the occupancy and use of the
Premises by the Tenant may be governed by the provisions of the New Jersey
Environmental Cleanup Responsibility Act, N.J.S.A 13:lK-6 et seq. and the
regulations promulgated thereunder (ECRA). As such, the Tenant hereby
covenants that prior to any "closing, terminating or transferring of
operations" (as said terms are defined by ECRA including a transfer of title
to the property by the Landlord to a third party or a sale of partnership or
stock interests by partners or shareholders of Landlord, as the case may be,
during the term of this Lease), at the demised Premises, the Tenant shall at
Tenant's own expense and on behalf of the Tenant and/or Landlord as the case
may be, receive from the Bureau of Industrial Site Evaluation (the "Bureau")
of the New Jersey Department of Environmental Protection and Energy
(N.J.D.E.P.E.) either:
(i) a non-applicability letter;
(ii) approval of a negative declaration; or
(iii) a non-qualified approval of Seller's cleanup plan.
The Tenant shall promptly apply for ECRA approval at least six
(6) months prior to the occurrence of any event that would trigger ECRA
applicability. In the event that the occurrence is the transfer of title by
the Landlord to a third party, the Landlord shall give timely notice to the
Tenant of said contemplated transfer so as to give Tenant adequate time to
obtain the approvals contemplated by this paragraph.
(b) Tenant shall promptly furnish to Landlord true and complete
copies of all documents, submissions and correspondence provided by Tenant to
the Bureau and all documents, reports, directives and correspondence provided
by the Bureau to Tenant. Tenant shall also promptly furnish to Landlord true
and complete copies of all sampling and test results obtained from samples
and tests taken at and around the Premises if any.
(c) Tenant shall, at Tenant's own expense, comply with ECRA and
all orders and directives of the ECRA Bureau and shall implement and complete
all required cleanups to the satisfaction of the Bureau resulting from
Tenant's use and occupancy of the Premises during the term of this Lease.
(d) Should the submission of a cleanup plan be required
pursuant to ECRA, then notwithstanding the minimum financial security
requirements under ECRA, Tenant shall, at Tenant's own expense, furnish to
NJDEPE security satisfactory to NJDEPE, in the amount of at least 150% of the
highest cleanup cost estimate obtained, in the form of a bond or letter of
credit issued by a financial surety authorized to do business in the State of
New Jersey, guaranteeing the performance and completion of Tenant's
obligations pursuant to ECRA. The security furnished by Tenant shall be
renewed and kept in force by Tenant, at Tenant's own expense, until such time
as Tenant shall have received final approval of the cleanup and a release of
the financial sureties from NJDEPE.
(e) In the event Tenant is unable to obtain either (a) a non-
applicability letter, (b) an approval of a negative declaration or (c) an
approval of a cleanup plan, prior to the occurrence of the event triggering
ECRA applicability, then Tenant shall, at Tenant's own expense, do everything
necessary in order to obtain an administrative consent order from the New
Jersey Department of Environmental Protection and Energy (IINJDEPEII),
authorizing the occurrence of the event triggering ECRA and obligating Tenant
to comply, at Tenant's own expense, with all requirements of ECRA and the
ECRA Bureau and any other division of NJDEPE.
(f) Notwithstanding anything in this Lease to the contrary, and
without limiting the foregoing provisions of this Paragraph 45, Tenant agrees
that it shall, at its sole cost and expense, observe, comply and fulfill all
of the terms and provisions of the Spill Compensation and Control Act,
N.J.S.A. 58:10-23.11 et seq., as the same may be amended from time to time
and all rules, regulations, ordinances, opinions, orders and directives
issued or promulgated pursuant to or in connection with said Act by the DEPE,
and subdivision or bureau thereof or any other governmental or quasi-
governmental agency or body having jurisdiction, as same relates to Tenant's
use and occupancy of the Premises during the term of this lease, unless
caused by Landlord. (Said Act and all of said rules, regulations, ordinances,
opinions, orders and directives are hereinbefore and hereinafter in this
paragraph collectively referred to as "Spill Act").
Without limiting the foregoing, Tenant agrees:
(i) That it shall not do or omit to do nor suffer the
commission or omission of any act, the commission or omission of which is
prohibited by or may result in liability under the Spill Act, including
without limitation, the discharge of petroleum products or other Hazardous
Substances or Wastes (as hereinafter defined).
(ii) Whenever the Spill Act requires the "owner or operator" to
do any act, Tenant shall do such act at its sole cost and expense, it being
the intention of the parties hereto that Landlord shall be free of all
expenses and obligations arising from or in connection with compliance with
the Spill Act due to Tenant's commission or omission of any act in the
Premises, and that Tenant shall fulfill all such obligations and pay all such
expenses.
(g) The Tenant hereby covenants and agrees to indemnify, defend
and hold the Landlord harmless from any and all losses of whatever nature
including lost rentals, claims, costs, and reasonable attorneys fees that
Landlord may sustain as a result of the Tenant's failure to comply in a
timely fashion with the provisions of this paragraph, including attorney's
fees incurred to enforce this provision.
(h) The provisions of this paragraph shall survive expiration
or earlier termination of this Lease, regardless of the reason for such
termination, it being agreed and acknowledged that Landlord would not have
entered into this Lease but for the provisions of this Paragraph 45 and the
survival thereof.
(i) Notwithstanding anything to the contrary contained in this
Lease, Landlord represents and warrants to the best of its knowledge to
Tenant that the Premises including the surrounding grounds and building are
in full compliance with all federal, state and municipal environmental laws,
ordinances, rules, regulations and requirements and that there is no
reportable by applicable governmental regulation hazardous substance or waste
at the premises. Tenant shall not be responsible for complying with ECRA
and/or the Spill Act in connection with any spill or discharge of hazardous
substances or other environmental condition which occurred prior to the
Commencement Date of this lease (unless caused by Tenant, its agents,
representatives, contractors or employees prior to the Commencement Date) or
which was caused by Landlord or other tenants at the Building. Further,
Tenant shall not be responsible for complying with ECRA in the event of any
sale or financing of the Premises by Landlord, or in the event of any
transfer of Landlord's interest in the Premises through a sale of a
partnership interest or otherwise (but Tenant, at its sole cost and expense,
shall comply with ECRA in the manner provided hereinabove if a negative
declaration or cleanup plan is required as a result of Tenant's acts or
omissions at the Premises) provided, however, that Tenant shall cooperate
with Landlord by preparing and filing all documents and furnishing such
information as may be required by NJDEPE or Environmental Laws (as
hereinafter defined) or which is reasonably required by Landlord in
connection with such sale, financing or transfer of interest. Landlord shall
indemnify, defend and hold harmless Tenant from and against all claims,
liabilities, losses, damages and reasonable costs, foreseen and unforeseen,
including without limitation counsel, engineering and other professional or
expert fees, which Tenant may incur by reason of Landlord's non-action with
regard to, Landlord's obligations under this paragraph or breach of
Landlord's representations and warranties under this paragraph. The
provisions of this paragraph shall survive the expiration or earlier
termination of this Lease.
(j) Except as provided to the contrary in this Lease, at all
times after the Commencement Date, Tenant, at its sole expense, to the
extent applicable to the Leased Premises and as limited by the provisions of
subparagraph (i) above, shall furnish, observe and comply with, and keep the
Premises, including, without limitation, its surface soils, subsurface soils,
surface water, groundwater, and air, in compliance with any and all
Environmental Laws (as hereinafter defined). Whenever any of the
Environmental Laws requires the "owner" or "operator" to do any act, Tenant
shall do such act at its sole cost and expense, it being the intention of the
parties hereto that Landlord shall be free of all expenses and obligations
arising from or in connection with compliance with any Environmental Laws
arising from Tenants use of the Premises and that Tenant shall fulfill all
such obligations and pay all such expenses except that the Landlord shall be
responsible for and pay all such expenses, which arise after the Commencement
Date of this Lease, in connection with Compliance With Environmental Laws
resulting from the action or inaction of anyone other than the Tenant, its
agents, servants, employees, contractors and invitees. The term
"Environmental Laws" as used herein means all present and future federal,
state or local laws, ordinances, rules, regulations, opinions, orders,
directives and policies as the same, from time to time, may be amended, which
relate to the environment, health or worker safety, including, without
limitation, ECRA; the Resource Conservation Recovery Act, 42 U.S.C.
Section 6901 et seq. ; the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq; the Clean Water Act, 33
U.S.C. Section 1241 et seq.; the Spill Act; the New Jersey Water Pollution
Control Act, N.J.S.A. 58:10A-1 et seq.; the Water and Community Right to Know
Act, N.J.S.A. 34:5A-1 et seq.; and the Occupational Safety and Health Act of
1979, 29 U.S.C. Section 651 et seq. The term "Hazardous Substances or
Wastes" as used herein means any material, waste or other substance, whether
solid, liquid or gaseous, which is defined as a hazardous substance,
hazardous waste, toxic substance or toxic waste in any Environmental Laws.
OPTION TO RENEW.
46. The Tenant shall have the right to renew this lease for the
entire area occupied by it at the time of the exercise of the option for one
(1) five (5) year term after the expiration of the original term hereof.
Such option may be exercised by the Tenant by giving written notice to the
Landlord by certified mail no later than twelve (12) months prior to the
expiration of the original term of this lease. The terms and conditions of
this lease during the renewal term shall be the same as those herein
contained, except that the Base Rent payable shall be $11.60 per sq. ft. for
the Leased Premises as certified by Landlord's architect, pursuant to
Paragraph 5.(c).
NON-BINDING NATURE OF SUBMITTAL.
47. It is understood by the Tenant that the submission of this Lease
to the Tenant for execution in no way binds the Landlord to any of the terms
or contents therein unless or until this Lease has been executed by a duly
authorized Partner of the Landlord.
INTERPRETATION OF LAWS.
48. The within Lease shall be interpreted in accordance with the laws
of the State of New Jersey.
MEMORANDUM OF LEASE.
49. The parties agree to execute a Memorandum of Lease which may be
recorded by either party in form to the reasonable satisfaction of the
attornies for the Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals or caused these presents to be signed and sealed by their proper
corporate officers the day and year first above written.
ATTEST: DATE: ALLENDALE ASSOCIATES
________________ __________ By:_________________________
Michael E. Laino
A General Partner
ATTEST: DATE: CADAPULT GRAPHIC SYSTEMS, INC.
/s/ Paul Levin 12/23/92 By: /s/ Michael W. Levin, President
- ----------------- ---------- ---------------------------------
Paul Levin, Sec. Michael W. Levin, Pres.
EXHIBIT 16
MANTYLA, McREYNOLDS AND ASSOCIATES, C.P.A's
A Professional Corporation
July 6, 1998
United State Securities and Exchange Commission
Washington, D.C. 20549
To whom it may concern:
We hereby agree with the disclosure statements made by Seafoods Plus, Ltd. with
respect to our being dismissed as the principal accountants and our audit
reports on the financial statements for the years ended December 31, 1996 and
1997.
/s/ Mantyla, McReynolds & Assoc.
Mantyla, McReynolds & Associates
Certified Public Accountants
LIST OF SUBSIDIARY OF CADAPULT GRAPHIC SYSTEMS, INC.
This list is prepared as of September 24, 1999, and lists the only
subsidiary of the Company as of that date.
Name of Subsidiary State of Inc.
- ------------------ -------------
Media Sciences, Inc. New Jersey
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRCATED FROM FINANCIAL
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BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> YEAR
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